By Daniel Hunter

A report analysing expense claims made by more than 200,000 UK employees has revealed that companies paid out £692 million last year in out of policy expenses.

According to the study conducted by travel and expense company Concur, for every £100 a UK business paid out in expenses last year, nearly £10 (£9.85) was spent outside of that organisation’s expenses policy, for example on business class tickets for short haul flights, or rooms in non-preferred hotels.

The findings are a concern for businesses trying to retain visibility and control over their finances during a period of economic uncertainty. In addition, they suggest that although most UK companies have an expenses policy in place, employees — and their managers - are struggling to interpret it properly. Only a tiny 1.2 per cent of out of policy submissions last year were actually caught and rejected by the approver.

“Expense policies are there to help employees make the right decision when spending on their employer’s behalf," David Vine, Senior Director, Product Marketing EMEA at Concur commented.

"Whilst there’s no question that UK companies understand the importance of having a policy in place, some are clearly struggling to ensure it is properly understood, implemented and followed by their staff. This inevitably leads to inefficient spending, lost money and inaccurate forecasting.”

The report does highlight some positive signs that businesses and their employees applied greater rigour to the expense management process in 2011 compared to 2010. Last year only 89 per cent of claims that were VAT recoverable were supported with a valid receipt, a requirement for claiming the money back from HMRC. This year, employees have made significant improvements with 95 per cent of all VAT recoverable expenses supported with a valid receipt.

A big driver behind this increase was a focus by employers on encouraging employees to submit valid receipts for mileage claims, in some cases driven by increased automation of the expenses process. In 2011, nearly three-quarters (74 per cent) of mileage claims were supported by a VAT receipt compared to 59 per cent in 2009. However, 26 per cent of claims are still not supported by a receipt, representing an area businesses can still make bigger savings in 2012.

“The increase in VAT from 17.5 per cent to 20 per cent in January 2011 has clearly encouraged organisations to invest extra time and energy in ensuring all VAT recoverable expenses have valid receipts for HMRC," Vine continued.

"However mileage remains a problem child. Throughout 2012 we’ll be busily helping employees capture their VAT receipts, to ensure their company can benefit from the related tax savings.”

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