11/08/2014

By Rich Wagner, CEO and founder Advanced Payment Solutions (APS)

Every business, irrespective of size, has employee expenses to deal with. While a small company might just have a fraction of the employees of a huge corporation, it is easy to lose track of outgoings if expenses are not properly managed. Whether these costs account for tea bags or expensive IT software, failure to effectively track expenses can lead to profit dents – especially for small firms with narrow margins.

Many smaller companies have no official expenses procedures in place – instead expecting staff to produce receipts at the end of the month to claim back work-based outgoings from their own accounts. While this reduces the potential for fraud, it can of course be frustrating for employees who are expected to unearth their month-old crumpled receipts. Moreover, the admin time for the finance team is greatly increased with the necessity of manually imputing expense claims and checking against receipts.

Fear of fraud is of course why company credit cards tend to be reserved for the senior staff members. However, even some of the most trusted employees have been known to take advantage of the company plastic. According to a 2014 report titled Occupational Fraud and Abuse by the Association of Certified Fraud Examiners, small companies are more vulnerable to fraud of this kind than their larger counterparts. 16.5% of schemes being investigated involved expenses reimbursement fraud within small and medium-sized companies (SMEs), compared to 13.1% within companies with over 100 employees. This of course just covers the cases large enough to be deemed worth reporting, but even the slightest expenses fabrication can have a monetary impact on a small company.

What is best practice for managing and tracking expenses claims?

1. When to track?

Not only is monthly tracking liable to mistakes, with employees forgetting the details of their outgoings or losing receipts, it is also time-consuming for finance staff. The end of the month becomes a dreaded time for the finance team, forced to manually input data, or chase fellow employees for expense details in order to meet the necessary deadline. Small businesses can relieve this stress by introducing real-time expenses tracking. There are a number of services available that enable companies to log their expenses data as transactions are made.

2. Who to track?

Just as handing out company credit cards relies on employee trust, so too does laying the responsibility for managing expenses data on one finance staff member. It is important to have centralised management whereby the business owner can also log on and have full insight of expenses management.

3. How much to track?

It is important to have a clear figure planned out for expenses allowances, which take into account profitability. Simply handing out a credit card with no indication of limits can result in employee overspend. The simplest way to approach this is through setting a prepaid limit on card transactions. This way you can avoid the uncomfortable situation of having to take a card away from a staff member, as all limits will be pre-defined and definite. By putting restrictions on the type of transactions that are possible, small businesses can also greatly reduce the risk of fraud.

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