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You may have heard this story (or one similar to it) before: Imagine Lee, a general sales manager, goes on a road trip to win over a potential client. The trip successfully increases your expected earnings in the coming year, and quite nicely thereafter. Naturally, Lee incurred numerous expenses during the trip – airfare, hotels, car rentals, meals, and other incidental expenses. Lee paid them with the understanding that the company would reimburse them.
But the costs Not are repaid quickly, and Lee’s personal savings and credit cards reflect this. As days turn into weeks and months, interest rises and late fees accrue, affecting Lee’s personal financial history. Lee becomes frustrated and frustrated, followed by job dissatisfaction and reduced productivity. The quiet exit becomes a real retirement as your Lee’s valuable skills and connections are now working for a competitor who is paying his employees back on time. This lucrative deal is likely to be with Lee.
Related: 5 Easy Steps to Prevent Spending Fraud
What you can do – and what you should do
Wide range of business expenses allowed IRS often must be paid by employees. Those that cannot be covered in advance may include unscheduled flights, cab or cab rides, meals or hotel stays. In other cases, employees may be traveling on business in their own vehicle, in which case, of course, you must reimburse them for vehicle mileage and wear and tear. Other common categories of reimbursable expenses may include tuition, professional fees, supplies, tools and parts, and entertainment (note though You may decide to reimburse employees for expenses such as a client’s travel to a sporting event, these expenses are non-deductible to you and non-deductible from the date of Tax Cuts and Jobs Act of 2017).
The Importance of Timeliness and Accuracy
Accuracy in tracking your business expenses is important because most, if not all, purchases made by an employee on behalf of your company are for goods and services that can be deducted from your taxes.
Some businesses frequently re-invoice a customer. An example would be a plumbing or electrical contractor whose employee may need to pick up plumbing or electrical equipment from a hardware or building supply store.
Employees who invest their own funds on behalf of your business deserve an immediate refund for a variety of reasons. First, the business—and the risks and costs—belongs to you, not to them. You can pay them a salary, but they don’t have to incur cash or expenses to earn you a profit or secure your future business. Don’t leave them on the hook for doing you a favor any longer than necessary. Paying on time also highlights your commitment to them as valuable employees.
Related: Don’t Throw Money Away Without Tracking Expense Reports
Need rules
It also helps when employees understand what they are supposed to do on your behalf. Give instructions to employees who are asked to spend money on your behalf. This will start with your budget for specific expenses. Set it up ahead of time. And while the annual list of crazy expense reports is fun to read – from helicopter flights to work to hang gliders “so as not to get divorced” You don’t want your business to appear on this list. A budget often solves this problem with the added benefit of not having to approve every two dollar purchase.
As reimbursable expenses are realised, they should be recorded promptly using your preferred system. It might be a spreadsheet, but many small and medium-sized businesses (SMBs) use contract accountants or accounting platforms. More often, they rely on document management systems with expense tracking features that use optical character reading (OCR) to enter data such as receipts and invoices. These documents can be captured in a number of ways, including taking a photo of them, emailing them directly to a cloud server, importing them directly from a computer, or scanning them.
Once converted using OCR technology, the data can be manipulated in almost any convenient way. For example, you can track them for every salesperson you have, you can track them by which department submits the request, or you can track them by client or project. Your employee can also record.
Using a cloud-based system that allows you to capture receipts in this way means you can avoid the hassle and pitfalls of re-entering information and managing spreadsheets. You can sort the data by category, by vendor, or by date. Contrast this with spreadsheets, where remembering which tab your expenses fall under and ensuring that each cell has the correct equations makes it much harder to quickly reimburse your employees. Paper files have similar disadvantages. In addition, paper can be lost, misfilled, or damaged as a result of tragic coffee spills.
These platforms are also more efficient, which saves time and money. They also make it easier to view and control. Quickly return money to your employees by getting an idea of what is being spent and for what purposes. You can then make any necessary cost adjustments and keep your employees happy.
Related: This One Thing Can Make Managing Your Company’s Expense Super Easy
What does this mean for you?
Fast refunds avoid both mistakes and fraud. This is the risk that twice as high in small and medium-sized businesses And they hurt more.
But paying off your employees’ debt quickly gives you key benefits. This boosts employee morale and job satisfaction, making them better employees. Worrying about your spending hurting their own finances can also negatively impact their performance at work and cause dissatisfaction. And suppose your reimbursement practices become a problem for employees. In this case, it can also make it difficult to recruit new high-performing employees.
But when you give employees their money back quickly, everyone will be happy, resulting in time and resources being spent on growing the business.