Keeping an eye on internal business expenses is as important as any other aspect of your business finances. Accounting for all cash inflows and outflows helps your business grow. Employee spending that your company covers is a crucial part of that, albeit often an overlooked aspect of managing company money. This is why we've compiled this short guide on how to best manage employee expenses.
How to manage your employee expense claims
To maintain the best possible employer-employee relationship, it is advisable to not ask your staff members to cover expenses using their own money. Budget in advance for employees' expenses to avoid leaving them out of pocket or having to deal with lost receipts.
Of course, if your business is struggling financially, it can be difficult to have the ready cash to cover employee expenses on their behalf. This is when the use of business credit cards can be useful. They can come with benefits when being used for employees' spending, such as cashback or air miles. Of course, their use is difficult to supervise, particularly if your employees are traveling most of the time. Also, it is crucial to pay off business credit cards quickly to not cause interest payments.
A prepaid card can be a great option for your employee expense management - while providing the convenience of a credit card and preventing employees from having to cover their expenses themselves, it mitigates some of the risks associated with standard credit cards. They allow you to allocate a specific amount in line with your expenses policy. This prevents misuse and makes expense reports and cash flow projections easier.
Expense management and bookkeeping
Having a good finance department or bookkeeping system is key in managing employee expenses. You have to get a solid understanding of what HMRC considers business expense for employees. This means you will have a good understanding of what you can write off which informs your understanding of your tax liability for each financial year. Keeping good records will also help when you get audited.