Updated: Feb 2
If your business reimburses your staff for travel or expenses, such as gas or supply purchases, it may feel like you are constantly chasing down receipts. It doesn’t have to be like this. There are a few options on how you can streamline the process.
First, let's talk about the purchases.
There are two generally accepted ways for employees to make purchases for the business:
1. Employees spend their own money, then submit for reimbursement
Example: You send your office manager to the local doughnut shop to pick up coffee and pastries for the big marketing meeting in the afternoon. They use their debit card and give you the receipt afterward.
This is a common practice in many businesses, but it is not without its downfalls. Employees may not have the disposable cash at the time the purchase is needed, and the expense approval process can sometimes be lengthy, causing your employee to wait long periods to get their money back. There is also the possibility that proof of expense could be lost or damaged before submission, leaving your employee on the hook. The last thing you want to do is cause your employees any such hardship.
2. Employee Spending Card
Example: You provide each of your carpenters with a company credit card, and they are free to purchase supplies for projects wherever they wish. Receipts or invoices are submitted to show what was purchased, when, and why.
This can be a simple way to ensure that your employee is not spending their own money on expenses for your business. These cards can be prepaid, or credit based. They can be set up with spending limits and can be a good way to track what is being spent and by who. Depending on the type of card you get, you can even rack up points or cash back on your employees' purchases as well.
**We are in the process of trying out Float, as a business spending solution. You can look forward to our review in a future blog post.**
Now let’s talk about tracking the expenses
No matter which system you use for employee purchases on your company’s dime, you still need staff to provide you with proof of spending. Not only so that you can be sure you’re not paying for manicures or pitchers of beer, but so that you have the documents for good bookkeeping and proof to back up your expense claims with the government. Again, there are a few different ways to go about this:
1. Employees submit paper receipts
This can become quite a nightmare. Not only are you relying on your employees to keep track of the physical receipts (and keep them in good shape), but you are also left sorting through piles of bills once everyone has submitted them. Because this method can be quite time-consuming it is only recommended for businesses that reimburse their staff on rare occasions.
2. Employees submit their receipts electronically
Electronic submission can be significantly more efficient, provided that your employees have a smartphone. They can quickly snap a photo of the receipt and automatically submit it before they toss it in the back of the car and forget about it. The beauty of this system is that many receipt-capturing apps can be integrated with your cloud accounting software. This means that when it comes time to review and approve expenses, they will all be waiting for you. You can approve or deny them while having your morning coffee.
3. A combination of both systems
Some businesses opt to create a shared file or drive containing a simple spreadsheet where employees can input information about what was purchased, where, why, and if the purchase was made with a company card or needs to be reimbursed. Pictures or scans of the receipts can be dropped into the drive, which can be organized by employee, date, or type of purchase.
This system is a happy medium between the other two. Access to the expenses can be instant as long as the staff is diligent with submitting receipts and it can be cost-effective as well. There are cell phone apps that can quickly scan receipts and send them to a cloud drive. Someone will need to approve and send expenses to the company's accounting system (preferably regularly).
Don't worry, we're not going to tell you about these timesaving, expense-reporting marvels without actually letting you know what we use ourselves. Here are the expense-tracking apps that we use:
Xero Expenses – If you currently use Xero as your accounting system, you can integrate their expenses app for an additional cost. The beauty of this app is that you only pay for the months that the app is used. This means if none of your employees upload and submit any expenses in November, you don't pay for November. According to their website, in 2022 the cost of adding this app to your existing plan is an extra $5/month.
*** Bonus: This app also allows mileage tracking and expensing.
HubDoc - Your employees can capture receipts by snapping a photo, then email the files to a personalized email address just for your company. The documents can be published directly to accounting software like Quickbooks Online or Xero. You can create supplier rules to automate how receipts, statements, and bills are coded in these programs. According to their website in 2022, the cost is USD 12 a month, but you can sign up for a free trial to see if it will work for you.
MileIQ - Makes tracking mileage effortless. It automatically starts tracking mileage when you start moving at a certain speed and stops when you slow down. The next time you open the app, you can choose which trips were for business. There are different cost packages as well, the free basic package gives you tracking for 40 drives per month. The premium version runs about $6/month, giving you unlimited drives. You can read more on our Review of MileIQ here.
Like all things in business, what works for one company might not always work for another. If you'd like some assistance in finding the best system for you, reach out. We're happy to help you make your accounting processes as painless as possible.