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When it comes to running a business there are some areas where you have zero wiggle room: paying your invoices, your staff, and your taxes.

Now if you’ve had a strong quarter and are sitting on a healthy cash surplus, you might consider allocating funds towards discretionary expenses. This could include upgrading your software, improving your marketing efforts, or offering additional employee benefits—expenditures that, while not essential, can drive growth and improve long-term business performance.

Let’s take a look at what exactly is discretionary expenditure, some key examples, and how you can effectively manage it.

Are you ready to become a discretionary expenditure pro?

What is discretionary expenditure?

Discretionary expenses are costs that aren’t essential for keeping your business afloat.

They’re flexible expenses that can be adjusted, or removed entirely, without affecting your core operations. They often vary by department, such as marketing, HR, or sales ops, and include things like extra employee perks, business entertainment expenses, or mileage reimbursement. 

…basically, it’s a fancy way of saying non-essential expenses. 

What’s the difference between discretionary expenditure and non-discretionary expenditure? 

It’s pretty simple, with discretionary spending you can be creative, open-minded, and even impulsive. With non-discretionary expenditure, not so much. 

Examples of discretionary expenditure

As you know by now, discretionary expenditure is essentially spending that isn’t strictly necessary for your business to function.

If your business were a cupcake, then discretionary expenses are like the extra sprinkles that go on top– they make things sweeter, but aren’t essential. 

Let’s take a look at some examples: 

Marketing and advertising

Think of this as the cupcake’s frosting. It’s how you get people to notice and want to buy your products or services. This could include things like social media ads, TV commercials, or sponsoring events. 

Employee perks

These are like the sprinkles on the frosting. They make work-life more enjoyable for your employees and can help attract and retain top talent. Examples include company outings, gym memberships, or offering flexible working. 

Travel

This is like the cupcake’s base and it’s important for business growth. It could involve attending conferences, visiting clients, or expanding into new markets. 

Employee training and development

Think of this as the cupcake’s filling, it makes the business stronger and more efficient. It could include sending your employees on courses, workshops, or webinars.

Office improvements

These are like upgrading the cupcake’s stand, they make your business look better and feel more professional. It could involve renovating the office, buying new furniture, or upgrading technology. 

How to manage your discretionary expenditure

When you first start a business, every payment, every extra pound runs through the founder or the CEO, and they more or less know where the money is going. But as you take on more employees and grow, this is no longer possible. 

As discretionary costs will always be different from one quarter to the next, it’s vital to have a clear system in place to keep track and manage them, the best you can.  

Here are some of our top recommendations for managing discretionary expenses:

Outline a clear budget

Just like planning a vacation, having a budget for discretionary spending helps you stay on track. Decide how much you can afford to spend each month and stick to it.

Negotiate with your suppliers

Don’t be afraid to haggle! You might be able to get a better deal on things like subscriptions, gym memberships, tickets, insurance plans, utilities, or even phone and internet contracts. 

Regularly review your spending

Take a look at your spending habits every month and ask yourself: are there areas where you can cut back? Maybe you’re spending too much on corporate lunches or office parties.

Prioritise your discretionary expenses

To use a non-cupcake analogy, think of your discretionary expenses as toppings on a pizza. You want to pick the ones you love most, right? So, when it comes to spending your extra money, make sure you’re getting the most out of it.

Get a petty cash box

Starting a petty cash box can be a great way to manage smaller discretionary expenses. It’s like having a little stash of cash on hand for those unexpected costs that pop up.

Encourage cost-saving measures

Look for ways to save money on your discretionary expenses. This could mean finding cheaper alternatives, buying in bulk, or using coupons.

Track all your expenditure in granular detail

Stay on top of your spend and keep all your discretionary and non-discretionary expenses in one place with our sophisticated expense management platform Capture Expense.

Book a demo today to see how we can help.   

Regardless of the size of your business, you need to keep on top of your corporate card spend. 
If you’re interested in learning how to do a credit card reconciliation, you’ve come to the right place.

What is credit card reconciliation? 

Credit card reconciliation is the process of comparing your credit card statements to your internal records to make sure that all transactions are accurate and accounted for. It’s a crucial step in maintaining financial control and preventing expense fraud. 

What are the two types of credit card reconciliation?

Credit card statement reconciliation for company expenses

This type deals with expenses incurred by your company using its credit cards. The aim is to make sure that all recorded expenses in your financial books match the charges on the credit card statements.

The benefits

• Makes sure your financial statements reflect true business activity. 
• Helps in budgeting and planning financial activities. 
• Detects unusual or fraudulent transactions. 

For example

Imagine you run a mid-sized tech company. At the end of every month, your finance team receives credit card statements from your bank. They compare these statements with your internal expense records to make sure everything matches up. One month, they notice a charge for a luxury hotel stay in London that wasn’t logged in your records. Upon investigation, they find it was a fraudulent charge and promptly report it to the credit card issuer for resolution. This proactive reconciliation saved your company from an unauthorised expense. 

Credit card merchant service reconciliation for customer payments

Credit card merchant service reconciliation involves managing the income side of a business’s financial activities. This process makes sure that all customer payments made via credit cards are accurately reflected in the company’s financial system.

The benefits

• Makes sure all sales and income are correctly recorded in financial statements. 
• Provides accurate information on the company’s financial performance to stakeholders. 
• Helps manage cash positions effectively and plan for future expenditures.

For example

Suppose you own an online retail store that accepts credit card payments. Throughout the month, customers purchase products using their credit cards. At the end of the month, you receive a report from your payment processor showing all the transactions.

You reconcile this report with your sales records to make sure every payment received matches a sale recorded in your system. You notice that a large payment from a customer doesn’t appear in your sales records. After investigating, you discover a technical glitch in your sales software that failed to record the transaction. By identifying this issue during reconciliation, you can correct your records and make sure your financial statements are accurate. 

How to do a credit card reconciliation

Here’s an easy to follow 8-step guide on how to do a credit card reconciliation:

1. Gather all your credit card statements and receipts

• Credit card statements: collect the latest credit card statements from the issuer. 
• Internal records: prepare your receipts, invoices, expense reports, and internal ledger (if available). 
• Bank account statements: for payments made, have the corresponding bank statements on hand.

2. Check the opening balance

Compare the opening balance on the credit card statement with your internal records. Make sure that the previous balance matches your records and any payments made.

3. Compare the transactions

• Match transactions: go through each transaction on your credit card statement and match it with receipts, invoices, or any internal records. 
• Identify missing transactions: make sure every transaction on your internal records is reflected on the statement and vice versa.

You should watch out for:

• Discrepancies in amounts: for example, a receipt shows £50, but the statement says £55. 
• Duplicate charges: the same transaction appearing multiple times. 
• Unauthorised or fraudulent charges: transactions you don’t recognise

4. Record the adjustments

• Make adjustments in your internal records for any legitimate but unrecorded transactions or differences in the amounts (e.g., currency conversion fees). 
• If there are refunds, credits, or chargebacks, make sure these are reflected in both the statement and internal records.

5. Verify the payments

• Make sure that payments made towards the credit card (e.g., direct debit payments) are accurately recorded in both the credit card statement and your bank account statement. 
• Check that the payment dates and amounts match.

6. Investigate any discrepancies

If you find any discrepancies, investigate:

• Receipts/invoices: cross-check receipts or invoices with the amounts on the statement. 
• Vendor contact: contact the vendor if there’s a charge that you don’t recognise or believe to be incorrect. 
• Bank/issuer contact: if necessary, contact your credit card issuer or bank for assistance with unauthorised or fraudulent charges.

7. Finalise the reconciliation

• Once you’ve confirmed all transactions, update your internal accounting records to reflect any corrections. 
• Calculate the ending balance from your internal records and match it with the closing balance on the credit card statement.

8. Document the process

Document the reconciliation process for your records, making a note of any discrepancies and how they were resolved. This helps with future audits and keeps a clear financial trail. 

And that’s how to do a credit card reconciliation in 8 simple steps.

Automate you credit card reconciliation with Capture Expense

If you have any questions about how to do a credit card reconciliation or you just want Capture Expense to handle the entire process for you, we’ve got you covered! Book a personalised demo today.

Confronting an employee about expense fraud is never easy, but it’s a serious issue that needs addressing. It can be awkward and uncomfortable, leaving you wondering how to handle the situation effectively.  

Do you know what to do when you catch an employee with their hand in the cookie jar? Are you ready to learn how to confront an employee about expense fraud?

Here we go. 

Why would your employee want to commit expense fraud?

Before we get into the how to confront an employee about expense fraud, let’s have a think about the why.  

There are many examples of business expense fraud. Here are some of the main reasons your employee might decide to commit it:

Financial gain

Your employee may want to increase their income by claiming false expenses. This can include submitting receipts for personal purchases or inflating costs on legitimate business expenses. 

Appear productive

Some employees might fabricate expenses to make it seem like they’re busier or more productive than they actually are. This can be a way to justify their position or performance in the company.  
 
For example, your employee might submit false travel expenses for meetings that never took place to give the impression of being heavily involved in projects.

Lack of respect for the company

When your employees feel undervalued or have grievances against the company, they might commit fraud as a form of retaliation or out of a sense of entitlement. 

Accidental misunderstanding

In some cases, your employees might not fully understand the company’s expense policies. This can lead to unintentional fraud, where they claim expenses that they mistakenly believe are legitimate. 

Before you confront your employee of expense fraud 

Gather evidence

• Questionable receipts: collect all receipts that appear suspicious or inconsistent. 
• Inflated receipts: identify receipts that seem excessively high or do not match typical expenses for similar items or services. 
• Company handbook: have a copy of the company handbook that clearly outlines what constitutes legitimate business expenses and what doesn’t. 

Verify the evidence 

• Cross-check receipts: compare the questionable receipts with similar past expenses to identify any anomalies. 
• Consult relevant policies: ensure the suspected fraudulent expenses clearly violate the company’s expense policies as stated in the handbook or the expense policy template. 
• Seek expert opinion if needed: if unclear, consult with a finance or HR expert to verify the legitimacy of the receipts. 

How to confront an employee about expense fraud 

Expense fraud is a serious issue that can have a significant impact on your business. If you suspect that an employee has committed expense fraud, it’s crucial to address the situation promptly and professionally.  

Here’s a step-by-step guide on how to confront an employee about expense fraud:

Step 1: Set up a meeting with your employee

Start by arranging a private meeting with the employee in question. Ensure that the setting is confidential and free from distractions. This creates a safe environment where the employee can speak openly.

Step 2: Explain the issue

Clearly explain the nature of the issue. Detail how the suspected fraud impacts the business financially and operationally. Make sure to outline how your employee’s actions are involved. Being transparent about the situation sets the stage for an honest conversation.

Step 3: Review the documentation

Present the receipts or other documentation that you consider fraudulent. Ask your employee to explain these records. Give them the opportunity to provide their side of the story and any context that might be relevant.

Step 4: Encourage justification

Encourage your employee to justify the situation. Listen attentively to their explanation. It’s important to remain open-minded and consider all information before making any judgments.

Step 5: Take appropriate action

Based on your employee’s response, decide on the next steps. If your employee is found guilty of committing fraud, consider the financial amount involved and the severity of the offence. Actions could range from a warning to termination, depending on the gravity of the situation. 

Regain control over your spend with Capture Expense 

Take control of your company’s expenses and prevent business expense fraud. Book a demo with Capture Expense today to ensure no fraudulent claims slip through and keep your spend aligned with your policies. 

 

Have you ever stumbled upon a business expense that just doesn’t seem legitimate? Are you worried about losing money due to fraudulent expense claims?  

We all know that expense fraud is a serious problem, which is why we’ve put together a list of the most common examples to watch out for.  

Are you ready to learn how to spot, and stop expense fraud? 

What is business expense fraud?

Business expense fraud is when employees claim unjustified or inflated expenses so they’re reimbursed for mow than they’ve actually spent, leading to more money in the employees pocket but significant financial losses for companies. This deceptive practice can involve submitting fake receipts, exaggerating mileage for personal gain, or claiming business expenses for non-business-related costs. 

8 examples of business expense fraud

Misuse of corporate credit cards

Misusing corporate credit cards is a common type of expense fraud. This occurs when employees use company credit cards for personal purchases. For instance, one of your employees might use their company card to buy groceries or pay for a family meal, claiming these expenses as business-related.

Fake receipts and invoices

Employees may create fake receipts and invoices to claim reimbursement for non-existent expenses. A specific example would be your employee submitting a forged taxi receipt for a trip that never happened, thereby pocketing the reimbursement. 

Falsified expense entries 

In this type of fraud, employees enter false information into expense reports. For example, one of your employees could claim they attended a conference and submit expenses for travel and lodging, despite never having left their home office.

Misclassification of an expense 

Misclassifying an expense involves categorising personal expenses as business-related to obtain reimbursement. In theory one of your employees could submit a spa treatment as a “client meeting” expense, thereby getting the company to cover personal indulgences.

Duplicate receipt submissions

This fraud occurs when employees submit the same receipt multiple times to get reimbursed more than once. For example, one of your travelling salesmen might submit a taxi receipt for £50 in March and again in April, pretending it’s a different trip each time. 

Using corporate funds for personal use

Using corporate funds for personal use involves employees diverting company money for their own benefit. An example is your employee using company funds to pay for personal utility bills, claiming them as office expenses. 

Fabricated mileage claims 

Employees might inflate or completely fabricate mileage claims to get higher reimbursements. For instance, your employee could claim they drove 100 miles for a business meeting that was only 20 miles away, thus pocketing the extra reimbursement. 

Over-the-limit meal expenses

Employees may submit meal expenses that exceed the company’s allowable limits, without proper justification. An example would be one of your employees claiming a £150 dinner when the company policy only allows for £75, rationalising it as a “client entertainment” expense. 

How you can prevent business expense fraud

Depending on the size and structure of your business, the way you submit and approve business expenses will vary.  

Here are four “easy” ways you can prevent business expense fraud: 

1. Implement robust expense policies

A solid expense policy is the first line of defence against expense fraud. Clear guidelines on what constitutes a legitimate expense, the documentation required, and the approval process will set clear expectations for your employees.

• Define allowable expenses: specify which expenses are reimbursable and which aren’t. 
• Set limits: establish spending limits for different categories. 
• Receipt requirements: mandate itemised receipts for all claims (with justifications if necessary). 
• Approval workflow: define who approves expenses and the process they must follow.

2. Perform audits

Regular audits are crucial in identifying and preventing fraudulent activities. By systematically reviewing expense reports, you can spot inconsistencies and patterns that may indicate fraud.

• Regular audits: conduct frequent audits to keep on top of your spend, and to keep your employees vigilant. 
• Detailed reviews: check for duplicate receipts, altered documents, and expenses claimed outside of business hours. 
• Trend analysis: look for patterns such as frequent small claims just below approval thresholds

3. Provide employee education

Educate your employees about the importance of adhering to expense policies and the consequences of committing fraud, such as disciplinary action. Training sessions can clarify what constitutes acceptable and unacceptable behaviour.

• Training programs: regularly conduct training sessions on expense policies and ethical practices. 
• Communication: use newsletters or internal company updates to remind employees of any policy changes. 
• Integrity initiative: encourage employees to report suspicious activities anonymously.

4. Implement expense management software 

Robust expense management software offers several key features to help you prevent expense fraud effectively:

Electronic receipt capture

• Ensures all receipts are digitised and stored securely in one place. 
• Reduces the risk of lost or altered receipts. 
• Allows for easy and quick verification against claims.

Automated approval workflows

• Establishes a clear and systematic process for approving expenses. 
• Enables multiple layers of review to catch inconsistencies. 
• Speeds up the approval process while maintaining thorough checks.

Real-time tracking

• Provides instant visibility into all submitted and approved expenses. 
• Alerts you to any unusual spending patterns immediately. 
• Facilitates timely audits and reduces opportunities for fraudulent claims.

Policy enforcement

• Automatically flags claims that don’t adhere to your company’s expense policies. 
• Ensures every claim is checked against pre-set rules and guidelines. 
• Minimises the chance of human error or oversight. 

Maintain control over your spending

Are you looking for a system that will make sure that every pound is accounted for and spent wisely? Look no further, book a demo with Capture Expense today and say goodbye to expense fraud for good.

When it comes to the reimbursement of expenses, we know there’s a lot to cover. That’s why we’ve compiled a list of some of the most frequently asked questions (and some that are more niche).  

Are you ready to learn all about the reimbursement of expenses in the UK?

Here we go.

What does reimbursable expenses mean?

Reimbursable expenses are costs that employees incur on behalf of the company while performing their job duties, which the company agrees to pay back. These typically include travel expenses, meals, lodging, and other necessary expenditures directly related to work tasks.

For example, if you travel abroad for a business meeting, the costs of your flight and hotel stay would be reimbursed by your company. 

Do reimbursed expenses count as income? 

In most cases, reimbursed expenses are not considered taxable income. This means that if your employer reimburses you for business-related expenses, you generally don’t need to include those amounts in your taxable income. 

For example, if you’re a salesperson who frequently travels to meet clients. Imagine you spend £150 on train tickets for your latest trip. Since the travel expense was wholly, exclusively, and necessarily incurred in the performance of your job, you won’t have to pay tax on the £150 reimbursement. 

How to reimburse employees for expenses?

Depending on the size and structure of your company, your reimbursement method might vary. Here’s an easy five-step process to help make sure your employees’ expense claims are always legitimate and reimbursed promptly.  

1. Create a clear expense policy

Start by establishing a well-defined expense policy. This should outline what expenses are eligible for reimbursement, the required documentation, and submission deadlines. Make this policy easily accessible to all employees.

2. Make it simple for employees to submit an expense claim

Use detailed expense policy templates that simplify the submission process. Employees should be able to easily fill out necessary details and attach receipts without hassle.

3. Automate where possible

Leverage expense management software to automate the approval and reimbursement process. This helps minimise errors, speeds up processing times, and ensures consistency.

4. Choose a method of reimbursement

Decide how reimbursements will be made. Options include direct bank transfers, payroll additions, or cash in hand payments. Choose a method that’s most convenient for both your company and your employees.

5. Maintain records

Proper record-keeping is essential. Store all submitted forms, receipts, and approval records securely. This ensures compliance with your internal audits and HMRC. Accurate and up-to-date records will help resolve any disputes that may arise.  

More on record keeping coming next. 

How to record reimbursed expenses

Similarly to the previous answer, depending on the size and workflow of your business, the way you decide to record your reimbursed expenses may differ.

Here are five straightforward steps to help you make sure once an expense has been reimbursed it doesn’t get lost:

1. Gather all relevant documentation: collect digital receipts, invoices, or other proof of the expense (with justifications if required). 
2. Categorise the expenses: group them by type (e.g., travel, meals, office equipment). 
3. Record in your accounting system or expense management platform: note the date, description, and amount of each expense. 
4. Reconcile with bank statements: ensure your records match your bank account. 
5. Prepare a summary: create a report of all reimbursed expenses for tax and financial purposes. 

With a sophisticated platform like Capture Expense, once the expense has been logged, it does all the heavy lifting for you. You can even use Capture Expense’s ‘Ask James’ feature to provide you with fully customisable reports based on your data, in real time. 

How do I invoice a customer for reimbursable expenses? 

To invoice a customer for reimbursable expenses you should:

1. Create a detailed invoice: list each expense, its cost, and any applicable taxes. 
2. Attach supporting documents: include copies of receipts or invoices. 
3. Specify payment terms: clearly state when the payment is due. 
4. Send the invoice: email or mail the invoice to the customer. Include your payment terms at the bottom of the invoice. 
5. Follow up: if payment is not received on time, send a reminder. 

Do employers have to reimburse travel expenses? 

Yes, employers generally have to reimburse employees for reasonable travel expenses incurred on their behalf. 

However, there are some exceptions:

• Daily travel: generally, the costs incurred for commuting from home to the workplace aren’t reimbursed, as they fall under the employee’s personal expenses. 
• Corporate guidelines: certain companies may implement specific rules about reimbursing travel expenses. Be sure to review your organisation’s policies before you submit a travel expense. 

What are some other expenses that employers reimburse?

In addition to travel expenses, employers often reimburse a variety of other expenses that employees might incur while performing their duties.

Common reimbursements include:

• Training and development: expenses related to professional development, such as courses, workshops, or conferences, may be covered to enhance employee skills and knowledge. 
• Work-related supplies: employers typically reimburse costs for supplies necessary for an employee’s job, including tools, software, or other materials required to complete tasks effectively. 
• Remote work expenses: with the rise of remote work, many employers now reimburse costs associated with home office setups, such as internet service, electricity, and office furniture. 

Can a trustee be reimbursed for expenses? 

Absolutely, trustees can be reimbursed for expenses incurred while fulfilling their duties. It’s imperative that trustees maintain transparency and documentation of these expenses, as they’re often responsible for managing the assets and operations of the trust.  

Common reimbursable expenses may include travel costs for attending meetings, legal or professional service fees, and costs related to the administration of the trust.

Can an employer refuse to reimburse expenses?

Yes, an employer can refuse to reimburse expenses under certain circumstances. 

While there is an implied term in employment contracts that employers will reimburse employees for reasonable business expenses, this obligation isn’t absolute. Employers are legally entitled to refuse the reimbursement of expenses if: 

• The expenses aren’t reasonable: if the expenses are deemed excessive or extravagant, they may not be eligible for reimbursement. 
• The expenses aren’t necessary for the job: expenses that aren’t directly related to the employee’s job duties may not be reimbursable. 
• The employee hasn’t complied with company policy: if the employee has failed to follow the company’s expense reimbursement policy, the employer may refuse reimbursement. 
• The expense is specifically excluded in the employment contract: if the employment contract explicitly states that certain expenses won’t be reimbursed, the employer can enforce this provision. 

Can an employer withhold expense reimbursement? 

Yes, in certain situations, an employer has the right to withhold expense reimbursements. Here are a few scenarios where this might occur: 

• Insufficient or incorrect documentation: if an employee doesn’t submit the required paperwork to substantiate their expense claim, the employer may choose to withhold reimbursement.  
• Unreasonable or excessive expenses: should the expenses be considered excessive or unjustified, the employer may partially or fully deny reimbursement.  
• Breach of company policy: if an employee doesn’t adhere to the company’s reimbursement guidelines, the employer is entitled to withhold the reimbursement. 

Do you have a question of your own about the reimbursement of expenses? 

Whatever your question, big or small, we are all ears. More importantly, we’re confident that Capture Expense has the solution. Book a personalised demo today to see how we can help. 

 

 

Do you reimburse your employees for expenses incurred while working? Do you want to know the legal requirements when it comes to employee expense reimbursement law in the UK? If so, you’ve come to the right place.

We’ll outline what constitutes an employee expense reimbursement. We’ll also look at the legal framework governing expense reimbursement in the UK. Finally, we’ll provide you with our top recommendations so you can stay HMRC compliant and ensure a smooth reimbursement process. 

What is employee expense reimbursement?

Employee expense reimbursement is a process where you repay your employees for business-related expenses they have personally covered. These expenses can include travel costs, meals, accommodation, or any other out-of-pocket expenses they incur while performing their job duties.  

The process typically involves employees submitting receipts or expense reports, which are then reviewed and approved by your finance team before reimbursement is issued. This method helps make sure that your staff aren’t financially burdened by work-related costs, allowing them to focus on contributing to your business’s success. 

Common types of reimbursable expenses in the UK 

Travel expenses

• Commuting: includes transportation costs such as public transport fares, mileage, parking fees, and tolls. 
• Accommodation: covers hotel stays or other lodging expenses during business trips. 
• Meals: encompasses food and drink expenses incurred during travel or while entertaining clients.

Equipment and supplies

• Office supplies: items such as pens, paper, and other stationery. 
• Equipment: larger items like laptops, printers, and office furniture.

Training and professional development

• Courses and workshops: fees for attending professional courses, workshops, or conferences. 
• Certifications: costs associated with obtaining professional certifications relevant to the job.

Phone and internet bills

• Mobile phone bills: monthly charges for business-related phone usage. 
• Internet costs: fees for home internet if used for remote working. 

Employee expense reimbursement law in the UK 

The legal framework governing employee expense reimbursement in the UK is primarily based on common law principles and statutory provisions. While there isn’t a specific statute dedicated solely to expense reimbursement, various employment laws and tax regulations provide guidance on this matter.

Let’s look at some key legal considerations:

Employment Rights Act 1996

The Employment Rights Act 1996 outlines the basic rights of employees, including the right to be paid for work done and to receive wages that are not below the National Minimum Wage. While it doesn’t explicitly address expense reimbursement, it can still be relevant in certain contexts. For example, when employees incur costs related to their job duties, they may expect reimbursement. This expectation typically applies to reasonable expenses incurred while performing their responsibilities.

Tax legislation

UK tax laws, such as the Income Tax (Earnings and Pensions) Act 2003, provide guidance on the tax treatment of employee expenses. Reimbursed expenses are generally exempt from income tax if they are incurred for business purposes.

Implied term of contract

In many cases, there is an implied term in an employment contract that the employer will reimburse employees for reasonable business expenses incurred on their behalf.

HMRC guidelines on reimbursable expenses

HMRC’s guidelines on reimbursable expenses provide detailed instructions on what constitutes allowable expenses (such as travel and subsistence. HMRC distinguishes between business expenses and personal expenses to ensure only legitimate business expenses are reimbursed without tax implications.

Reporting your employee expense reimbursements to HMRC 

When handling employee expense reimbursements, you have two main options for reporting these expenses:

• Firstly, you can use a P11D form to report expenses and benefits to HMRC at the end of the tax year.
• Alternatively, you can opt for payrolling, where you include the value of the expenses and benefits in the employee’s pay. This method spreads the tax due across the year, which can be more manageable.

Record keeping

You should keep records of all itemised receipts, completed reimbursement forms, the purpose of expenses, amounts spent, and any relevant documentation outlined in your expense policy.

Common challenges between you and your employees when it comes to reimbursements

Disputes over what constitutes a legitimate expense

Disputes over what constitutes a legitimate expense can be a recurring issue between you and your employees. Often, the grey areas arise from differing interpretations of the expense policy.  
 
For instance, while you might consider a client lunch a justifiable business cost, an employee could see a casual coffee meeting the same way.

Delays in reimbursement 

Delayed reimbursements can seriously affect your employees’ morale. When your team experiences repeated delays in getting reimbursed for their expenses, it creates financial strain and frustration.  

This lack of timely compensation can decrease trust in your company, reduce job satisfaction, and lower motivation among your staff. 

Expense reimbursement strategies to consider 

Provide employee training 

For an expense to be reimbursable and non-taxable, it must be incurred wholly, exclusively, and necessarily for business purposes. Ensuring that your employees understand this is essential.

You should invest in training sessions that explain:

• What qualifies as a reimbursable expense. 
• How to document expenses accurately. 
• The importance of timely submissions. 

Create a clear and concise expense policy 

An expense policy template is the backbone of any reimbursement strategy.

Your policy should be:

• Clear: avoid ambiguity by laying out which expenses are eligible for reimbursement. 
• Concise: make sure it’s easy to read and understand, avoiding overly technical language. 
• Accessible: employees should have easy access to this document at all times.

Implement expense management software

Manual expense management can be time-consuming and error-prone. Automating this process with expense management software like Capture Expense offers numerous benefits:

• Efficiency: speeds up the submission and approval process. 
• Accuracy: reduces human errors in data entry. 
• Transparency: provides real-time tracking and reporting of expenses. 
• Compliance: ensures adherence to company policies and tax regulations. 

Meet Capture Expense

Simplify and automate how you manage your expense reimbursements using the intuitive Capture Expense app. Book a personalised demo today to see how we can help.

Managing business expenses can get tricky without clear guidelines. If you want to streamline your financial processes and avoid unnecessary headaches, having a solid company expense policy is essential.  
 
So, let’s walk you through the importance of an expense policy template, how to create one, and the best practices for ensuring smooth implementation.

What is a business expense policy?

A business expense policy is a set of rules that outline how your employees can spend company money. It specifies what types of expenses are allowed, how much can be spent, and the process for reimbursement. This policy helps control costs, ensures compliance with HMRC, and provides your employees with clear guidelines.

For example, your expense policy template might cover travel expenses, office supplies, business entertainment expenses, and more. Clear definitions will help your employees understand what’s acceptable and what’s not, reducing the risk of overspending.

Why your business needs an expense policy

Cost control

• An expense policy establishes clear spending limits for your employees, which helps keep costs in check and makes sure that budgetary constraints are respected. 
• It prevents your employees from making unauthorised purchases. This helps make sure that company funds are used wisely.

Compliance

• A robust expense policy promotes adherence to legal and regulatory requirements, reducing the risk of financial penalties.
• It establishes a framework for audits, simplifying the tracking and verification of expenditures while supporting accountability. 

Transparency and fairness

• Clear guidelines prevent misunderstandings about what constitutes an acceptable business expense.
• A detailed policy holds everyone accountable for their spending, leading to more responsible financial behaviour.

Your step-by-step guide to creating an expense policy template

Creating an expense policy template might seem daunting, but if you get it right it will save you a lot of time, money and headaches down the line.  
 
Here’s your 5-step process to create a robust expense policy template for your company: 

Step 1: Define expense categories

Start by outlining the types of expenses your employees might incur and categorise them. This helps in setting clear guidelines and avoiding confusion.

Common expense categories include:

• Travel expenses: flights, accommodation, meals, local transportation. 
• Office supplies: stationery, software, equipment. 
• Client entertainment: meals, event tickets, gifts. 
• Professional development: training, workshops, conferences.

Step 2: Set clear guidelines for allowable and non-allowable expenses 

Specify what’s covered under each category (including spend limits) and what isn’t. Make these guidelines clear and easily accessible to all your employees.

Examples of allowable expenses:

• Transport and travel: you can claim expenses for fuel, parking, or public transport when traveling for business. 
• Phone and internet bills: you can claim the part of your bills used for business purposes (i.e. sales calls to clients).

Examples of non-allowable expenses:

• Commuting: you can’t claim costs for traveling from home to your office. 
• Personal expenses: costs unrelated to your business aren’t claimable.

Step 3: Establish a simple process for approving and reimbursing expenses 

Outline a straightforward procedure for submitting, approving, and reimbursing expenses. 

• Define your roles: make sure you understand your responsibilities along with those of your employees and finance team in the approval process. 
• Establish deadlines: create submission deadlines to guarantee that everything is processed on time.  
• Clarify documentation needs: be clear about what types of proof (like receipts and invoices) you need to provide and the submission process for them. 
• Establish reimbursement timelines: let your employees know how long a reimbursement will take and how it will get paid (via payroll or check).

Step 4: Outline the requirements for managing documents and receipts

Make it clear what documentation is required for expense claims. This helps in maintaining accurate records and streamlining the approval process.

Types of documents to manage:

• Receipts: itemised receipts for all expenses. 
• Invoices: for any pre-approved large purchases. 
• Justifications: brief explanations for unusual or high-cost expenses.  

Storage requirements:

• Format: make sure all your documents are stored in the required format (i.e. digital or paper). 
• Retention duration: retain all documents for the legally required period (six years in the UK). 

Step 5: Update your policy regularly

An expense policy should evolve with your business. Regular updates will help make sure that the policy remains relevant and effective.

Here are some suggestions to help keep your policy up-to-date: 

• Review frequency: it is recommended to conduct a thorough review of your policy either annually or bi-annually. This allows you to assess its effectiveness and relevance in your industry. 
• Feedback loop: establish a systematic feedback loop by actively gathering insights from both employees and other stakeholders. This can be done through surveys, focus groups, or one-on-one discussions. 
• Policy amendments: based on the feedback collected and any significant changes in business operations, make the necessary amendments to the policy. This process should be transparent, enabling your team members to grasp the rationale behind any changes. 

Top tips when implementing a new expense policy

Communicate clearly

• Hold training sessions to explain the policy to all your employees. 
• Provide written documentation (like FAQs) that your employees can reference.

Enforce consistently

• Apply the policy uniformly to all employees to keep things fair. 
• Monitor compliance and address any violations promptly.

Review regularly

• Periodically review and update the policy to reflect changes in the business. 
• Gather feedback from your employees to identify areas for improvement. 

Keep it simple

• Use simple language and avoid jargon to ensure everyone understands the policy.  
• Limit the number of rules to make it easier for your employees to follow and remember. 

Implement expense management software to enforce policy compliance

Managing expenses manually can be cumbersome and error-prone. Here’s how expense management software like Capture Expense can help:

Automation and accuracy

• Automate the submission and approval process to reduce errors. 
• Guarantee accurate data entry and record-keeping every time.

Real-time tracking

• Track expenses in real time for better visibility and control. 
• Generate reports to monitor spending patterns and identify areas for cost-saving.

Policy enforcement

• Built-in controls make sure that expenses comply with your company policy. 
• Flag non-compliant submissions for review. 

Are you looking to streamline your expense submissions and approvals?

Book a personalised demo today to see how Capture Expense can help you keep your business expenses legitimate while ensuring your employees get reimbursed promptly.