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In April 2016, HM Revenue and Customs (HMRC) implemented a significant change in the way benefits in kind (BIK) are managed for employers in the UK. This new system, aptly named “payrolling benefits in kind,” revolutionised the approach to reporting and taxing non-cash perks provided to employees. 

In early 2024, the British Government unveiled plans to make the payrolling of benefits in kind mandatory starting from April 2027. We’ll get into the details of this announcement later on.

So, if you provide non-cash benefits to your employees and want an overview of payrolling benefits in kind, you’ve come to the right place. 

 What are benefits in kind?

Benefits in kind encompass a wide range of perks that you may offer to your employees, including company cars, private healthcare, gym memberships, and even the use of a mobile phone.  
 
Essentially, if you provide something of value to your staff that isn’t included in their salary, it likely falls into this category.  
 
Some common examples of BIKs include company cars, private medical insurance, and gym memberships. 

What are your current options when it comes to BIKs? 

When it comes to benefits in kind you have a couple of options: 

1. You can continue using the traditional method of submitting P11D forms to report employee benefits for tax purposes, if they aren’t included in payroll (until April 2027).
2. You can register for payrolling benefits. This allows you to handle employee benefits through your regular payroll process, enabling real-time taxation of benefits via PAYE. 

What are payrolling benefits?

Payrolling benefits in kind means including the estimated value of employee benefits directly in their regular payroll, instead of reporting them separately to HMRC on the annual P11D form.  
 
This simplifies tax deductions, as Income Tax contributions for the benefits are deducted along with regular taxes.

The benefits of payrolling benefits in kind 

Opting to payroll benefits in kind offers several advantages such as:

• Simplified admin: if your payroll software is capable of processing benefits in kind, you can say goodbye to the hassle of completing P11D forms and the associated deadlines.

• Improved accuracy: by reporting benefits in kind in real time, you minimise the risk of errors and discrepancies in your tax calculations.

• Enhancing the employee experience: payrolling benefits in kind allows you to provide your employees with a clear and transparent view of their total remuneration package. By integrating these benefits directly into the payroll, employees can easily see and understand the full value of their compensation. 

 What’s changing in 2027? 

From April 2027, all benefits in kind (except for loans and living accommodation) must be reported and taxed through payroll. Which means that you’ll no longer be able to process BIKs through P11Ds. 
 
You need to make sure that your payroll system can handle this change and upgrade or replace your software if need be. 

How to register for payrolling benefits? 

To register for payrolling benefits, use HMRC’s online service to manage your employees’ taxable benefits and expenses before the tax year begins. During registration, select the benefits you wish to integrate into payroll. Keep in mind that unless you use the online service to exclude specific employees, all benefiting employees will have their tax codes adjusted.

If you miss the 5th of April deadline to register for payrolling benefits, you’ll have to wait until the next tax year to include benefits in your payroll. 

The Government hasn’t set a deadline for compliance with the legislation change coming in April 2027. However, they have said more updates will be released throughout the year. 

What happens next?

You have a responsibility to communicate with your employees about the implications of payrolling benefits. This includes explaining how their pay will be adjusted, how tax deductions will be managed, and the impact on their tax codes.

Additionally, you must provide annual statements detailing the benefits received by each employee. 

Benefits that are not included in payrolling must continue to be reported using P11D forms as per current procedures. 

How to notify your employees

You must notify your employees by 1 June after the end of each tax year.

You can do this via:

• Email 
• Letter 
• Payslip 

What happens if you want to cancel your registration?

To cancel your registration for payrolling benefits, notify HMRC via their online service before the tax year begins. If you decide to cancel after the tax year has started, you’ll need to wait until the year-end to cease payrolling (until the law changes in April 2027). 

Where can I get extra information to help me prepare for April 2027? 

To keep abreast of mandatory payrolling updates and requirements, you can refer to HMRC’s Employer Bulletins.  
 
These bulletins offer crucial updates, guidance, and information on changes related to payrolling benefits, helping you remain informed about any new developments or requirements. 

Is your current payroll process up to scratch?

If you are looking for a team of experienced payroll experts that can quickly and efficiently manage all your employees’ taxable benefits. Book a personalised demo with our sister-company Cintra.

Cash flow is the lifeblood of any organisation, and it can make or break a company.

However, increasing cash flow can be a challenging task, especially if you have limited resources. 

But don’t worry, you’re in safe hands. We’ve outlined the top 8 ways on how to improve cashflow, regardless of the size of your business. 

8 ways to improve cash flow

1. Do a deep dive into your expenditure

First things first, in order to improve cash flow and plan for the future of your company you need to know exactly how much money you’ve got coming into the business vs. how much you’re spending. 

Start by looking at your income:

Make a list of all your income streams from the previous year in order to detect peaks and seasonal trends (i.e. a boost around the holiday season). This will give you a better understanding of your customers’ spending patterns and which areas of your business are thriving.

Then look at your expenses:

Just like for your income, make a list of all the things you are spending money on such as: employee salaries; office rent; travel and accommodation for the sales team.

Now, for some of these expenses, like employee wages, there’s no wiggle room. But having a clearer picture of all your expenses will help determine where you can cut costs or look for more competitive deals.
 

Finally, compare the two: 

If you find that there are periods during the year when your expenses exceed your income, you can start to question why this is happening. 

2. Increase your prices

It might sound like something you should discuss with your senior management team first (and it definitely is). But even a slight increase to your prices, combined with a small reduction to your costs can go a long way. 
 
Ask yourself: would your clients care? Well, yes, they probably would care if they were told they had to pay more money. But would they care if prices suddenly went up by one or two percent? Probably not.

3. Send out your invoices ASAP

It’s a no brainer really, sending invoices out immediately helps expedite the payment process by encouraging clients to settle their debts promptly.

Make sure your invoices include:

• Clear terms and conditions. 
• The due date in bold at the top and on the payment slip. 
• Instructions for accepted payment methods. 

By immediately sending out accurate, and easy to read invoices, you reduce the risk of late payments and improve cash flow for your business. 

4. Entice your clients to pay sooner

Everyone loves an incentive, and this one’s a win/win for both you and your clients: Offer discounts for early payment. 

Incentivising customers to pay sooner serves multiple benefits. It helps speed up cash flow, providing timely access to funds for both operations and growth. Additionally, it contributes to strengthening your business’s financial position. 

5. Concentrate on building customer loyalty

By focusing on building customer loyalty you can increase retention rates.  
 
You can also ensure more repeat business, maintain a steady cash flow, and turn loyal customers into brand advocates who attract new business. 

6. Invest in your company 

Investing in your own business is crucial for boosting skills, productivity, and overall promotion, which directly impacts cash flow.  
 
While there is an initial cost involved, such investments lead to streamlined operations and improved efficiency. Whether it’s upgrading skills, optimising workflows, or enhancing marketing strategies, the aim is to reduce costs and increase profits.  

7. Improve your inventory

You can increase cash flow by improving your inventory through regular checks to identify “slow-moving items”. 
 
By selling these items at a discount – or discontinuing them entirely – you free up cash tied in inventory and prevent it from jeopardising your cash flow. 

8. Get rid of wasted expenses

Start by asking your employees for input and conduct audits to identify unnecessary costs.  
 
By identifying and cutting out these expenses, you’ll save money that can be redirected towards more productive areas of your business. This will ultimately improve cash flow.

Find more ways to improve cash flow with Capture Expense

We can help reduce your spend up to 44% by saving on costs; improving your spending habits and reducing your risk of expense fraud. 
 
Book a personalised demo today to see Capture Expense in action. 

FAQs

Why is it important to improve cash flow?

By improving your cash flow, you can ensure that your business is here to stay.

You’ll be able to: 

• Invest in new business ventures. 
• Hire more employees.  
• Plan for the future. 
• Meet payroll. 
• And more.

Are there different types of cash flow?

Yes, there are the three primary classifications of cash flow: 

• Cash flow from operations (CFO) 
• Cash flow from investing (CFI) 
• Cash flow from financing (CFF)

These will all appear on the cash flow statement on your company’s financial statements. 

Management accounts offer a window into your business’s financial status, aiding senior management in decision-making and implementation.

This practice holds significant value for all organisations—so regardless of your business size or industry, it facilitates comprehensive insights into past, present, and future financial standing across your entire business.

This article will provide you with an overview of how to prepare management accounts. 

First things first, exactly what are management accounts?

Management accounts, typically generated monthly or quarterly, provide a detailed overview of your company’s financial health. They include key components such as: 

• A balance sheet. 
• A cash flow statement. 
• A brief report. 
• A profit and loss account.

With accurate management reports, you can spot current business trends, address issues regularly, and track your business’s evolution.  

Although they are not a legal necessity and don’t need to be filed with HMRC, they will provide you with greater financial management than ever before and help your company expand.  

Why are management accounts important?

For any business aiming to grow and succeed, management accounts are essential.  
 
By keeping track of your income and spending regularly, you’ll gain valuable insights into your financial health and potential for growth.  
 
Continuous monitoring allows you to make informed decisions and adjust your strategies whenever necessary.  
 
Management accounts go beyond just looking at your bank balance – they take into account factors like upcoming expenses, revenue streams, and market conditions, giving you a full picture of your company’s finances.  
 
Quickly spotting sales trends helps you plan better and seize expansion opportunities, while understanding your profitability margins and trends enables you to make strategic decisions aimed at boosting your net profit.  
 
In short, management accounts provide you with the tools and information you need to thrive and succeed in today’s competitive business world.

How to prepare management accounts

Management accounts are most useful when they contain pertinent facts tailored to your business and are presented in an accessible format for colleagues throughout the company.

Here’s your step-by-step instructions on how to prepare management accounts: 

1. Gather data 

The cornerstone of management accounting rests on the quality and depth of your collected data. Without precise and pertinent data, any subsequent analysis and insights will be distorted.

You should consider:

Source identification: Determine your primary data sources, which may include accounting software, CRM systems, sales platforms, or manual records. Knowing where to extract data ensures crucial information isn’t overlooked.

Time period selection: Decide on the timeframe for which you’re preparing the management accounts. Whether it’s monthly, quarterly or annually, this will dictate the range of data you need to collect.

Data segregation: Categorise your data into sections. For financial data, this could mean segregating revenue, expenses, assets and liabilities. For operational data, segregate sales, production, inventory and customer feedback.

Automation tools: Explore tools and software for automating data gathering, saving time and reducing human error. Integrating different systems ensures seamless data flow and accuracy.

Data validation: Validate the gathered data for any anomalies, such as high expenses in a month or sudden sales spikes, to identify errors that need correction. 

2. Ensure accuracy

Ensuring data accuracy is essential. Inaccurate data can result in misguided decisions, potentially harming your business.

To ensure data accuracy you should employ: 

Cross-verification: Always verify the data collected by comparing it with external sources. For example, ensure that the bank balance in your accounting system matches actual bank statements. 

Reconciliation: Regularly reconcile accounts to identify and resolve any discrepancies. This includes verifying balances with HMRC, suppliers, and other stakeholders.

Audit trails: Maintain clear audit trails to ensure accuracy and trace any discrepancies back to their source. 

3. Produce financial statements

Financial statements form the foundation of management accounts, offering a comprehensive view of your company’s financial well-being.

You should draft a: 

Profit and loss report: This statement provides a comprehensive overview of the company’s revenue, expenses, and overall profitability within a defined period. Accurate categorisation of income and expenses is essential for understanding profit margins and operational efficiency.

Balance sheet: This document presents a snapshot of the company’s assets, liabilities, and equity at a specific moment in time. Regular updates and reviews of assets (such as inventory) and liabilities (like loans) are crucial to reflect the current state of the business accurately.

Cash flow statement: This statement offers insights into the company’s liquidity by illustrating cash inflows and outflows. It is essential for assessing the company’s ability to cover short-term liabilities and operational expenses.

4. Incorporate operational metrics

Operational metrics offer a detailed perspective on your business’s performance, enhancing the financial data.

You should consider:

Sales and production figures: Monitor monthly, quarterly, and yearly sales alongside production costs to assess efficiency and profitability.

Inventory levels: Track inventory levels to maintain optimal stock levels, minimising storage costs and ensuring timely deliveries.

Customer satisfaction metrics: Utilise tools such as Net Promoter Score (NPS) or customer satisfaction surveys to evaluate customer sentiments regarding your products or services, identifying areas for enhancement. 

5. Prepare an executive summary

An executive summary at the beginning of your management accounts can be very helpful. This section could highlight:

• Key monthly data/figures. 
• Notable changes or concerns. 
• Net profit margins. 
• Turnover ratios. 
• A departmental overview. 

6. Analyse and interpret

When analysed and interpreted accurately, data becomes actionable insights.

Consider the following:

Trend analysis: Identify patterns in sales, expenses, and other key metrics. Recognising these trends early can help in capitalising on opportunities or mitigating risks.

Budget vs. actual: Compare forecasted budgets with actual figures to pinpoint overspending or areas of savings.

SWOT analysis: Conduct regular SWOT (Strengths, Weaknesses, Opportunities, Threats) analyses to inform strategic decisions and identify growth opportunities or potential challenges. 

7. Share the insights

Communication is key. Sharing insights ensures that all your stakeholders are on the same page.

You should consider:

Regular updates: Conduct frequent meetings with key stakeholders to review findings from management accounts, promoting alignment and informed decision-making.

Visual representation: Utilise charts, graphs, and other visual aids to present data, enhancing comprehension of complex information.

Recommendations: Don’t just present the data. Offer recommendations based on the insights. This proactive approach can guide the business towards better decision-making. 

FAQs

How often are management accounts prepared?

While there’s no fixed schedule for preparing management accounts, the common practice is to do so monthly or quarterly, allowing business owners to maintain regular oversight of their finances. 

Can management accounts help secure new funding?

Yes, management accounts are crucial for securing new funding. They give investors and lenders a clear view of the company’s financial health and potential for growth, building confidence in potential funders.

How are management accounts different from statutory accounts?

Statutory accounts are primarily used for external reporting and regulatory compliance, while management accounts are internally focused, providing guidance for strategy, assessing financial position, and monitoring progress.

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Organisations in the UK can reclaim VAT on the fuel component of mileage expenses paid to individuals.  
 
However, navigating this process is complex and requires gathering specific evidence to meet HMRC requirements.  
 
In our blog, we’ve compiled all the necessary information on reclaiming VAT for fuel and petrol expenses during business trips, helping you choose the best approach for your organisation. 

Who is eligible to reclaim VAT on fuel? 

To reclaim VAT on business expenses, including fuel, you need to be a VAT-registered business.  
 
If your annual turnover is below £85,000, you can opt to register for VAT and claim back VAT on expenses. However, if your annual VAT taxable turnover exceeds £85,000, VAT registration is mandatory.  
 
It’s also worth noting that if you’re under the VAT Flat Rate Scheme, you can’t reclaim fuel expenses. 

How much VAT on fuel can you reclaim?

According to HMRC guidelines, you can reclaim 100% of the VAT on fuel used for business purposes.  
 
To comply with HMRC requirements, you must maintain precise mileage records and retain fuel receipts as evidence of expenses. 

How do you reclaim VAT on fuel usage? 

To reclaim VAT on fuel usage, ensure it’s used solely for business purposes (VAT can only be reclaimed on business-related expenses). 

However, as many small businesses and self-employed individuals use their vehicles for both business and personal purposes, this can complicate the process of reclaiming VAT on fuel.

There are two ways you can reclaim VAT on fuel:

1. Reclaim all the VAT paid on fuel purchases and pay the appropriate fuel scale charge for your vehicle. 
2. Claim VAT only for the fuel used during business trips by maintaining thorough mileage records to demonstrate usage exclusively for business purposes. 

How can you reclaim VAT with a fuel scale charge?

If you use a business car for personal purposes, you can reclaim VAT on all fuel usage, including both business and personal use. Then, you’ll pay a fuel scale charge to offset the personal use, eliminating the need for detailed mileage records.

Here’s how it works:

1. Reclaim VAT on all fuel used for your vehicle. 
2. Use HMRC’s VAT fuel scale tool to calculate your fuel scale charge. 
3. Include the fuel scale charge on your VAT return.

However, if your fuel usage is very low, the fuel scale charge might exceed the VAT you reclaim, making this method unsuitable for some businesses. 

Let’s take a look at an example

Imagine you make quarterly VAT submissions and your company uses a BMW 318i with a CO2 emissions figure of 146.

The road fuel surcharge for this emissions figure is £349 per quarter, consisting of a basic charge of £290.83 and VAT of £58.17.

You can deduct the basic charge (£290.83) from the total fuel costs for its Corporation Tax calculation.

For VAT purposes, your company can reclaim the VAT paid on fuel purchases, excluding the VAT portion of the road fuel surcharge (£58.17). 

How can you reclaim fuel VAT by calculating business mileage?

As you now know, you can make a claim for only the fuel you use for company purposes.

For vehicles such as pool cars, commercial vehicles, and petrol machinery, keeping an accurate mileage record is simpler, as all mileage will have been completed for business purposes.

If you use a vehicle for both business and personal use, you will need to keep a detailed record of the purpose and mileage of all your journeys. Once you have calculated the percentage of your mileage that was for business use, you can claim that percentage of VAT back from HMRC. 

How do you prove business mileage to HMRC?

HMRC requires that you keep an accurate mileage log. For this to be compliant with HMRC standards, you must include:

• Date of the journey 
• Purpose (personal or business) 
• Start and end addresses (with postcodes) 
• Total miles driven

You should request monthly mileage logs from all your employees.

It’s also worth noting that any self-employed individuals need to maintain their own records. 

How do you submit a VAT claim to HMRC? 

As a business, you can claim back VAT on fuel expenses, along with other business costs, in your VAT return. If you’re VAT-registered, you’ll need to submit a VAT return every three months, called an ‘accounting period.’  
 
HMRC requires a return to be sent at the end of each accounting period, even if you have no VAT to pay or reclaim. 

The question you’ve been waiting for: Is it worth it?

As you may have guessed, many businesses avoid reclaiming VAT on fuel and petrol due to the complexity of bookkeeping. However, it can be beneficial if you provide free fuel to employees for business purposes.  
 
If this is something you’re interested in, keep records for up to four years, as VAT on fuel can only be reclaimed within this timeframe, and remember to use Fuel Scale Charge and Flat Rate Claim to simplify VAT calculations for fuel expenses. 

FAQs 

What is a reasonable rate for fuel expenses? 

To determine a reasonable rate for fuel expenses, businesses can use HMRC’s Advisory Fuel Rates, which provide standard mileage rates based on engine size and fuel type. These rates apply to both VAT on business fuel usage and private journeys using company fuel.

For employees using company cars and fuel:

• The company can reimburse the employee at the advisory rate for business mileage and reclaim VAT on the payment. 
• Alternatively, the company can cover the fuel cost, then charge the employee for private mileage, reclaiming VAT on the fuel cost minus the employee’s contribution. 

Can sole traders claim petrol costs? 

As a sole trader, you can claim petrol costs as part of your business expenses. You’re eligible for a mileage allowance of 45 pence per mile for the first 10,000 miles when using a car for business purposes. After exceeding 10,000 miles, the allowance reduces to 25 pence per mile. If you use a motorbike for business, the mileage allowance is 24 pence per mile.

Take advantage of our business mileage tracker

If you need help calculating your fuel expenses, or with any other aspect of your travel expenses, book a demo today to see how Capture Expense can help. 

What is petty cash? 

Petty cash is a small amount of money kept on the company’s premises for minor expenses, there’s usually no more than a few hundred pounds – unless the company Christmas party is around the corner.

It seems simple enough, but actually cash is often prone to abuse, easy to lose track of, and susceptible to theft.

In modern times, many consider it outdated, with safer and equally convenient alternatives available for small purchases. 

Don’t know where you stand? That’s where we come in, we’ve put together this handy blog to help you understand all the challenges, benefits, and best practices when it comes to efficient petty cash management. 

The 3 biggest challenges with petty cash management

1. The cash custodian holds all the power

If your custodian lacks the required accountancy skills or experience, tracking issues may arise

For example, custodians use cash vouchers to record employee expenses, so if your custodian misreads or misplaces these records, cash balances may not align – leading to increased risks of errors or fraud

With a sole custodian handling all your reporting and spending, the lack of a second-level check could result in financial losses for your business. 

2. Compliance with your expense policies

Due to the informal nature of cash, spending might become too casual.  
 
If you are not careful, money could be withdrawn without recording expenses or logging receipts.  
 
Without proper documentation, it’s hard to ensure expenses comply with your policies and achieve accurate expense reconciliation.

3. Too much reliance on manual processes

Traditional petty cash management heavily depends on paperwork, requiring receipts and bills to support expenses.  
 
Manual processes, such as journal entries in general ledgers, are common but susceptible to errors and fraud. 

What are the advantages and disadvantages of petty cash?

The top 6 petty cash management best practices in 2024

1. Establish a clear petty cash policy

To manage cash effectively, start by creating a comprehensive, yet easy to follow policy.  
 
This policy should define the fund’s purpose, identify authorised users, set the maximum cash disbursement, and outline procedures for replenishing the fund.  
 
By having a policy in place, you can ensure consistency and accountability when handling cash. 

2. Set a sensible float amount

To maintain good cash flow and avoid having too much unused cash, it’s vital to set the right float amount.  
 
This amount should be determined by looking at past expenses over a specific time. Analyse historical data to figure out the average needed, and update it regularly based on changes in business operations. 

3. Implement a system of internal controls

To prevent unauthorised or unwanted access and mitigate the risk of fraud, it is essential to implement a system of internal controls. Some essential control measures include: 

• Segregation of duties: Have different people handle cash disbursements and record-keeping to prevent one person from having full control over cash. 

• Secure storage: Keep the cash fund in a locked and limited-access box or drawer to prevent theft or misuse by unauthorised individuals. 

• Perform regular audits: Perform surprise audits to check cash records, ensuring the actual cash matches the recorded balance. This helps identify discrepancies or fraud early on. 

4. Maintain accurate documentation

Maintain transparency and track cash transactions by ensuring accurate documentation. All disbursements should be supported by original receipts or vouchers.  
 
Implement a system where your employees provide a clear description of the purpose, date, and amount of the expense, attaching this documentation to the receipts for future reference. 

5. Replenish the petty cash box

Top up the cash box regularly to maintain its effectiveness.  
 
You should also establish a process for submitting reimbursement claims and ensure that all required supporting documents are provided.  

6. Provide training and communication

Ensure compliance with petty cash policies by providing proper training and communication.  
 
Educate employees handling cash on accurate record-keeping, guideline adherence, and the consequences of non-compliance.  

FAQs

Why is It called petty cash? 

“Petty” comes from the French word “petit,” meaning small. In English, it means minor or insignificant. Petty cash is a small amount of money reserved for small purchases, not major expenses. 

What is the difference between petty cash and cash? 

Cash is money on hand, while petty cash is a predetermined amount set aside for small expenses (where checks or bank transfers may not be suitable)

What are examples of cash?

Cash is usually kept in a drawer, lockbox, or large envelope. Typical expenses covered by cash include: 

• Office supplies (pens, erasers, staplers, etc.) 
• Catered meals 
• Postage 
• Parking fees 

Why should you have a cash box?

A cash box offers convenience as it provides quick access to cash for small, unplanned business expenses. It’s handy for regular payments and facilitates transactions with non-digital businesses, saving the hassle of frequent trips to the ATM. 

What is a cash voucher? 

A cash voucher is a small form for documenting payments from a cash fund. It’s called a cash receipt and is available for purchase at office supply stores. 

Can I track petty cash in Excel? 

Excel has a built-in format for petty cash management, suitable for small funds with few transactions. However, as your business grows, you may need alternative methods for handling  cash due to increased volume and reconciliation needs. 

Keep track of company spend with Capture Expense

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An expense policy is like a rulebook for business expenditure. It provides explicit guidelines for your team on how to spend company money without causing confusion for the finance team.  
 
This framework outlines what business expenses can be reimbursed, what can’t, and the process for getting money back after spending it. 
 
In this blog, we outline everything you need to know about business expense policies and the steps you can take to build the perfect policy, tailored to your organisation. 

What are 5 the biggest expense policy challenges businesses face?

1. Enforcing the policy

It’s one thing to create a policy, making sure it’s implemented company-wide is another story.

Finance teams often struggle with the time-consuming nature of tracking receipts and reconciling corporate credit card data.

2. Poor communication

It’s difficult to ensure that all employees, read and save a copy of the policy, especially if it’s extensive. 

Generally speaking, it’s best to send ongoing reminders to your employees and ask line managers to redistribute a copy to their teams. 

3. Unwillingness to move away from manual processes

Relying on manual practices, such as saving physical receipts and using paper spreadsheets, can overwhelm your finance team.

This is not only an outdated way of working, but more importantly, it can lead to inefficiencies and human errors.

4. Lack of visibility over company spend

Numerous finance teams encounter difficulties in managing and controlling expense spending, and this problem intensifies as organisations expand their headcount. 

5. Downstream impacts on month-end close

Discrepancies, unaccounted receipts, or unapproved business expenses can cause delays, preventing your finance team from closing the books promptly.  

 What makes a successful expense policy? 

You might think the key to a successful policy is length and over explanation. In actuality, an efficient policy should be short and to the point. 

In essence, your policy should be:

Clear and easy to understand: Avoid unnecessary financial terminology and focus on establishing a standardised set of rules without numerous exceptions. 

Well structured: Enhance readability by incorporating a solid structure. A recommended starting point involves creating a comprehensive overview, followed by outlining which expenses can and cannot be claimed back.

Concise and straightforward: Regularly review and update it to ensure alignment with the company’s size, culture, and compliance with fiscal laws and regulations in the relevant countries of operation. 

Your easy to follow checklist when creating an expense policy

Creating an effective policy involves several key steps to ensure clarity and consistency within an organisation:

1. Collaborate with key stakeholders

“It takes a village” this predominately refers to raising a child, but it also applies to creating an efficient expense policy.

You’ll need support from the leadership team, the finance team, HR, marketing, and sales to understand company spend needs.

 2. Categorise your business expenses

Well defined expense categories will help you streamline your accounting, taxes, and reporting.

These categories should cover all company expenses, from travel and accommodation to meals and entertainment. 

3. Set pre-defined budgets for each category

A good way to establish spending limits for each category is by examining previous business expenses. 

This entails analysing the average costs of travel and accommodation for the sales team, and adjusting budgets based on changes in organisational size. 

4. Define the approval process 
 
Ensure that your employees are well-informed about the procedures for submitting their expenses and the individuals responsible for approval.  
 
These processes should be transparent and include guidelines for contesting a rejected expense.

5. Outline the reimbursement procedure

You need to outline the entire process for filing expense reports, specifying the reimbursement timeline.

This approach ensures clarity, prevents misunderstandings, and streamlines the overall reimbursement process, contributing to effective financial management.

6. Outline employee responsibilities and compliance expectations

A well-constructed policy will clarify what type of proof is expected when submitting a business expense (i.e., paper receipts, digital screenshots…).

It should also define the consequences of any policy violations. Disciplinary actions for noncompliance should be communicated during employee onboarding and included within the expense policy. 

7. Regularly update your policy 
 
As businesses evolve, expanding their operations and workforce, expenses naturally increase.  
 
A dynamic and adaptable expense policy is essential to navigate the evolving landscape of employee spend as the organisation grows and prospers. 

8. Streamline the entire process with tech 
 
Regardless of the size of your company, receipts get lost, and mistakes happen.  
 
That’s why many organisations turn to expense management software that seamlessly integrates with their payroll and accounting systems, ensuring a smooth and efficient reimbursement process. 

Want to keep track of your company spend?

With our accurate expense tracker your management team enjoys a comprehensive data overview, enabling them to discern trends, monitor business expenses, and maintain a firm grip on budget management and cash flow. Book a demo here, to see Capture Expense in action.