What is the best expenses policy for modern finance teams?

Expense management is a big challenge for finance teams at the moment, particularly when there’s so much pressure on cash flow.

Those teams using automated systems fared extremely well during the pandemic, but for those with manual processes, it can be tricky. Businesses face the question: should they cut down expenses to only the most essential things, or let things continue as normal and keep a close eye on things?

Our members in business panel share how they manage expenses and if things have changed during the past 18 months.

Video series: how to become a finance business partner

This AAT video learning series will teach you how to marry the powerful skills of finance business partnering with digital technology to advance your career. (Free of charge to members.)

Get the series

It’s worth automating the expense process

Clare Elliott, CFO, ILUX

We automated our expenses process about four years ago, from an original paper-based system to ExpenseIn, which has both an online platform and an app. Our engineers travel country-wide, and as they incur expenses, they simply photocopy the receipt and upload it immediately via the app.

We have an approval process, so depending on which team the employee is in will depend on the process for that approval, but generally, it quite simply goes through their line manager. That all gets centralised by our Admin team and processed for payment to the employee. We sometimes re-charge our expenses too, so the Admin team ensure those expenses have been appropriately allocated to the clients’ monthly invoice.

Automating the process makes it easy and streamlined, everyone knows the rules, it can all be done remotely by all employees, managers and the Admin team, and everyone knows the status of the approval process. The manager is notified when expenses are awaiting approval, the employee and admin team are notified they have been approved, and the employee is further notified when payment is authorised. Nothing is lost or missed, it keeps everything up to date and charges are reflected through the accounts on time too.

Everyone understands what can be expensed, we have a very clear policy on what the company will approve, and what it won’t. By setting the rules, financial limits, standards and expectations, we don’t have a problem with anyone pushing boundaries and asking for excessive expenses to be reimbursed. They also have to stipulate exactly why they have incurred the expense, and we have also automated that by setting up Projects and Categories within the system. Each engineer needs to choose the type and reason for the expense, and that can be validated by the Admin team by cross-referencing that client’s work on that day. We use ticket numbers for this, which follows every single job through the company, so everything can always be cross-referenced easily.

We’ve chosen to automate our expenses in this way, rather than giving employees credit cards because it ensures they supply the correct documentation at the outset. They cannot claim for an expense without a vat receipt, so there’s no need for the Admin team to do any chasing at a later date to prove the validity of the expense. It forces the employee to be accountable for their expenses, otherwise, they cannot make a claim.

Whilst this works for us, as it ensures the process is dynamic in how expenses are processed, there is still Admin time behind the scenes to validate and check every expense. For example, the vat on each expense must be checked to ensure the correct rate has been chosen at the source. The expenses are exported from ExpenseIn to our accounting system to process for payment, which is now via an API so that’s as efficient as it can be, but they still need to be further categorised within the accounting software, they also need to be re-charged on to invoices (which is a manual process) and the payments processed too. It would be great to further streamline that process to ensure no time is wasted unnecessarily.

We do everything manually – I’d like a more rigorous system

Farha Jamadar, finance manager, Todd Doors

Expense management hasn’t changed much for us, other than ensuring we reconcile soft copies to hard copies. We already had to process expenses electronically as we have different locations across the UK, so processing expenses was already electronic.

We do not have a solidified expense system, just a template-produced excel sheet that needs to be submitted fortnightly to coincide with our payment runs and authorised by a director. The system is not automated so it is passed as an email attachment. All expenses are signed off by the directors, the volume is not large so is manageable. Our only issue is late expenses, which can be difficult to manage when it’s a significant amount.

We have a company card system, but the credit limits are set to a specific amount so there cannot be an overspend. All receipts are reconciled monthly and signed off by a director.

I’d like to see more visibility and authorisation of expenses before it is incurred in the future. If it could all go through a PO system so we can reconcile it, that would be great. The onus is heavily on finance to reconcile expenses and I feel this should be passed to the employees.

We tightened up expenses spending during the pandemic

Andy Murray, finance lead, Manna Pro UK

We took a very proactive approach to expenses during the pandemic as we knew our cost base would be heavily influenced by it, like many other businesses. As an organisation, all travel was put on immediate hold – not just employee level, but executive-level too. We communicated to all colleagues that all expenses that were deemed ‘non-essential’ would not be authorised nor reimbursed if paid personally. One key area which needed to be tightened up was the process control surrounding expenses and therefore we decided to implement a new sign-off procedure.

This was to ensure that any expenditure deemed necessary had to be signed off at director-level (where previously it could be approved by a head of department). At the start of the pandemic, the finance team carried out a heavily detailed analysis of our current cost base. Certain budgets were capped to further control cost, but also from a risk perspective, this extra control was deemed vital for expense management.

As we have quite a small employee base in the UK our expenses are still handled via a simple Excel spreadsheet. This Excel template includes all of the necessary fields for use by employees when submitting their expense claims. Finance can process them once the form is correctly completed (signed, accompanied by receipts and approved by their line manager or director). These expenses can then be included in the monthly expenses payment run.

The expense claims received on a monthly basis are still of a fairly low volume, however as we continue to grow our employee numbers, automation will become a greater consideration, from an efficiency point of view but also to avoid any manual entry and omit any potential errors.

Finance is always on hand to offer support to a colleague should assistance be required in completing the expense form. We send out a monthly email to all employees to act as a ‘gentle reminder’ prior to the monthly expense submission deadline to ensure they are submitted in time. Should any expenses be received past the deadline then they are deferred to the next expense payment run (a month later!). The email that is distributed stresses the strict requirement of submitting expenses complete and on time as we want to be sure that all costs are captured in the correct period and of course that employees are reimbursed for any expenditure in a timely manner!

The same process is conducted for our corporate credit card programme, employees have to submit an expense form for anything charged to their company card, this then allows the Finance team to reconcile the cards on a monthly basis.

In the future, I would like to get away from as many manual processes as possible within the Finance function, i.e. by eliminating the use of Excel spreadsheets for employee expenses. There may be scope to use an app that integrates directly to our ERP Finance system. Therefore automating the expenses process, improving the overall efficiency by streamlining the entire process.

Photograph shows Farha Jamadar, finance manager, Todd Doors

Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.

Related articles