David Vine (Europe) - UK Expenses: Companies can Plug Holes in Finances
Business Management

David Vine (Europe) - UK Expenses: Companies can Plug Holes in Finances

With international economic predictions remaining unstable and erring more towards a pessimistic outlook, it looks to me like it’s another year where costs need to be kept under strict control, cash conserved and more achieved in business with fewer resources. Now, more than ever, businesses should be looking for ways to prevent money draining away without their knowledge.

The recent Concur Employee Expenses Benchmark report 2012, analysing expense claims made by more than 200,000 UK employees, has helped to highlight areas where companies are haemorrhaging money. From this data, we can see the main areas of concern are: employees making excessive and out-of-policy claims on top of businesses also not reclaiming all the VAT they should on their expenses.

The study revealed that companies paid out £692 million last year in out-of-policy expenses which means for every £100 a UK business paid out in expenses last year, nearly £10 (£9.85) was spent outside of that organisation’s expenses policy. For example, this could have been spent on business class tickets for short haul flights, or rooms in non-preferred hotels. These findings should definitely be a wake-up call for businesses trying to retain visibility and control over their finances during this period of economic uncertainty.

In addition, the survey suggests that although most UK companies have an expenses policy in place, employees – and their managers – are struggling to interpret it properly. Only a tiny 1.2% of out-of-policy submissions last year were actually caught and rejected by the approver. The fact is that expense policies are there to help employees make the right decision when spending on their employer’s behalf. Whilst there’s no question that UK companies understand the importance of having a policy in place, some are clearly struggling to ensure it is properly understood, implemented and followed by their staff. This inevitably leads to inefficient spending, lost money and inaccurate forecasting.

Despite this, the report does highlight some positive signs that businesses and their employees applied greater rigour to the expense management process in 2011 compared to 2010. One example is VAT reclaims. Last year, only 89% of claims that were VAT recoverable were supported with a valid receipt, a requirement for claiming the money back from HM Revenue & Customs (HMRC). This year, employees have made significant improvements with 95 per cent of all VAT recoverable expenses supported with a valid receipt. The increase in VAT from 17.5% to 20% in January 2011 has clearly encouraged organisations to invest extra time and energy in ensuring all VAT recoverable expenses have valid receipts for HMRC.

A big driver behind this increase was employers encouraging their employeesto submit valid receipts for mileage claims, in some cases driven by increased automation of the expenses process. In 2011, nearly three-quarters (74%) of mileage claims were supported by a VAT receipt compared to 59% in 2009. However, 26% of claims are still not supported by a receipt, representing an area where businesses can still make bigger savings in 2012.

A great way to keep a firm eye on company-wide expenses is through automated systems where businesses can view expenditure online through real-time reporting tools. More importantly, regulations can be put in place by the company to automatically reject any claims that are over or out of company policy. Additionally, VAT can be calculated automatically - and with integrated mobile apps, employees can take photos of receipts from their smartphones to be automatically uploaded onto their reports.

Using new innovations in travel and expense management in this way can help to plug the holes in finances by stamping out the ability of employees to fiddle expenses, to cut down on the number of out-of-policy submissions and to help companies reclaim tax on staff expenditure in this tough climate.

By David Vine, Senior Director at Concur Technologies

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