Ask the expert: Business expenses

Cracking expense compliance

Q. What exactly is meant by expense compliance?

A. Expense compliance can be internal and external. Internal compliance refers to employees within a business following travel and expense (T&E) rules prescribed by company policy. Both intentional and unintentional errors are identified and addressed to help the business achieve greater compliance. External compliance concerns a company’s adherence to statutory and HMRC regulations governing business practices and taxes. This could be examined by internal auditing teams or the HMRC “tax man”.

Q. How do you tackle internal compliance?

A. Strong internal compliance begins with good policies. These must be company-wide and include details of what can and cannot be claimed for, travel guidelines, mileage/fuel rates, and personal expenditure. Policy only helps to a point though; you need an understanding of the human side of T&E alongside a supporting strategy. With travel, people often spend time away from loved ones and money out of their own pocket, so shouldn’t be further burdened with complex policies. Company culture can also have an effect on compliance, as without proper policing, it’s only natural to test the boundaries. Take mileage for instance. It can account for the vast majority of your T&E spend, yet also be the trickiest to track. That makes it an easy target for expense “padding”. Advanced tools can automatically track and create mileage claims to ensure their accuracy and alert people when an expense is out of policy. So, what should businesses do? Firstly, they must understand the existing corporate culture and enable positive change by encouraging and enforcing the right kind of behaviour. Secondly, they should use technology to understand whether people are complying with policy, making it easier for people to submit expenses correctly.

Q. How do you tackle external compliance?

A. HMRC has clear definitions of what a business expense is, what constitutes business travel, and when an expense becomes a “benefit in kind”, along with differing levels of VAT on expenses. It can be complex for finance to memorise and apply all the rules, ensuring compliance along the way. Expense management tools can therefore help minimise risks around regulatory compliance as they automatically apply tax rules, so your team doesn’t have to remember them all. VAT is worked out for each expense type so you can reclaim the correct amount of tax without falling foul of legislation.

Q. What should the tech solution include?

A. There are many providers of expense tech out there, so look for a few key things: use a cloud-based mobile solution; use something that integrates credit cards and supplier feeds; use a system that includes a mileage tracker; ensure reporting and visibility capabilities are built in; and ensure that data security and GDPR adherence is accounted for.

For more than two decades, SAP Concur has taken companies of all sizes and stages beyond automation to a completely connected spend management solution encompassing travel, expense, invoice, compliance, and risk. Learn more >