Expense reports are by far the best way to manage and track business expenses incurred by employees. Such business expenses commonly include:
- Travel expenses
- Client meals/entertainment
Employees naturally expect any personal funds expended for business to be paid back to them. An expense report allows employees to document each business expense, provide a corresponding receipt and get reimbursed from company funds.
However, the true beneficiary of expense reports is the business owner. Expense reports make it easy to stay on top of expenditures and ensure the proper amounts are deducted from overall revenue (so you don’t pay more in tax than you have to!).
What is a travel expense report?
For most businesses, the distinction between “expense report” and “travel expense report” isn’t necessary. Some organizations ask employees to document and claim expenses for a particular business trip on a separate travel expense report form immediately following the trip. The same employee may submit a separate non-travel expense report for business expenses unrelated to the trip.
This strategy can help separate spending for different reasons into different buckets (expenses specific to the business trip would be easy to tally). It can also ensure employees are paid back promptly for large expenditures like plane tickets and accommodations. However, the bottom line is that there is no need for two different types of expense reports and it is not necessary to require a distinct expense report for travel.
What is an income and expense report?
An income and expense report is entirely different from an expense report and is often created using accounting software or by a company’s accountant or finance department. Such a report is also commonly referred to as a “profit and loss statement” or “income statement.” It details all the funds coming in for a specified period of time (e.g. one month) and all the funds going out (rent, wages, insurance, utilities, etc.) during the same period of time.
What information should be included on an expense report?
While an expense report should be customized to suit your business needs, a standard report often includes the following fields:
- Employee name
- Total reimbursement amount
- Advances received (if applicable to be subtracted from reimbursement)
- Your own coding (You may want to code expenses by client, business purpose or department for example)
- Amount of each expense
- Date each expense was incurred
- Description of each expense (e.g. hotel, meal, etc.) and reason
An expense report should always be submitted with itemized receipts matching the totals claimed.
Do I really need a receipt for every expense on an expense report?
Yes! Not only is it important as a business owner to confirm that every expense is valid, receipts are non-negotiable if you are audited by the Canada Revenue Agency (CRA). If a claimed expense does not have an acceptable corresponding receipt, that expense will be disallowed and you will responsible for any taxes and penalties.
Don’t forget that the CRA requires itemized receipts with full information (versus credit card statements or receipts that show a total only).
Saving receipts is a huge pain point for employees and business owners alike, which is one reason many businesses are turning to paperless expense reporting.
Who approves expense reports?
Depending on your business, you may decide to require one or more levels of approval for your expense reports. For instance, with just ten employees, the business owner alone may accept responsibility for reviewing and approving all expenses. With one hundred or more employees, that model would be less feasible and perhaps both a department and finance manager would review and approve expense reports before reimbursement could occur.
What should I do if I find an invalid or personal expense on an employee’s expense report?
When the money has already been spent by an employee, it’s an uncomfortable situation. However, it is important to manage the incident quickly to ensure illegitimate spending doesn’t become part of company culture.
We recommend sending a letter via e-mail to the employee to inform them that the submitted expense cannot be reimbursed. The letter should include the reason for refusal (e.g. the submitted expense does not comply with your Expense Policy, the purchase was not used for business, etc.).
The best way to prevent improper expense claims and eliminate any “grey area” surrounding which expenses are reimbursable is to have a clear Expense Policy in place.
How do I create an Expense Policy?
SAP Concur has developed a fully-customizable Expense Policy Template to address the needs of Canadian small and medium businesses. It’s absolutely free and takes just minutes to customize. Your finished Expense Policy will include:
- Statement of purpose
- Employee and manager responsibilities
- Zero tolerance fraud clause
- Itemized reimbursable expenses
Alternatively, your HR department can create an Expense Policy.
Are SAP Concur’s expense report services affordable and efficient for small businesses?
If managing expense report paperwork sounds time consuming to you, you’re not alone. We work with small businesses from coast to coast every day to eliminate the hassles, risks and costs of paper-based expense reports. Our services are not only affordable for businesses of all sizes, but designed to cost less than manual expense reporting. Watch this 2-minute video to see exactly how SAP Concur Expense works. If you like what you see, we invite you to test out our self-guided expense demo.