FDs probably know more about MP expense claims than they do about their own employees expense habits.

The biggest political scandal for a generation has elevated employee expenses from the backwaters of the finance department to the front pages of the national newspapers. 

• when the mileage rate paid by the employer doesn’t cover the actual car and fuel costs ( 76 percent);

• when pay has not risen in line with inflation (40 percent);

• when the employer is slow at paying back expenses (29 percent); and

• when an employee feels they are not paid  a fair salary (28 percent).
  
  

That’s a very broad church.

Putting employee expenses back on the right track isn’t a matter of simply imposing new control procedures to prevent fiddling.  The way the employee expense system is used frequently muddies the waters.

Many employees believe that their bosses use company expenses as a personal piggy- bank to fund weekend breaks with their wives, fine dining and golf. YouGov found that 41 percent of working adults think their boss probably or definitely exaggerates his or her expenses.

Only 20 percent of employees believe that their employer is even-handed when approving expense claims.  It seems that ‘favourites’ with the boss don’t get queried about expense claims as much as other employees, and managers make it difficult for employees that are in the dog house to claim back expenses by using delaying tactics, for example.  Other managers use the expenses system as an unofficial way of rewarding hard-working staff.

This kind of culture is often below the radar of most Finance Directors, but it can seriously hamper efforts to cut down on employee expense budgets.

Advice for FDs

GlobalExpense research shows that around 11 percent of employee expense claims fall outside the company expenses policy but get paid anyway (this figure rises to over 20 percent for business travel and accommodation). More than 75 percent of the employees surveyed said they had never had an expense claim queried by their employer. GlobalExpense’s own data shows that less than one percent of actual expense claims are rejected.

One way for Financial Directors to tackle out-of-policy and fraudulent expense claims is to properly train and support expense authorisers.

Most line managers that join a company are lucky to have a five minute induction on the company expenses policy and it is usually focused on what they can claim rather than what they shouldn’t authorise.

Many line managers are unaware of the company expense policy, the HMRC expense rules, the information required to support a claim in order to claim back VAT, or the VAT implications  to the organisation of an un-receipted claim.  They certainly won’t have the time to check the accuracy of every mileage claim. 

If an authoriser identifies an out-of-policy or fraudulent expense claim, there is no guidance for them on how to proceed.  It takes courage to confront someone regarding expenses which can be a very emotive subject.  Financial Directors should support authorisers by ensuring that they have the back-up of procedures, systems and technical information as well as the support of senior management.

Below are some tips that Financial Directors should consider:

• Lead by example; be transparent and accountable at the highest level.  If the majority of employees think their boss is fiddling, then they will, too.

• Communicate the expense policy to all staff at all levels.  Make sure it is visible.  Put it up on staff notice-boards.  Include it as part of the contract of employment.

• Train authorisers to do the job.  The well thought through and costly expense policy you have in place is worthless if authorisers do not know how to apply it.

• Provide reference material on the technical and tax aspects of expense claims to support authorisers

• Enforce the expense policy and punish those that flout the rules.

• Pay people quickly to prevent resentment.