Should I randomly check expenses?
Expense management is a long and multifaceted process. From the initial entry into the claim form to the payment, there are plethora of steps and people involved. Whilst everyone involved usually has the best intentions, there are many things that could and oftentimes do go wrong. Whilst expense claims may not form the largest figure on the Profit and Loss Statement, they have many hidden costs involved, which pile up quite quickly if left unchecked.
In an ideal world, every business would have an internal audit function overseeing all finance functions, including expenses, like a hawk. However, we do not live in an ideal world and only very large businesses tend to have the luxury of an internal audit department and the resources to maintain one. The best most businesses can do is having a select few internal audit tasks in a manager’s job description. Finding the balance between time spent on the tasks and their effectiveness is, therefore, the key.
Should you have a regular random expense check? Absolutely! Should it be drawn out of a box of shuffled expense claims? Absolutely not!
There has to be a method to the madness, as it would be utterly pointless randomly auditing a monthly train ride to the regional office costing £2.49 each way. On the other hand, an expense claim succinctly titled “Team Meeting” costing a few hundred pounds with a receipt dated the Friday before Christmas with nothing but Jäger-bombs would be reason enough to have a chat with someone’s manager!
- Follow the money: Categories with the highest overall cost and largest individual expenses need to take priority in the checks.
- Unmix the mix-up: Analyse the expenses types that tend to be categorised incorrectly. Staff and client entertainment, for instance, might get jumbled up, which would also affect the VAT that could be correctly claimed by the business. The confusion might be unintentional and caused by the jargon used in the expense policy itself, so it might be time to overhaul the trusty old expense policy!
- Identify the usual suspects: Employees who have made excess or out-of-policy exclaims in the past, for instance. Whilst most do have the best intentions, a business can never be too careful when it comes to expenses, as fraudulent and out-of-policy expense claims cost UK businesses about a billion pounds a year!
Once the above three pointers have been analysed, it would only be a matter of picking a few expense claims from each identified category or individual every month to keep on top of things. Chances are that everything would check out and everyone would finish for the day happily. However, that may not always be the case.
Depending on the gravity of the error or violation, a friendly reminder about the specifics of the policy or a meeting with the management may be warranted.
Much of the work outlined above would be very manageable to undertake if done electronically, book a free, no-obligations demo
