What is Account Reconciliation? Basics for UAE-Based Companies

Not every expense in the company requires you to issue a check. Payments like petrol, supplies, stamps, etc., are paid via cash. For these business transactions, either the employees take cash in advance or put in a request for reimbursement. This mechanism requires you to set some cash aside and employ a person for receipt management and reporting. The cash is referred to as petty cash. 

What Is the Meaning of Petty Cash?

Petty cash refers to a small amount of money that businesses keep readily available for handling minor payments and expenses that are too small to be processed through regular accounting procedures. It is often kept on hand and is reimbursed periodically.

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What are Petty Cash Examples?

Petty cash includes small miscellaneous expenses, such as:

• Office supplies
• Gifts
• Client lunch
• Refreshments
• Postage
• Medicine and first aid
• Minor repairs
• Transportation

What Is the Process of Petty Cash Disbursement?

The first step in petty cash disbursement is to define policies and procedures. This includes specifying:

• The purpose of the fund
• The maximum cash amount 
• The types of expenses the fund can cover
• The process for replenishing the fund

The next step is to appoint a petty cash custodian. They are responsible for handling the petty cash fund. 

Then, you set up the fund by transferring the initial sum of money into a safe or locker. This amount should be sufficient to cover minor expenses for a defined period. 

When employees make small purchases, they request funds from the custodian. After the purchase, they return with a petty cash voucher, receipt, and cash balance. 

The custodian reviews the receipts and provides reimbursement. They maintain detailed records of every transaction, including the date, purpose, recipient, amount, and a brief description of the expense. This record-keeping method ensures transparency and accountability.

After that, the custodian reconciles the petty cash fund at regular intervals. They add up the safe's cash balance and the receipts' value. The total should match the original amount in the fund. 

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What are the Two Types of Petty Cash?

To manage petty cash, the custodian relies on either of the petty cash book systems:

1. Imprest Petty Cash Book

An imprest petty cash system involves maintaining a fixed amount of money in the petty cash fund at all times. 

For instance, you set up a fund of $100. When the fund gets down to $20, the custodian requests reimbursement and replenishes the fund to $100.

2. Columnar or Analytical Petty Cash Book

A columnar or analytical petty cash book is a detailed and structured method of recording petty cash transactions. It categorizes expenses into different general ledger codes for better tracking.

For instance, you create separate columns, such as "office supplies," "refreshments," "meals," etc. Whenever a transaction occurs, the custodian records it in the appropriate column and specifies its purpose.

What are the Challenges of Petty Cash?

While the process of petty cash seems linear and simple, it has many intricacies in practice. 

Imagine the custodian getting hundreds or thousands of requests and receipts every day. So, maintaining a petty cash system is easier in a smaller business with limited expenses and reporting needs. However, for larger enterprises, relying on manual vouchers and physical safes/lockers causes a lot of chaos. 

1. Vulnerability to Theft and Misuse 

Unlike an automated system, a manual petty cash system lacks controls and security measures.

For example, if the custodian is not vigilant, employees can use the cash for personal expenses. Similarly, if the custodian gets stuck between multiple requests and receipts, it leads to oversight.

Moreover, the physical nature of cash in a petty cash box makes it an easier target for theft. Since there's no immediate digital record, anybody can steal money, which goes unnoticed for a while. This lack of transparency and a digital audit trail makes it difficult to identify funds misuse.

2. Poor Receipt Management 

Receipts are the document of proof for the expense. With the traditional approach, custodians have to chase employees for receipts. This results in incomplete or unaccounted-for submissions. 

Moreover, relying on the manual petty cash process makes it harder. The custodians have to manage countless receipts daily, making reconciliation tedious. Hence, you end up with misplaced, duplicate, or even damaged receipts. 

A common example of this issue is when a custodian receives multiple receipts and with an analytical petty cash book to maintain. It takes them hours to reconcile, report, and ensure accurate categorization. 

The worst is when it's time to report, and locating these receipts takes hours.

3. Chaotic Approval Workflow  

In smaller companies, getting approval for expenses is easy. But, in large enterprises, even small expenses can prompt approvals from various departments and stakeholders. This makes the approval workflow complicated and time-consuming. This delays the fund release, disrupting the workflow and reimbursement process.   

For example, imagine an employee who wants to buy a subscription for less than $300. In a big company, it will prompt approval from the manager, IT, finance, and legal departments.  

All this back-and-forth slows things down a lot.

4. Internal Resentment

In big companies, there's tension between the finance team and other departments.  This issue occurs when employees can't access the funds and have to wait for approval. Such a delay disrupts the work or delays the reimbursement.

For instance, an employee needs to buy a subscription for work. But the delay in approval impacted the deadline and client relationship. This creates problems and stress between the finance team and other departments.

5. Branch-Level Petty Cash Management

Large enterprises use separate petty cash systems for departments at the branch level. This means that each department has its own petty cash fund to manage.

Managing small amounts of cash at individual branches is tricky. Employees misuse/steal the money as there's not much oversight. There is no visibility on how money is being spent. Maintaining funds for multiple branches becomes a headache. Also, departments find it challenging to request more funds.  

Reconciliation becomes challenging as the finance teams have to chase branches for complete information. This leaves a lot of loopholes for employees and branch custodians to misuse petty cash.

6. Tedious Reconciliation Process

Reconciliation ensures that the petty cash fund's balance matches the sum of all expenses. 

Manually, reconciliation in large enterprises takes weeks and is prone to errors. Moreover, when adding up expenses, the process is prone to manual errors, which are hard to identify and correct.

For instance, the custodian overlooks a receipt. This mismatch between the recorded expenses and the actual cash on hand can take him weeks to spot errors. 

7. Low Visibility Over Expenses

Traditional petty cash systems lack real-time data. At any given point of time, the custodian is unaware of the fund's current status. This lack of visibility delays financial decision-making. For instance, it can take weeks before the custodian realizes that the petty cash fund is running low. This can lead to temporary cash shortages for essential expenses.

The absence of a clear record makes it slower to notice problems and reconcile the cash. Moreover, transactions and expenses are recorded on paper, which leads to further errors. For example, when an employee uses petty cash to buy office supplies, there will be a delay until the expense is recorded.

Similarly, when many employees spend money simultaneously, tracking them in real-time is tough. This lack of transparency allows employees to misuse petty cash for personal expenses.

How to Manage Petty Cash Effectively With Pluto? 

To overcome the challenges described previously, you can not rely on any automation tool. Instead, you need a product that is tailored to your specific needs. While many tools can assist you in digitizing petty cash management, Pluto goes the extra mile.

With Pluto, you no longer need to maintain a physical safe or countless vouchers and receipts. Pluto records every transaction in real time and gives you visibility at each step. From receipt to reimbursement, you manage everything with complete control and clarity.

Unlimited Corporate Cards

Pluto enables you to issue unlimited corporate cards, simplifying petty cash management. It eliminates the need for physical lockers or safes, promoting smoother cash flow. The availability of unlimited cards allows you to replace shared credit cards. This enables the use of cards for even small petty cash expenses. 

Finance teams get full control and visibility over each petty cash expense in real time.

Employees can either swipe the cards for a seamless process or withdraw cash from ATMs. Every expense made with the corporate card triggers an approval workflow. It prompts employees to add receipts and managers to approve expenses. They can then add the receipts simply via WhatsApp and get reimbursed without any delays.

With all the data consolidated on a single platform, reconciliation becomes easier. This simplified process eliminates the need for a dedicated custodian to manage petty cash.

Not only do you get more control, but you save money with visibility at each step.  

Budget Control

Pluto allows you to specify limits for corporate cards issued. This ensures employees stay within budget. 

When the spending exceeds, employees can request more funds. The budget expands on the manager's approval in seconds, allowing for necessary spending.

Administrators can also issue zero balance cards. These cards with zero balances prompt an approval request for each expense. This approach ensures budget control without causing any delays or resentment.

Easy Receipt Management 

Pluto simplifies receipt management thanks to its seamless WhatsApp integration. 

Your employees can upload receipts via WhatsApp, which are recorded in real-time. The custodians no longer need to run after employees for the receipts.

However, Pluto does more than just store receipts. It extracts vital information through OCR, including vendor names, amounts, and GLs. As a result, your accounting team spends less time on manual tasks like creating logs.

Approval Workflow  

Normally, getting approval for expenses can involve a lot of back and forth. But with Pluto, you can set up custom approval processes to make the process smoother. 

When an employee uploads receipts, Pluto automatically starts the approval workflow. It notifies the custodian and managers to approve the expense, removing the friction.

The reimbursement process accelerates without any compromise on efficiency.

Further, Pluto uses OCR to detect duplicate receipts to avoid dual payments and fraud. This makes it easier to double-check expenses and approve the legitimate ones. 

Digital Expense Report  

Pluto offers digital expense reports that compile data from all the receipts. 

The report simplifies the task for your finance teams to see how each branch/department is spending. It enables them to make adjustments to policies and procedures as needed.

For instance, a company has small office supply purchases spread across various departments. Pluto's real-time visibility and report help to locate these costs. As a result, finance teams can reconsider and promote bulk purchases for cost savings. 

With Pluto, the custodian gets complete visibility into the expenses and the available funds at all times.

Close Books 10X Faster  

Pluto simplifies the process of closing books. 

Since employees can submit receipts directly through WhatsApp, custodians don’t need to chase employees for receipt submissions. This enables you to close the book 10X faster by accelerating the reconciliation process.  

Pluto records all transactions in a centralized digital platform. This streamlines audit logs and eliminates the need to maintain physical records.

With its OCR-based receipt retrieval, finding specific receipts and information becomes more effortless. This simplifies the reconciliation process, making the entire book-closing process faster. 

Replace Petty Cash With Corporate Cards

Small expenses and cash transactions can not be removed. However, finding an expense management tool can make petty cash management simpler. 

Stop relying on manual traditional processes to manage petty cash. Choose Pluto to replace your tedious petty cash books and vouchers with corporate cards. 

Sign up today to digitize your petty cash for complete visibility and control.

Accounts payable (AP) is the money you owe vendors and creditors, i.e., short-term liabilities. These are the payments for goods and services you received that are yet to be cleared.  

Companies struggle to manage accounts payable because the process involves multiple stakeholders, and the workflow isn't clearly laid out. The teams have to handle hundreds of documents, including purchase requests, purchase orders, goods received notes (GRN), invoices, etc. and ensure there isn't any discrepancy with the order received.

So, decentralized approvals and verifications make the process chaotic before the team can clear the final payment. If you find yourself in a similar situation, where accounts payable is hectic, and the working capital is messed up, read this post to discover the top strategies for effective accounts payable management.

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What is the Account Payable Process?

The AP process starts upon receiving goods and an accompanying invoice for payment processing. The next step involves verifying the accuracy of the invoice details. This verification process ensures that the goods received match the information provided in the invoice, including quantities, prices, and other relevant terms.

Following the confirmation, the invoice undergoes an approval workflow. It involves obtaining the necessary authorizations from various departments or individuals within the organization and ensuring compliance with internal policies and procedures before proceeding with the payment.

After completing the payment, the accounts payable team records the transaction in the financial system, updating the company's records. This step ensures accurate financial reporting and maintains an up-to-date overview of the company's financial position.

Challenges of the Decentralized Accounts Payable Process

Companies strive to maintain a seamless flow of goods and services while meeting financial responsibilities through timely and accurate AP management. However, relying on a manual process for these tasks introduces these bottlenecks: 

• Managing documents manually raises concerns, particularly with paper-based documents that are susceptible to misplacement or damage. It not only hampers day-to-day operational efficiency but also poses a threat to data integrity.
  
  
• Similarly, a manual verification process increases susceptibility to mistakes. Achieving precise alignment between received goods and invoice information requires meticulous attention, heightening the possibility of overlooking crucial details such as terms and conditions.
  
  

• The manual handling in the approval workflow introduces risks of delays and potential oversights. Obtaining authorizations from different departments becomes time-consuming, and ensuring compliance with internal policies is prone to human errors.
  
  
• After completing the payment, the critical step of recording the transaction in the financial system becomes vulnerable to manual data entry errors, impacting the precision of financial reporting and the clarity of the company's financial standing.
  
  
• The manual process increases the likelihood of inadvertently paying the same invoice multiple times. Inaccurate data entry and a lack of robust authentication processes expose the organization to fraud, including the manipulation of invoices.

In summary, the manual accounts payable process detrimentally affects operational efficiency and financial stability. The lack of synchronization across different teams results in communication gaps and discrepancies. Failing to maintain a cohesive and streamlined process leads to errors in financial reporting, impedes effective decision-making, and strains interdepartmental collaboration.

Strategies for Efficient Accounts Payable Management

Effective management of the accounts payable process is possible when you optimize the human and technological aspects of the same. 

On the human side, optimizing requires streamlining workflows, enhancing communication, and fostering a collaborative environment. Simultaneously, the technological part involves shifting to an accounts payable automation solution that provides a centralized platform for complete visibility and control. 

Here are the strategies for efficient accounts payable management:

Strengthen Internal Control Over Financial Reporting

Internal control over financial reporting (ICFR) ensures the accuracy, reliability, and integrity of financial information within an organization. ICFR helps safeguard financial processes and mitigate risks as the intricate nature of accounts payable necessitates a robust control framework.

Strengthening ICFR for enhancing accounts payable management involves the following elements:

1. Segregation of Duties

With the segregation of duties, you ensure that no single individual controls all the stages of the accounts payable process. You divide the responsibilities among different staff members, which reduces the risk of errors, fraud, and mismanagement.

For instance, by assigning one team member to handle invoice approval and another to process payments, the segregation of duties minimizes the risk of errors or fraudulent activities and promotes accountability.

2. Audit Trail

Establishing a comprehensive audit trail involves recording and documenting every transaction in a chronological sequence of activities. It facilitates transparency and serves as a valuable tool for tracking and investigating discrepancies that arise during the accounts payable process.

For instance, in the case of an invoice mismatch, a comprehensive audit trail makes it easy to trace the exact steps in the transaction history, revealing where the error occurred. It speeds up the resolution process and enhances accuracy in financial reporting by promptly addressing issues.

3. Approval Policies

Clearly defined approval policies outline the hierarchy of authorizations required for various transaction amounts, ensuring that financial transactions undergo proper scrutiny before processing.

For instance, a clearly defined approval policy mandates that transactions under $1,000 require approval from a department head, while amounts exceeding $10,000 necessitate approval from top-level management.

4. Document Policies and Procedures

Clear documentation outlines specific steps for the accounts payable process. When a team member adheres to these guidelines, all required approvals are obtained, documentation is consistently retained, and errors are minimized.

In practical terms, this means that during an audit, the organization quickly and accurately traces the entire lifecycle of an invoice, showcasing compliance, reducing audit time, and enhancing financial transparency.

By strengthening ICFR, organizations systematically address challenges such as fraud, errors, and inefficiencies.

Employing Technology 

AP automation optimizes the accounts payable management process beyond mere operational enhancements, enabling accuracy, efficiency, and informed decision-making. Automating AP management is a strategic approach with the following key elements:

1. Centralized Collaboration

Automation involves centralizing AP management and creating a unified document storage and collaboration platform. Not only does it extract all the critical information, but it also stores them on a centralized dashboard for easy access and processing. This fosters seamless communication among team members, ensuring everyone can access real-time information and collaborate effectively.

2. Safeguards for Duplicate Payments

Automation includes built-in safeguards to prevent duplicate payments. Automated systems employ checks and validation processes to flag duplicate receipts and eliminate the risk of paying the same invoice multiple times, reducing the likelihood of financial errors. Moreover, since the centralized platform acts as a single source truth, the possibility of double payments automatically reduces.

3. Streamline Workflow

Automated workflows simplify and streamline the entire AP process. With simple if-then rules, you can create workflows for trigger-based approvals. By eliminating manual intervention at various stages, tasks such as invoice approval, payment processing, and data entry become more efficient, reducing processing times and enhancing overall workflow. 

4. Integrate

The accounts payable software integrates with other financial systems. This integration ensures a cohesive flow of information across departments, reducing data silos and enhancing accuracy in financial reporting.

5. Insights

Automated AP systems provide valuable insights through analytics and reporting tools. These insights enable businesses to track key performance indicators, identify trends, and make data-driven decisions. This analytical capability contributes to strategic financial management and planning.

Improve Vendor Relationships

Vendor relationships are not just about successful transactions. Healthy partnerships bring many benefits, such as streamlined processes, minimized disruptions, and a collaborative atmosphere that enhances the overall effectiveness of the accounts payable function within the organization.

Improving accounts payable management involves the following components:

1. Negotiate With Vendors

Initiating negotiations with vendors involves engaging in open discussions about terms, pricing, and contractual agreements till both parties arrive at mutually beneficial arrangements. Compelling negotiation ensures favorable terms for the company and establishes a foundation of trust and collaboration.

For instance, when negotiating with a key supplier for raw materials, the company secures favorable terms such as bulk purchase discounts and extended payment periods. This not only reduces costs but also builds a positive, long-term relationship.

2. Timely Payments

Adhering to agreed-upon payment schedules fosters goodwill and reliability, positioning the company as a trusted and preferred partner. Timely payments strengthen vendor relationships and contribute to smoother transactions and potential benefits such as early payment discounts.

3. Transparent Communication

Keeping vendors informed about payment timelines, potential delays, or any changes in the process contributes to a positive working dynamic. Open lines of communication facilitate problem-solving, creating an environment where both parties feel comfortable addressing concerns and finding resolutions.

4. Streamline Onboarding Process

Simplifying the onboarding procedure by providing clear guidelines, efficient documentation processes, and transparent communication ensures that vendors can seamlessly integrate into the accounts payable system. It saves time and lays the groundwork for a cooperative and efficient long-term partnership.

By implementing these strategies, businesses cultivate vendor relationships that go beyond transactional interactions, fostering a collaborative environment.

End Result: Optimized Accounts Payable Management Process

For storing and retrieving documents, you get optical character recognition (OCR) technology that extracts invoice information accurately. All the information goes on a centralized digital platform, reducing the chance of misplacement and improving accessibility. 

For verification, you get all the necessary information on a unified dashboard. This centralized database enables accurate cross-referencing of received goods with invoice details, minimizing errors and making the process more efficient.

You get a no-code trigger-based approval workflow builder for approvals, where you can create workflows with simple if-then rules. These preset rules and automated notifications make authorization seamless across departments, reducing delays, ensuring policy compliance, and lowering the risk of human errors.

For recording transactions, you get integration facilities, where your accounts payable software syncs data across your accounting systems for consistent records, minimizes errors, ensures precise financial reporting, and offers a real-time, accurate view of the company's finances.

Next Steps for Efficient Accounts Payable Management

After establishing transparent processes and policies and adopting the right automation tools, plan an AP audit.

An AP audit involves reviewing and assessing the existing procedures to pinpoint areas that can be improved. By doing so, you identify inefficiencies or bottlenecks in the accounts payable management system. It provides insights into how well the established processes align with the intended goals and whether adjustments are needed.

This proactive approach helps enhance the overall efficiency and effectiveness of accounts payable management, ensuring that the system operates smoothly and aligns with the company's objectives. 

Read more about AP audits in our post to understand how they help and how you can prepare for them in advance.

Business expense reimbursement is one area of spend management that business owners do not always give its due. And yet, nearly every organization will have to reimburse employees for their expenses at some point.

Part of the problem is that these expenses can vary significantly, from buying office supplies to traveling or even medical costs. If your business deals with many types of expense reimbursements, you might wonder what you need to cover and how you should handle it.

If you’ve had trouble working out your organization's different business expense reimbursements, or you want to learn more about repayments, you’ve come to the right place.

Today, we’ll take a look at the different types of business expense reimbursements and even share some tips to help you streamline your expense reimbursement process.

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What is expense reimbursement?

A business expense reimbursement is simply the act of paying back an employee for expenses incurred while performing a job for your organization.

Technically, almost any type of expense can qualify as a business expense for the purpose of reimbursement, depending on the reimbursement policies of the business. But to give you a clearer idea, here are some common examples of reimbursable expenses:

• Business travel costs
• Meals and entertainment
• Employee education or training
• Medical expenses
• Gas expenses for a company-issued or private vehicle
• Business supplies or tools
• And other miscellaneous business-related expenses

You could handle these expense reimbursements individually, meaning you review each expense separately, or you could create a policy for employee expense reimbursement. 

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Do I Need to Have an Expense Reimbursement Policy?

You are not required to have an expense reimbursement policy, and in some cases, reimbursing expenses is not even mandatory to begin with. Though that largely depends on the legal framework of your country.

However, since it is customary in the UAE and the MENA region to reimburse employees for expenses, then it would be wise to create guidelines and policies to help you organize and streamline that process.

Creating a policy for reimbursements helps set the right expectations for employees about what qualifies for repayment and enables you to streamline your expense reimbursement process.

With an expense reimbursement policy, your employees will know precisely what they can be reimbursed for, how to request said reimbursement, and how long it would take to receive the funds.

Whether you have a business reimbursement policy or not, you need to have a clear picture of which expenses your employees might incur for your business and how you would go about reimbursing them.

• Is the expense tax deductible?
• Is this a common type of business expense in your industry?
• Do you have a policy in place for this expense?
• Are there any types of emergency purchases that an employee might need to make?

Types of expense reimbursements

Traveling and accommodation

One of the most common types of reimbursement requests is for travel expenses. Gas has been a particular pain point for many businesses in the MENA region due to the rising costs of fuel. Other examples of travel expenses include moving to and from an airport or travel terminal, travel tickets, public and private transportation expenses, car rentals, and lodging.

Office supplies and communication

If your organization relies heavily on digital work, you might need to reimburse your employees for supplies like laptops, tablets, software purchases or subscriptions, training materials, and more. 

Also, if your team needs to move around frequently and you need to maintain communication at all times, reimbursing them for their cell phone plans might be necessary. In particular, this applies to teams in sales, marketing, and business development. 

Food and entertainment

Business trips typically cover employee meals as reimbursable expenses. As long as the expenses are incurred in the interest of the business, they’re reimbursable.

Other expenses

Medical expenses, such as health insurance, insurance premiums, and tuition, are another form of employee expense that is often reimbursed by companies. If your business deals with these types of expenses, make sure you have a clear policy for handling them.

8 tips to simplify your expense reimbursements

1. Learn what you need to reimburse

Although the legalities of employee reimbursements vary from country to country, it’s traditionally customary for employers to reimburse their employees for expenses incurred on behalf of the company. 

It is important to note, however, that your employees cannot claim reimbursements for every purchase made, only those that are specifically tied to your business in some form.

While the specific type of expenses you have to reimburse will vary from industry to industry, you should have a general idea of what costs an employee might have to cover out of pocket in the process of working for you.

• Do they need to travel around in their own vehicle?
• Do you need them to be communicated at all times?
• What kind of equipment do they require?
• Are there any health risks associated with their job?

These types of questions can help you figure out which expenses you will have to deal with. Clear guidelines about what is and isn’t reimbursable will help reduce instances of fraudulent reimbursement requests.

2. Use a spend management platform

With the right expense management software, you would be able to automate and optimize end-to-end workflows throughout your process. 

For instance, with a spend management platform like Pluto, employees can use a mobile app to record expenses as they incur them.

In this way, your employees no longer have to save receipts or wait before entering their expenses. Plus, Pluto can automatically assign reports to the right reviewer, making the review and approval process more efficient.

Not only that, but Pluto can also tag the receipt so the categorization of the expense is much easier and reporting is real-time.

In addition to providing digital copies of relevant documents, Pluto can notify your finance team of approvals and deadlines.

3. Spend management platforms enhance collaboration

Pluto’s expense management solutions come with an employee portal so that your finance team can collaborate seamlessly with your employees. 

This allows you to save time when you need to discuss any irregularities with their expense reports. Additionally, your employees can use Pluto to check the status of their reimbursement requests.

The finance team can also use Pluto  to manage costs more efficiently due to its analytical capabilities, real-time reporting and instantaneous spend limit settings.   

4. Create a Thorough Expense Reimbursement Policy

When creating your reimbursement policy, you’ll want to make sure that it covers as many angles as possible. 

One way to do so is to invite stakeholders from multiple different departments, such as HR, finance, legal, and procurement, to a brainstorming session, as their knowledge will make it easier to draft the policy.

5. Crafting your reimbursement policy

It’s also critical to consider the following when drafting your expense reimbursement policy:

• The specific type of expenses that can be reimbursed
• The process your employees need to follow to submit their expenses, including any proof and supporting documentation
• Whether any allowances will be given for expenses, and how to manage any excess
• The specific time an employee has to submit their expense report
• How the approval process will be handled
• When and how your employees are reimbursed

6. Promote the adoption of the policy

One way to help employees adopt the policy more quickly is by making it readily available to them. The policy should be emailed to your employees or posted on your internal networks.

Employees should be informed when they will receive their payment from the company. You should set up a transparent and clear process to communicate what can be expected in terms of expense reimbursement. 

7. Be extra clear about deadlines and payments.

Be sure to let them know how they will receive the payment, such as via direct deposit or check, as well as how they will receive recorded confirmation of the payment made (such as a statement on their paycheque). You can complete this step easily with the help of an online payroll solution.

It is important to keep things running smoothly when it comes to paying employees. By processing reimbursements timely and reliably, you can easily prevent frustration caused by late payments. 

Having your employees pay out of their own pockets and not receiving payment back sooner rather than later can cause unnecessary ill feelings toward your company. When you handle reimbursements well, it reflects back on you as a respectable and considerate employer who cares about employees.

8. Make sure your employees follow the deadlines you set

You need to provide employees with deadlines for submitting expense reports, such as one week before their next pay date, so they can be reimbursed and get approval for their claims. 

Make sure the expense reports comply with the policy guidelines by giving yourself enough time to review them. By doing so, you can consult with the employee if there are any discrepancies, missing or incomplete documentation, or expenses that do not fall within the policy.

It’s important to submit expense reports on time since certain business expenses are tax deductible. 

Optimize your expense reimbursement management process

It’s not enough to know what your expenses are and to create a policy for their reimbursement. 

You also need to make sure that your reimbursement process is organized and efficient.

Otherwise, you run the risk of creating bottlenecks if you get slammed by more requests than you can handle. You can avoid this by optimizing the process used to submit reports and their attachments, ensuring all reports are reviewed in a timely manner and processing reimbursements as quickly as possible.

Having put all of this in place, it’s now time for the audit. The importance of audits is particularly important for enterprises and mid-size firms where employees incur large expenses. Auditing your expense reports also helps you identify loopholes in your policy and reduce instances of fraudulent claims.

You can also use audits to analyze your business expenses and identify areas for reduction.

Ensure there is an organized system for expense reimbursement requests

You should ensure that the system your employees need to use to submit their expense reports is easy to use and understand. 

Pluto allows the employee to submit all necessary supporting documentation, such as their receipt, the total amount of the purchase, a description of the goods or services purchased, and the date of the transaction.

Use a corporate card or direct deposits to remove the need for reimbursements

A corporate p card is a great way to prevent employees from paying out-of-pocket for business expenses.

You can track your expenses more efficiently and effectively with corporate cards, which provide spending limits that prevent employees from abusing their privileges.

Consider issuing corporate cards only to your regular travelers, or try direct deposits if you’re concerned about the cost. 

Alternatively, you can also use direct deposits of reimbursement funds to eliminate the reimbursement process. 

Two benefits result from this: One great perk of following either process is that your finance teams will have better visibility into the reimbursement process, making auditing employee expenses easier.

Key Takeaways

• The best way to deal with business expense reimbursements is to have a rock-solid reimbursement policy in place. This way, you can reimburse employees for their costs on your terms.
• Another great way to manage your expenses is to make use of a corporate card to eliminate the reimbursement process altogether, though this might not be feasible for all cases.
• As in many situations, your best option will most likely come in the form of digitization. Using a spend management platform like Pluto, will not only give you much better visibility over your employee spending but also streamline the reimbursement process for you.

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