Errors and fraud in employee expense reporting happen more frequently than you might think. In fact, small businesses around the world lose approximately $3.7 trillion a year to employee theft, fraud, or misuse. Although that may be too large a number to grasp, any small business owner may be familiar with small employee transgressions that can add up to tens of thousands of dollars per year in losses. However, there are ways that small business owners can properly manage employee expenses. Recently I spoke with Farhan Ahmad, CEO of Bento for Business. Launched in March of 2015, Bento is the only technology-enabled expense card solution for small business employees. Bento offers real-time spending controls on employee credit cards. Employers can turn on and off cards or set spending limits in one click on their dashboard, and no expense reports or receipts are required.
Ahmad offered these three ways for small businesses to better manage employee expenses:
- Provide employees with pre-paid expense cards. Cash is hard to track and credit cards are way too risky to give to multiple employees, but pre-paid expense cards are a safe and efficient way to manage expenses. Sharing a company card, even between 4 people or less, is not always the solution because all jobs and employee expenses will vary. A technology-enabled solution allows business owners to see where their employees are making purchases and tracks their current spending levels.
- Focus on preventing unauthorized employee expenses rather than on a reporting tool. There are tons of solutions that make it easier to create expense reports. These may help with administration; however, they rarely help manage and reduce expenses. A recent study found that 85% of employees overstate their expense reports. Business owners should look for solutions and processes that help them prevent unauthorized expenses, not just report them. Often times, just the presence of such a system will deter significant misuse.
- Automatically track employee expenses with an accounting software. Small businesses are required to report their expenses annually to the IRS. They often submit their taxes using a Profit & Loss statement. Before they reach that point, the easiest way to track and summarize how much their employees spent per category (such as gasoline, food and office supplies) is through an automated accounting software such as QuickBooks. There’s no need to manually add up employee expenses for the year.