Recent surveys indicate that 71 percent of organizations depend on spreadsheets to collect data for their business. It's not 1990 anymore, though, and software companies have worked hard to develop more efficient solutions for managing information.
Expense policies are a great example. A typical business may be still relying on archaic methods such as spreadsheets to track expenses. On the other hand, new softwares come with some amazing features that can streamline your expense reporting procedures.
Keep reading if you're one of the many businesses that need to update your expense policy.
What is regulatory expense policy compliance
To understand compliance with expense policies, you first need to understand the term "compliance."
Regulatory compliance refers to complying with the laws set out by both the Department of Labor and the IRS. When an organization adheres to the laws and regulations that are relevant to its specific business, then they are in regulatory compliance.
If your business does not comply with these laws, then you and your business open yourself up to the possibility of legal punishment. You can even incur federal fines.
Why is expense policy compliance important?
Policy compliance refers to how employees respond to business policies. When a business has a stated policy and employees follow it, they comply with the business policy. The employee who does not adhere to the policy is not necessarily breaking the law, but the employee is not staying true to the rules of the company. The company would call him non-compliant.
When creating compliance policies, a company will identify the risks and then seek to mitigate them with these stated policies. For a company to make sure it stays compliant with the law, the powers-that-be draft their policies. The policy should adhere to the law and work in the best interests of the company.
Consequences of expense policy non-compliance for employers
Whether the business or the employee does not comply, everyone loses.
On the business owner's end, when a business fails to comply with regulations, the Department of Labor and the IRS get involved. Whether you break the law by accident or on purpose, the government will treat you the same way.
Employers may have to end up paying back an employee and even reinstate fired employees when the government steps in. If you violate a law, you may end up in front of the National Labor Relations Board for investigation. An unfavourable decision will cost both time and money.
Failing to comply with IRS requirements will result in a stiff punishment as well. You will most likely end up having to pay a fine, and you may even take on felony charges and have to spend time in prison.
Consequences of expense policy non-compliance for employees
When employees fail to comply with company policies, everyone suffers.
If your company does not have an accountable plan, employees lose. When an employee travels and then hands in receipts for their travel expenses, their expenses may become taxable. If you do not have a compliance policy, any money a company gives for reimbursements counts as income.
As a result, employees will lose out on personal money. They end up spending their own money for necessary expenses, and this lowers boost morale.
When an employee travels for work and is working within the boundaries of expense policies, he feels secure. He knows his company is taking care of him, and as a result, he works hard for the company. For this purpose, make sure that during the employee cross-training or onboarding process, they are aware of such important things.
Strategies to improve expense policy compliance
You may or may not have a current expense reimbursement policy. Even if you do, audit it. Take time to make sure that it is complying with federal labor laws and tax laws. Also, ensure that it matches the corporate culture you're attempting to create.
Draft effective policies to promote expense policy compliance
- Analyze your current travel and expense policy and expense reports, and then look for your most prominent offenders. Typically the same few people will fail to adhere to policies.
- Once done, ask those offenders - Why are they bending the rules? They may or may not have a good reason.
- As you revamp your policies, consider offering financial incentives to those who follow policies. In the end, providing a financial incentive could save you money.
- Everyone may already be on board with your new expense policies, but if you add in a financial incentive for adhering to the policy, you will see a boost in expense policy compliance.
Communicate policies for better expense policy compliance
- Take time to educate your team about your new travel expense policy.
- Conduct an informal meeting to take your employees through the policy.
- Set the policy where anyone can access it.
- Give your employees the tools they need to stay within the guidelines of the policy.
- Make sure you give them not just the policy but the “why” behind it.
- Employees who understand consequences like an IRS audit or a Department of Labor violation will comply more readily with the policy.
Simplify the process for all stakeholders
- You can simplify the process for all parties involved by using speciality software and not Excel to create expense reports.
- Expense management softwares are explicitly designed to ease the task of expense reporting and expense management.
- Your employees can comply more easily with your new expense report policy.
- An expense management software will also help incorporate the pre-approval for big employees' expenses, such as booking tickets and lodging.
How can Fyle help with expense policy compliance?
- Fyle is an automated expense management software that automates, streamlines, and simplifies the expense-reporting process. This means everyone walks away happy.
- With us, employees have clear policies and simple methods for reporting expenses.
- Employees will see automatic data extraction and can scan their receipts with ease. They also can take advantage of one-click submissions.
- The accounting department can dot their I's and cross their T's with a smile because the policies are clear, and the software makes their jobs easier.
- Finance teams are happy because they see compliance through policy checks. This eliminates the possibility of fraud.
Ultimately, Fyle helps all stakeholders stay happy while also keeping a check on the bottom line. For all of your expense policy compliance needs, contact us, or schedule a demo today!