FTX made headlines last year with its sudden collapse. Court testimony highlighted the lack of internal controls within the company, ultimately contributing to its downfall.
Former employees and court filings revealed that FTX’s spending went unchecked, with millions of dollars expensed on lavish travel, sports sponsorships, and even luxury homes - many of which were approved via emojis on Slack.
It’s a cautionary tale in accountability, and the importance of having proper expense management systems in place.
But managing employee expenses can be a hassle, especially when claims have to be processed manually. When relying on manual expense management, reimbursing expenses can be subject to delays and errors.
Especially for global Web3 teams like DAOs, reimbursing expenses like conference tickets in stablecoins can be an additional challenge as almost no expense apps today support crypto payouts.
In fact, the average expense claim takes a whopping 20 minutes to process when done manually. When you have multiple claims to deal with every month, this can add up to a significant amount of time and effort for your business. That's time and energy that could be better spent on more valuable tasks.
The chances of errors in manual expense management are also high. In the UK, 1 in 10 employees submit expenses containing errors regularly. These errors can lead to incorrect reimbursements, wasted time and resources, and even fraud.
There’s good news, though. With the right practices in place, businesses can overcome these challenges, and streamline their expense management process.
In this article, we’ll explore some of the best practices for managing employee expense reimbursements to ensure the accuracy of expense submissions.
Best practices for managing employee expense reimbursements
1. Create an expense policy to set clear expectations
One of the most effective ways to do that is by implementing an expense policy that establishes clear expectations for your employees. Your expense policy should include guidelines for what expenses are eligible, how they should be submitted, and what the reimbursement process looks like.
To start, establish rules and requirements, including limits for different categories, per diems, and receipt requirements. Clear communication about what can and cannot be submitted is vital to avoid confusion.
Expectations for submissions and reimbursements should also be clearly defined, including the process for submitting expenses and how employees should expect to receive reimbursements. Additionally, it's essential to provide FAQs for employees to follow if they have any questions or concerns. To help you establish your expense policy, you can find various templates that can serve as a useful starting point.
The rule for claiming reimbursement is simple: purchases must be necessary for running your business. While expenses such as meals and travel costs can qualify as business expenses, they must be incurred during essential work-related travel, and not for recreational activities.
Keeping receipts is crucial for claiming tax relief in most countries. To ensure that expenses are valid and eligible for reimbursement, the IRS requires supporting documents. Your supporting documents should contain essential information such as the name of the recipient, payment amount, proof of payment, date of expense, and a description of the purchased item or service. This information must demonstrate that the expense was incurred for business purposes.
As such, your reimbursement process should require employees to submit receipts for business trips and other expenses. Furthermore, receipts allow companies to verify the legitimacy of all claimed expenses.