In the global marketplace, in which we now all operate, travel is an inescapable element of business life.
Despite video conferencing technology, there is still no substitute for a face to face meeting. Face to face meetings reduce the chance of misunderstandings, demonstrate respect and commitment and open the way to further business opportunities. Oxford Economics has found that face to face meetings are twice as successful in terms of brokering deals, than other forms of communication. Many major companies won’t sign a contract without a face to face meeting between business leaders.
Employee travel expenses, as opposed to their daily commute, are legitimately tax deductible as part of company expenses, but a company needs to supply detailed information about how those expenses were incurred and that is a process that can waste a lot of finance department time. There are essentially three systems, used by companies to manage their employees’ expenses.
- Reimbursement – A decidedly old-fashioned way of doing things and not one that is popular with employees. The employee is required to use their personal finances to pay for expenses incurred on the company’s behalf. They must keep all receipts and tickets and wait until their claim has been processed before being reimbursed.
- Lump sum reimbursement – The company pays a predetermined lump sum to the employee irrespective of the expenses actually incurred. A simpler system but one in which either the employee or the company will lose out. The absence of documentation makes it hard for the company to claim the expenses as tax deductible.
- A mixed refund – Some items, food for example, are reimbursed under a flat rate system, whilst others, such as travel, require receipts.
All these systems are inefficient and time consuming. The use of a company credit card is often seen a solution, but the use of a card which is passed from person to person is fraught with security risks and is an active encouragement to staff overspending. Research suggests that around £1.9 billion of fraudulent expenses claims are made in the UK every year.
A fintech solution
Many companies are now switching to the use of a virtual company card as a way to manage their employee expenses. A virtual card is a prepaid card, this means that a set budget can be allocated to each member of staff, allowing for budget differentiation between the most junior and most senior employees. The card is a randomly generated number which is linked to a credit account, but which cannot be traced back to the company bank account and because it is not a physical card it cannot be cloned, lost or stolen.
Employees simply take a photograph of tickets and receipts and upload them via the app. At the end of the month they receive a PDF showing all their transactions. The employer has a real time overview of all employee spending, either by means of desktop software or a mobile app. The employer can adjust budgets, impose spending limits under specific headings or freeze a single card without the need to freeze an entire account. An efficient, secure and convenient solution to employee expenses.