![]() “Expenses such as postage, travel and subsistence are costs included in the services a contractor supplies to their client,” explains Clare Rickman of contractor accountant Intouch. These expenses and Disbursements are treated differently for tax and VAT purposes and must be invoiced accordingly. You can then make any spending adjustments needed and please your employees.Contractors often incur expenses when delivering their services to clients, and some may also purchase goods and services on behalf of their clients. Pay your employees back quickly, while gaining insight into what's being spent and for what purpose. ![]() They make review and control simple, too. These platforms are also more efficient, which goes hand-in-hand with saving time and money. Plus, paper can be lost, misfiled or damaged in tragic coffee-spill accidents. Compare that with spreadsheets, where remembering which tab your expense belongs on and ensuring each cell has the proper equations make it that much harder to reimburse your employees promptly. You can sort the data by category, by vendor or by date. Using a cloud-based system that will let you capture receipts in this way means you can avoid the complexity - and errors - of re-keying information and managing spreadsheets. For instance, you may track them for each salesperson you have, you may track them by which department puts in the request or you can track them by client or project. Once converted by OCR technology, the data can be manipulated in pretty much any method that makes sense. These documents can be captured in multiple ways, including photographing them, emailing them directly to a cloud server, importing them directly from a computer or scanning them. More often, they rely on document management systems with expense-tracking features that use optical character reading (OCR) to input data such as receipts and invoices. This may be a spreadsheet, but many small and medium-sized businesses (SMBs) use contract bookkeepers or bookkeeping platforms. Often a budget solves this problem, with the added benefit that you don't have to approve every two-dollar purchase.Īs reimbursable expenses are realized, they should be recorded promptly using your preferred system. ![]() And while the annual list of crazy expense report submissions is amusing to read - from helicopter rides to work to hang gliders "to avoid a divorce" - you don't want your business to show up on that list. That would start with your budget for certain expenses. Give guidelines to employees asked to spend their money on your behalf. It also helps when employees understand what they're expected to do on your behalf. Related: Don't Throw Money Away By Not Monitoring Expense Reports Rules are needed Prompt payment also underscores your commitment to them as valued employees. Don't leave them on the hook for doing you a favor any longer than necessary. You may pay them a salary, but it's not up to them to carry cash or expenses to earn you a profit or secure future business. First, the business - and the risks and expenses - is yours and not theirs. Examples might be a plumbing or electrical contractor whose employee may need to pick up a plumbing or electrical fixture at a hardware or building supply store.Įmployees who lay out their own funds on behalf of your business deserve to be repaid straightaway for myriad reasons. Some businesses often re-bill expenses to a customer. The importance of being timely and accurateĪccuracy in tracking your business expenses is important because most, if not all, purchases made by an employee on behalf of your company are for items and services that can be deducted against your taxes. Other common categories of reimbursable expenses may include training, professional dues, supplies, tools and parts and entertainment (note, while you may elect to reimburse employees for expenses such as taking a customer to a sporting event, those costs are not deductible for you and haven't been since the 2017 Tax Cut and Jobs Act). Other times, employees may be traveling on business with their own vehicle, in which case you should, of course, reimburse them for their mileage and vehicular wear and tear. Those that cannot be covered in advance can include unplanned flights, cab or rideshare trips, meals or hotel stays. Related: 5 Simple Steps to Prevent Expense Fraud What you can do - and what you should doĪ wide range of business expenses allowed by the IRS often need to be paid by employees.
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