URSSAF audits, employee fraud, complex processes—there’s no denying that managing expense reports in IT services companies is no walk in the park. And yet, neglecting this process comes at a high cost to the company—and even to employees. How can this be addressed?
In this comprehensive guide, we’ll walk you through managing your expense reports.
So follow the guide!
What is an expense report or business expense?
An expense report, or business expense report, refers to expenses incurred by an employee in the course of their work. These expenses are reimbursed by the employer.
Expense reports are not included in the calculation of Social Security contributions and CSG-CRDS.
What is the process for reimbursing expense reports?
There are several ways to claim reimbursement for business expenses:
- Reimbursement of actual expenses.
- Reimbursement in the form of a lump-sum payment.
- Reimbursement through a specific flat-rate deduction.
Reimbursement of Actual Expenses
As the name implies, this involves reimbursing the exact amount of expenses paid by the employee. These expenses must be related to the employee’s work.
In the case of actual expenses, there is no exemption limit, as we will see with reimbursement in the form of a lump-sum allowance.
Reimbursement of actual expenses applies to:
- Expenses Related to Working from Home.
- The use of information and communication technology tools.
- Moving due to a job transfer.
- Employees of French companies who are on assignment abroad.
- Employees on temporary assignments or who have been transferred from mainland France to overseas communities, or vice versa.
Reimbursement in the form of a lump-sum payment
The employer reimburses the employee a lump sum based on the exemption limits set each year.
Costs to consider:
- Meals at a restaurant.
- Workplace dining.
- Meals eaten off company premises.
- Mileage expenses.
- Long-distance travel (in mainland France, the overseas territories, and abroad).
- Expenses for temporary housing.
- Expenses related to business travel.
Please note that the lump-sum reimbursement does not apply to the following items:
- Executives covered by the social security system for self-employed individuals.
- Minority managers.
- Chief Executive Officers of corporations.
- The presidents and executives of simplified joint-stock companies.
Reimbursement through a specific flat-rate deduction
This is a deduction applied when calculating social security contributions, insurance premiums, and AGS (Association de la Garantie des Salariés) contributions.
For these provisions to apply, certain conditions must be met:
- The occupations of the employees in question (construction, artist, etc.).
- A cap of 7,600 euros per year per employee.
For any additional information, particularly regarding the applicable rates: URSSAF
What expenses are considered business expenses?
The types of expenses eligible for reimbursement are varied. We can distinguish between:
Restoration
When an employee, as part of their job, needs to treat a third party to a meal at a restaurant, for example.
Travel Expenses
When an employee is unable to return home. Two criteria must be met:
- One-way trip longer than 50 km.
- It’s not possible to make the trip in less than 1 hour and 30 minutes by public transportation.
The expenses covered include meals and lodging.
Transportation
These expenses relate to costs incurred by the employee when using his or her personal vehicle for work-related purposes (fuel costs, etc.).
This also includes the cost of public transportation or public services such as bike rentals.
Please note that travel between home and work is not included in expense reports.
Mobility
These expenses are related to a job transfer that results in a commute of 1 hour and 30 minutes or more, or a distance of 50 km or more.
Information and Communication Technologies
Covers expenses related to the Internet, software, cell phones, etc., incurred in the course of business.
Telework
Expenses incurred in connection with professional activities while working from home. These expenses may include necessary equipment, costs associated with adapting a room, IT expenses, etc.
Other expenses
Covers all other expenses that an employee may incur in the course of their work (work clothes, etc.).
Expense claim procedures
Mandatory information
When producing the expense report, certain items must be included:
- Issuer name.
- Date.
- Nature of costs.
- Description.
- Total amount.
- Means of payment.
Depending on the type of expense, other elements need to be integrated.
Invitation to the restaurant
- Guest name.
- The reason for the invitation.
Mileage expenses
- Reason for travel.
- Travel location.
- Number of kilometers travelled.
- The vehicle’s tax horsepower (which is used to adjust the mileage-based tax rate)
What should I do if I lose my receipt?
There may be times when an employee loses the supporting document. In that case, the employee has three options:
- Request a duplicate from the supplier concerned.
- Justify with a bank statement.
- Make a sworn declaration.
Fraudulent expense claims
False invoices
Whether they’re hotel, restaurant, airline, or train receipts, fraud involving fake receipts involves inflating prices to conceal expenses that are not actually related to business activities.
Invite a friend to lunch and charge the ticket as an invitation to a business meal, for example.
Another example: a higher cab fare.
Expense claims from abroad
It can be difficult to understand certain supporting documents from abroad because of the language—for example, Japanese. In such cases, some employees may take advantage of this to inflate prices and include expenses that are not related to the company.
Currencies
The exchange rate also offers an opportunity to receive a higher reimbursement. Without a conversion rule, the employee can benefit from the exchange rate.
Mileage costs
Reporting a higher mileage, for example, or using a car with a lower tax-assessed horsepower than what was reported. Incorrect calculation of mileage expenses is a common form of fraud in the workplace.
Duplicates
Use the same receipt to be reimbursed twice.
Expense claims on unpaid invoices
For example, an employee submits an expense report for a restaurant meal even though he was treated to it.
Business gifts
Give people gifts paid for by the company that are normally intended for business partners.
How can I prevent expense fraud?
To prevent expense report fraud, the company must establish guidelines for business expenses, including:
- A budget tailored to employees’ actual expenses and compliant with regulatory limits.
- Receipts for expenses which must accompany claims for reimbursement, as well as compulsory information.
- Expense-tracking software to help manage this time-consuming task.
Sales Tax and Expense Reports
A business can deduct the VAT on certain business purchases. This is referred to as deductible VAT.
Certain conditions must be met, and some purchases are not eligible.
Conditions for reclaiming VAT
- VAT must appear on the supporting document, such as an invoice.
- Respect the deadline, i.e. the month in which the purchase is paid for.
- The purchase must be used for business purposes and not more than 90% for private use.
Ineligible purchases
- Housing for managers and employees is not eligible, with the exception of free housing for security, guard and surveillance personnel.
- Transportation vehicles included in the company’s assets (transportation companies, driving schools, etc., are excluded).
- Business gifts (with the exception of those of very low value).
- Some petroleum products.
- Service related to ineligible goods.
IT services companies: How Can You Optimize Your Expense Report Management?
To optimize the management of your expense reports, you need to implement two elements:
- A professional spending policy.
- And expense report management software.
Professional spending policy
This will allow you to monitor your employees’ expenses to prevent abuse and fraud. It also saves the company money.
For example, you can set up a workflow-based approval system, set spending limits by expense category, and so on.
Expense Report Management Software
Implementing expense report management software will allow you to automate the various steps in the expense report process and also:
- Reduce manual data entry, and therefore data entry errors.
- Enhance the employee experience through technologies that facilitate the often time-consuming and non-value-added daily tasks.
- More assiduous monitoring of business expenses.
- Time-saving for both employee and manager.
VSActivity: Software That Manages Your Expense Reports (and More)
VSActivity is an ERP system that includes several modules for managing a company’s administrative operations. In addition, its “Expense Reports” module allows you to:
- To manage and monitor expense reports.
- To be approved via a workflow system.
- To track reimbursements.
- And even to advance funds.
The software includes a mobile app that allows your employees and managers to manage their expense reports on the go.
Want to try out expense report management on VSActivity?
Request a free trial to test vsa’s features in a customizable test environment.
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