CFOs reveal their employees’ most outrageous expense report submissions
Wednesday, August 28, 2019
If it’s your job to monitor and approve expense report submissions, you may have noticed an uptick in employees trying to submit inappropriate requests. According to a recent survey by Robert Half Management Resources, 56% of chief financial officers have observed an increase in unsuitable expense report submissions during the last three years.
Here are some of the more outrageous expense submissions that responding CFOs have seen:
- Trip to Italy
- Bear rug
- Jet ski rental
- Super Bowl tickets
- Invoice for another company
- Video games
- Pet sitting/animal rental
- Daycare/kids’ clothing/crib/toys
- Home air conditioner
- Home refrigerator
Why inappropriate expense report submissions have increased
There are at least two factors contributing to the rise in inappropriate expense report submissions. "Many companies could do a better job of communicating what is and isn’t appropriate to expense," says Dan DeNisco, senior vice president at Robert Half Management Resources. "Not knowing or understanding the policies in place could certainly be part of the issue."
When companies don’t communicate their policies well enough, they run the risk of employees not knowing what can and can’t be submitted for reimbursement.
In other cases, companies that manually monitor expense reports run a greater risk of mistakes — and he says this includes failing to catch problematic submissions. "Expense reporting systems make it easier to spot problems, including those that may have slipped through the cracks previously."
How to respond to inappropriate submissions
Here’s how you shouldn’t respond: let it slide and hope it doesn’t happen again. Instead, DeNisco says the managers whose staff submit inappropriate requests should talk to those employees. "Explain the company’s policies, and invite employees to ask questions," he says.
Employees may have items their managers don’t immediately see as business expenses, and the onus is on workers to explain. "For example, the employee may be treating a top client to a fancy meal, but this manager didn’t know it."
DeNisco believes that most people want to follow the rules. However, in addition to not knowing what the rules are, he says they may not know where to find them. "But if there are repeated problems, more severe action may be needed."
Ways to reduce inappropriate expense report submissions
Don’t keep your policies and guidelines a secret. "Regularly communicate guidelines and make them easily accessible for all staff, such as by posting them on the company intranet," DeNisco says.
He also recommends looking for ways to make the process easier, such as using an automated system. "This reduces the burden on staff submitting expense reports and the finance team reviewing them."
Monitor reports for patterns or red flags. "You may find there is a common misconception among employees that can be easily addressed — or something more serious going on," DeNisco says.
And you may get a gentle nudge from the federal government. “According to IRS rules that went into effect in 2018, companies can’t write off entertainment expenses unless attending the event has a direct business purpose,” says Bryan Eaves, CPA, an expense reduction consultant helping companies with change management, procurement solutions, and cost controls.
"These new tax rules will make it easier for CFOs to drive compliance by communicating internally that the company won't be able to write off costs of events like the Super Bowl anymore." Prior to 2018, Eaves said businesses could write off 50% of these costs.
He also recommends using technology, such as SAP Concur, for preapproval of expenses before they happen. "Preapproval is a best practice to better manage expense report costs," Eaves says. "By requiring trips, events, and any other category of employee expenses to be preapproved, there will likely be greater compliance to company policy."
Consistency is another best practice, and all employees should be treated the same regarding the policy. "If one manager is allowed to continually spend outside of the policy, it sends a bad message to the rest of the company as word gets out about the manager's behavior," Eaves warns.
Transparency can also reduce these outrageous submissions. It’s one thing to privately tell one manager to rein in their people. But it’s another thing to publish all relevant expense information for senior management to review on a monthly basis.
"This will provide visibility of the noncompliance areas and create a desire by management to change behavior and become more compliant," Eaves says. "Let's face it, senior managers don’t want people in their areas to be on that noncompliance list."
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