How to Get Employees to Fill Out Expense Categories Correctly on Reports

Published July 25, 2017
man and woman sitting with computer

Expenses are a huge part of any business. Many consider the mantra spend money to make money a tried and true philosophy. However, you also need to make sure that those expenses are properly accounted for. Your shareholders need to know where their investment capital is going, your billed clients need itemized expense reports, and you need accurate information for IRS year-end returns and audit defense. Since many business expenses are deductible, they should be properly categorized and accounted for.

To properly report expenses to the IRS, internal auditors, or clients, they first need to be entered properly. That might sound simple. However, as any accountant knows, properly entering travel, meal, and entertainment expenses is not the forte of many non-accountants. After all, salespeople, and other non-accountants, are less interested in the minutiae of accounting than with their day-to-day duties.

Create Clear Categories

One first step you can take towards proper expense reporting is to create clear categories. You might even want to have several different expense reporting sheets to cover different sorts of expense. When you break down expenses into broad categories, employees will have an easier time with proper reporting. For instance, you could have reports that include items such as the following:

  • Administrative Costs
  • Equipment
  • Supplies
  • Transportation
  • Airfare
  • Car Rentals
  • Lodging
  • Meeting-room Rentals
  • Meals
  • Client Entertainment
  • Event Planning
  • Event Promotion
  • Event Coordination
  • Catering
  • Business Development
  • Professional Organization Memberships
  • Private Club Memberships
  • Periodical Subscriptions
  • Trade Show Fees
  • Presentation Materials
  • Promotional Items
  • Research & Development

Employee Handbook

One place to start with proper expense reporting is the employee handbook. When you include chapters and sections that clearly define each expense category, your employees will have a handy resource that will keep their reporting on track.

To reinforce the information included in the employee handbook, the accounting department should put together presentations to review all of the information. You could design presentations for specific departments. For instance, your sales team will likely be interested in how to report travel expenses, and the R&D team will need to know what is appropriate for their expense reports.

These presentations can break down general categories for employees. Your sales team may need to see that the general category travel should reflect itemized expenses such as airfare, in-flight meals, lodging, client meals, meeting-room rentals, and car rental. The R&D team likewise may need to see how to itemize expenses such as focus group studies, modeling materials and software, and research materials.

Expense Software

Expense software alleviates much of this difficulty. A strong software package that employees access via their desktop or mobile device can allow seamless expense entry. If, for instance, they have multiple receipts for the same chain of restaurants, they might not recall which corresponds to what client or account. However, if they can properly enter the expense as soon as they pay a bill, this instant availability may help them avoid confusion later.

Expense software can also help facilitate proper reporting of travel expenses. Employees can book their flights, car rentals, and hotels through the software, which often comprises the bulk of their travel expense. The software can be set up to refuse to resolve the expense without proper information such as a client code or other specific categorization. This should reduce the need for your accountants to seek clarification on an expense report.

Since the software allows real-time updates to expense reports, accounting professionals can monitor how various expenditures are recorded. If problems arise, accountants can contact employees to discuss and amend the difficulty in a timely manner. This is a great help when new employees are learning the ropes of expense reporting. After a few expense reports are entered, the employee should have a better grasp of proper expense entry.

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ExpenseWire is a wholly-owned subsidiary of Paychex, a trusted name in the HR business that serves over half a million small and medium-sized businesses nationwide. Our expense management software captures expense data at the time of purchase, then flows that information into your reimbursement process and accounting systems.

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