Managing a small business takes a lot of effort, that much isn’t a secret. A day in the life of a small business owner involves seemingly nonstop planning, reviewing, preparation, budgeting, scheduling, etc. Smart small business owners always try to cut down on excess ‘work’ in every way possible in order to maximize efficiency and still achieve the desired outcome. Unfortunately, tracking employee expenses often ends up being an area of oversight for many new small business owners as a result.
Employees in general can incur business costs above and beyond simple payroll. According to Austin SEO consultant, sometimes employees may be entitled to reimbursement for certain expenses throughout the day that need to be tracked rigorously. These expenses can be related to gas mileage, wear and tear on vehicles, reimbursement for personal money spent on work supplies, etc.
- The Consequences For Not Tracking Your Employee
Expenses Can Be Severe
The consequences for not tracking employee expenses can be
severe; ranging from loss of revenue and profits, all the way up to fines and
audits from the IRS. While reimbursing employees for expenses is optional in
many cases, it is generally advised as it is both a tax deductible ‘write-off’,
as well as a way to create a better work environment. Here are some things that
you, as a small business owner, should know about managing and tracking
Rules of Employee Expenses from the IRS
The IRS has a few general guidelines for employee expenses
that small business owners should bear in mind when tracking and filing.
- Always have a receipt for employee expenses over $75.
- Do not reimburse employees for citations or fines as a
result of illegal activity.
- Expenses should be submitted to the business no later
than 60 days following the date of the expense incurring.
- Employees should provide as much context for their
expenses as possible. This can include time and date, location, reason for the
expense, and vendor.
- How To
Track Employee Expenses
A common mistake among small business owners is logging and filing their employee expenses by hand. This can lead to paperwork being lost, calculations being mishandled, and delays setting back the reimbursement of the employee. The best practice is to implement employee expense tracking software into your daily computer system routine.
Programs such as Quickbooks, Expensify, Abicus by Emburse, etc.
There are numerous programs designed to help small business owners track and
manage employee expenses and keep information filed for tax season. It’s up to
you how you prefer to manage these expenses, and which software works best for
- Employers Should Have a System in Place
As an employer, you should have a system in place with your
employees that ensures that they turn in their expenses in a timely manner. The
largest hurdle that small business owners face is delays due to employees
forgetting or neglecting to turn in their receipts. It may seem harsh, but
consider implementing a hard ‘deadline’ for turning in expense reports from
your employees; otherwise they forfeit their reimbursement. It is just as
important to keep your employees on-track with this as it is keeping your own
records in line.
Bear in mind that it is a good practice to include in your
reimbursement policy some discretionary exceptions. Sometimes employees have a
good reason for being late, try to have a detailed but fair system in place!
If not managed properly, employee expenses can quickly get
out of hand for new small business owners. Employee expenses, when left to run
amok, can cause massive loss of revenue for a business. It is crucial for small
business owners to keep a very close eye on all of the money coming in and
going out. Employee expenses is not an area of business that small business
owners should cut corners in.