58% of CFOs say expense claims rising: “outrageous” reimbursements include speeding tickets, toys and embezzlement expenses

In a new survey of 300 CFOs, respondents indicated an alarming increase in “outrageous” expense claims from team members. [1] Fifty-eight percent of CFOs in Canada report claims are increasing, versus only 32% reporting no change. Seventeen percent reported a “significant increase” in expense claims over “the last three years.” Among the ridiculous claims made were:

  • Pet-sitting and pet food
  • Toys
  • Speeding tickets
  • Cowboy boots
  • Carnival costume
  • Hot air balloon rental.

Granted, the speeding ticket was “to make a client meeting on time,” and the cowboy boots were “to wear to a client meeting in Calgary” [2] — but after the initial chuckle-factor, companies have to deal with swelling, and inappropriate expense claims.

Among the ones that seem crazy, but are a little more acceptable were:

  • Cleaning bill for dog poop removal
  • Popcorn maker
  • Lawnmower
  • A day at the spa

The most incredible of all: “Embezzlement expenses.”

These claims are made, despite the fact most of the companies surveyed have a clear expense reporting guideline in place. Strict compliance and management are the key factors to reducing abuse.

Expenses inappropriately up

The survey indicates that expenses claims are inappropriately up. Only sharp, pro-active management — a no exceptions policy — can prevent abuse.

Claims systems reported by CFOs in the survey were mostly via software submissions:

  • Internally developed software: 51%
  • Third-party software systems: 39%
  • Manual submissions (no software): 10%

The most important safeguards: clear policies and strict management

Many companies allow “inflated” expenses to avoid employee bad will with valued teams. However a few recommendations can prevent this issue:

  • Publish and educate team-members on policy for expenses
  • Use a third-party Payroll Management team to be the “bad guys” in turning down claims
  • With internal teams, be strict — no exceptions for some employees (information travels fast internally)
  • Monitor strictly at all times. After the fact review isn’t helpful.

Do you need help crafting a fair expenses policy? Do you need help with managing reimbursements? Contact the Payroll Management experts at Pivotal Solutions>>

Little shame in claims

Since it’s clear employees have little shame in asking employers to reimburse — it’s worth a try? — the issues are broader than costs and bottom lines. There’s a boast-factor in having claimed a “live octopus as a pet”) on an expense form. If some “get away with lit” it can demoralize teams. Or worse, turn it into a game to see who can “beat” the system. Beating the “man” may seem fun, but it’s technically a form of expense “theft.”

Little expenses add up, from parking meter change (with no receipt) to big-tickets like rental homes. Only a clearly articulated policy — with examples — and a no-compromise Payroll management or accounting team can prevent widespread abuse.

 

Infographic higlighting some of the findings in the survey of CFOs in Canada.

 

 

Policies to consider

What do you include in your expense reimbursement policy? That will depend. Salespeople who are highly valued may demand — and receive — leeway on expenses. Whether you are reimbursing some more outlandish expenses or not is up to your company, but it’s important it be equal for all to avoid erosion of trust.

The main points to include in your Reimbursement Policy include:

What can be claimed and when?

What can be claimed? Be clear. Is travel and entertaining clients covered? Do you reimburse without a receipt (for example parking meters). Don’t forget cellular phone costs and entertaining clients. It is unreasonable to expect your team to ask “after the fact” if something is allowed. Be precise and map out what is, and what is not, reimbursable. If it is easier, make a list of the absolute “no to reimbursements”: not necessarily cowboy boots, but you could specify “no clothing,” for example. You may have to create multiple lists, since salespeople may require extra reimbursables — but usually not speeding tickets when they are late for meetings.

The most important guideline to establish: do some expenses require pre-approval? If so, which ones? Don’t be vague. For instance, you could stipulate “mileage to client meetings is reimbursed at X per kilometre; all other travel must be pre-approved.” Similarly, policies on “receipt or no receipt” must be stated clearly.

When expenses can be claimed must also be clear. For example, you might stipulate, “expenses can only be claimed within 30 days or the date incurred” or any other guidelines. The key is to be consistent and enforce that timeframe to avoid confusion.

Enforce policy

It’s often easier to assign one designated enforcer — often an outsourced supplier — to avoid any perception of favoritism. “Why did she get cowboy boots, but I don’t get my speeding ticket covered?” — that sort of thing. If it’s a third party, enforcing fixed rules, it’s similar to a deputized sheriff. No one blames the law-enforcer for making sure the rules are followed.

If you aren’t in a position to outsource, of designate an “enforcer”, the next best thing is strict enforcement from managers. “I’m sorry, rules are rules. We can’t reimburse your speeding ticket.” As soon as an exception is made for one, the rules become unenforceable.

Verify legitimacy

After verifying the expense falls within the reimbursable time you established, make sure you also have guidelines that give your “enforcers” time to check receipts and verify policy. For instance, some managers will verify mileage on Google Maps. The point is not to be anal about the rules, but to be consistent. Allow enough time in your approvals process in case you have to personally ask the team-member about an expense.

Transparency

To avoid negative impact on morale, it’s best to be entirely transparent. Imagine a salesperson boasting about how the company reimbursed cowboy boots, when the other salespeople in the lunchroom were turned down for mileage. Avoid grievances and badwill by being open, transparent, fair and consistent at all times. Don’t make exceptions for top performers, for example, or you may disincentive the moderate performers. Don’t make a single exception, because the next time they will expect it again.

In short

  • Have rules
  • Enforce them
  • Make no exceptions
  • Use arms-length enforcers where appropriate.

The easiest way to do this, without damaging morale, is through an outsourced enforcer. Do you need a Payroll Management team with the expertise to help out? Do you need help crafting your expense policy. Contact the experts at Pivotal Solutions:

 

Payroll Contact

 

 

NOTES
[1] Survey of 300 CFOs “Markets Insider” from research compiled by Robert Half Management Resources.
[2] CFOs reveal most outrageous expense submissions Consulting.ca

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