expense report

expense report

The Importance of Accurate Expense Reports

1. Introduction

Customers are frequently charged a very sizable amount of money for the creation of a cost report. When they see the bill, they are frequently disappointed with the amount they have paid in respect to the capacities of the report. Basically the expense report is underutilized because of the measure of time the customer can bear to pay for. The business in general doesn’t understand the expense to-estimation of cost reports. This causes bringing down quality reports when there is pressure cut expenses. This is inappropriate movement to decrease costs, as the measure of cash put forth to get the cost report must be not as much as that when the cost report was done. Cost analyses are utilized to enhance the customer’s general productivity. This is characterized as a correlation of anticipated incomes and errors which makes referenced before. Ideal use is considerably more significant given there is a cost report concerning all work done by the CPA. The last issue with cost report usefulness is the trouble it takes to audit and dissect it. When income of a cost report is moderate it may take a long time before the report is reviewed and obviously the more extended the time the customer may overlook the purpose of the report. Customers who get their cost reports may wind up examining their duplicate of the report and the bill never knowing what its identity was the gathered information. For these reasons, it is plainly observed that there’s a requirement for intelligent post-examination of cost reports that isn’t at present being practiced.

Finishing a precise cost report is a basic piece of a certified public accountant’s activity. In a perfect world, the cost report ought to be finished and inspected by both the customer and the CPA. This implies recently made cost reports despite everything have an enormous level of brokenness. The reason for this paper is to investigate the different ways that expense reports neglect to satisfy their actual potential, and to give an answer that will increase the value of this procedure. Cost reports frequently neglect to satisfy their maximum capacity. They are commonly done toward the finish of a customer commitment as fast as conceivable so the customer can be charged and the CPA can proceed onward to the following activity. This regularly brings about the two players just playing directing the cost report has small importance to the genuine condition of the customer’s accounts.

2. Benefits of Accurate Expense Reporting

One very obvious benefit of accurate expense reporting is the ability to see where your company’s money is going. A recent survey by Robert Half Management Resources suggests that managing expenses is the top concern for CFOs. Expense data often provides a clear window into spending patterns or activity that is not in line with an organization’s priorities. This is particularly useful in a large organization where spending can easily be lost in the noise. For example, one of our customers, Japan Airlines, allows its financial controllers to quickly track spending in a variety of cost centers. JAL has found that by doing this, they have greatly improved the accuracy of data in their General Ledger. It is difficult to overstate the importance of accurate data in the general ledger, as this is the data that is used when making crucial decisions regarding the direction of the company. Not only does accurate expense reporting allow you to track money that has been spent, but it also allows you to see exactly where future spending should not occur. This idea of “correction through visibility” is something that was highlighted in Best Practices for Controlling Internal Costs, a report by Bain & Company.

The benefits of accurate expense reporting are significant. When employees understand the reasons behind recording their expenses accurately, they are more likely to abide by travel and expense policy guidelines. According to a report by Aberdeen Group, employees demonstrate a more disciplined attitude towards policy compliance when they understand the rationale behind an organization’s travel and expense (T & E) policies. Employees are more likely to submit expenses on time and take the time to ensure that the data is accurate. Accurate and timely data is further ensured via the automation of expense reporting, as automated systems can issue alerts for policy violations as a transaction occurs. Step one in compliance is data accuracy. Compliance can also be enforced with workflow tools, discussed in the next chapter. All of these methods serve to prevent fraudulent or wasteful spending before it happens, ultimately saving an organization money.

3. Common Challenges in Expense Reporting

Faculty and administrative staff are likely to find themselves constantly working with some kind of report or another, but expense reports are most likely the most common. Accurately knowing the costs, you incur and how you have used your budget is a standard accountability measure, both in and out of higher education. Whether it is a report from the faculty about how he spent his travel stipend, a staff member accounting for the cost of a recruitment dinner, or an administrator detailing the expenses from a conference, chances are that in all cases accuracy will be a challenge. The most common method for reporting expenses is the use of a computer-based spreadsheet to record the details of what was spent, why and when, and to summarize this information at the end. Usually a table is made for each expense on something like Microsoft Excel, but for the purpose of this essay, the author has only created a table to compare two methods using plain text (figure 3.1). Note that the spreadsheet method is a step up from those still using pen and paper, but the fundamental issues remain the same. With the conventional table creation being not too different in appearance, information can still be applied to those not using Excel. Given this, with a brief example, the author will compare the pen and paper and Excel method for expense report creation.

4. Best Practices for Creating Expense Reports

After employees have identified the expense and recorded the cost in a timely manner, prepare accurate expense reports. Again, use the effortless test. If it would be difficult to explain to a boss or a colleague why a particular cost was necessary, consider whether the expenditure should have been made in the first place. If it passes the test, gather the data in an organized fashion that will be easy for the employer to understand during the review process. Always keep in mind it’s the employee’s responsibility to justify costs, not the employer’s responsibility to discover justifications. Compiled evidence tracking the value derived from a particular cost is helpful in cases where an employer approves the cost during the review, but may request that it not be repeated in the future. Proper justification can mean the difference between guilt and innocence in this regard. In addition, provide a detailed description of costs incurred. A proper description ensures the employer will understand what the cost represents, eliminating confusion and the need for further investigation.

5. Conclusion

Understanding the various ways that expenses can affect a company’s financial statements is important in assessing the perpetual implications of employee spending. In essence, an expense represents an exchange of company resources. A cash transaction is simple to record, as it instantly depletes company cash. Consider the case of an employee dinner paid with personal funds. If the employee is to be reimbursed, the company cash will be depleted. Recording the expense reveals no net income effect. The most common form of company expense is on credit. It enables purchase of an item with delayed cash payment. If the employee uses a company credit card to buy a computer for his personal use, he has exchanged a company resource. The computer is an asset, and the subsequent monthly credit card payment is a computer expense. This transaction does not affect net income, as it represents acquisition of an equal cost asset. Failure to distinguish between company and personal resources in this transaction could result in improper classification of an expense and loss of the computer as an asset for company use. Purchase of a travel ticket and hotel stay is another typical expense. In some cases this may involve accrual of an expense for an exchange of no tangible resources. Failure to recognize this can lead to an unnecessary depletion of company cash. A tax implication exists for travel related expenses. If sufficient knowledge of expense implications is exercised, it may be possible to increase company tax deductions.

Embezzlement of funds is a recurrent problem in today’s business. Through embezzlement, employees steal a company’s funds or misuse company resources for personal gain. Whether done intentionally or not, incurring expenses is one of the easiest ways for employees to misappropriate company funds. Pulley (2001) found that over 10% of workers admit to having falsified or exaggerated expense reports. This combined with error due to carelessness could result in a significant amount of misappropriation. By gaining an understanding of the nature and extent of employee expenses, companies can more effectively prevent this problem. This paper highlighted the importance of expense monitoring and control, using realistic expense expectations and promoting detection of false or overstated expenses.