Managing expense reports can be extremely frustrating and time consuming. After all, how many times have your employees lost a receipt or forgot to submit a bill for payment, or a receipt was somehow lost in transit? The good news is that the latest trend in electronic scanning is helping businesses keep these frustrating losses to a minimum. However, this does not mean that new processes are infallible. Rather, it is crucial that you have several safeguards in place, such as the ones listed below, prior to implementing this process.
1. Establish a Clear Policy
Before introducing the use of scanned receipts and online expenses to your employees, you should have a clear policy in place. Your employees should know what types of receipts can be scanned or sent electronically, whom they should send them to, if additional approval is required and other pertinent information. Explaining the required steps to your employees will make this transition smoother.
2. Require Management Approval
One of the most common concerns business owners have with electronic scanning is that employee's may turn in fraudulent receipts. One of the best ways to prevent this from happening is to require all receipts to be approved by the employee's direct supervisor. The supervisor will be in the best position to know if the expenses are authentic, or if the employee deserves reimbursement.
3. Frequent Internal Audits
It is also recommended to perform regular internal audits of your expense accounts. Randomly, select a few dozen transactions each month and check for authenticity. You want to make sure the scanned copies meet all IRS or CRA requirements, and that the receipts' details are legible. Since these files should be easily accessible, an audit should not take very long to conduct.
4. Retain a Hard Copy
If you are concerned about your internal controls, you can use electronic scanning and still maintain hard copies of the receipts. You can request that scanned receipts be sent directly to your accounting office, but also require employees to follow up, by submitting hard copies. To ensure you actually receive the hard copy, you can hold payments in the accounting office until the receipt is officially received.
5. Staying Compliant with IRS Regulations
The main concern business leaders have is whether maintaining scanned receipt is compliant with all tax regulations. The IRS (Internal Revenue Service) has actually allowed American taxpayers to used scanned copies of receipts since 1997. However, this is not without a lot of restrictions. The scanned copy must be completely legible and readily accessible if requested by the IRS. In addition, the scanned copy must be an exact duplicate of the original and it must clearly show the vendor, date, prices and the items being purchased.
6. Staying Compliant with CRA Regulations
If your business is in Canada, you will find that the CRA (Canada Revenue Agency) has slightly stricter policies with regard to scanned copies. It not only requires all the same conditions that the IRS does, but you must also have strong internal controls in place; indeed, the CRA requires a complete separation of duties. The same person requesting reimbursement or handling the finances cannot be the one that actually scans the receipts.
Electronic scanning of all receipts is a lot easier than using only printed copies, and you reduce the risk of losing or misplacing any receipts. The most important thing is to have plenty of safeguards in place, even before implementing the new submission process with your employees. If you decide to maintain hard copies, you can store them in a different location and only access them when necessary. This will still free up space in your office and make checking your expense accounts quick and easy.
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