ERP & Finance Management

Complete guide to business expense reports

30 September 2021

10 min
Found in the majority of companies, expense reports allow the reimbursement of professional expenses incurred personally by an employee or manager. The reimbursement of expense reports is strictly controlled by tax and accounting regulations, to which management also adds its own expense policy. Cegid Notilus helps you understand the issues related to expense reports, decipher the social and fiscal formalities behind them, and manage them optimally.

What is an expense report?

Definition of an expense report

An expense report is a document that an employee or a company manager files to obtain reimbursement of professional expenses paid from his or her personal funds. It can be travel expenses for a professional mission, restaurant expenses, hotel bills, or even expenses incurred for telecommuting.

What are the different types of expenses?

Meal expenses in the context of a working day. It can range from a sandwich to lunch at the restaurant.

Travel expenses for professional missions, reimbursed in the form of mileage allowances when the employee uses his or her personal vehicle, or through the reimbursement of toll fees, fuel costs, or transportation tickets.

Accommodation costs, usually for hotel nights when the employee travels more than 1.5 hours by public transport and is more than 50 km away from home.

Telecommuting expenses, some of which are partially reimbursable: internet and telephone packages, workspace set-up, a fraction of the rent corresponding to the space dedicated to the professional activity, etc.



How to make an expense report?

What are the criteria for a valid expense report, what to do in case of loss, and what are the deadlines for the employer to reimburse the expenses incurred?


How to establish a valid expense report?

There is no unique official model for expense reports. However, certain information must appear on the document for it to be valid and in compliance with tax regulations. For all expense reports, independent of the type of expense, the date, amount, and reason for the expense must appear. Other mandatory information may specifically concern mileage expense reports (location of mission, mileage, fiscal power of the vehicle if applicable), restaurant expense reports (name and function of guests if applicable), or accommodation expense reports (number of nights and balance paid). how to set up a valid expense note To preserve all information and simplify your expense report management, it is possible to use practical and pre-designed tools such as our actual expense report management software.


How to manage the loss of an expense report?

The expense report and its associated receipts are necessary in case of a tax audit, given that the firm’s reimbursements of professional expenses are exempted from social security charges within the limit of a ceiling set by tax authorities. Reimbursements are likely to be subject to an audit and, if done poorly, may result in a risk of adjustment. As an employee or manager, you must therefore provide a valid invoice with all the supporting documents required so that the company can make the reimbursement in compliance. If you lose these receipts, there are several possible solutions: Try to obtain a duplicate from the professional where the expense was incurred. In the case of small amounts only, provide a bank statement with an attached note explaining the reason for the expense and its details. Have the employee write a sworn statement if the expenses are small.


What is the deadline for reimbursing expenses?

The law sets a 5-year time limit for the reimbursement of an expense report by the employer, starting from the time of presentation of the report by the employee. In practice, expense reports are generally reimbursed within one month. The speed of reimbursement depends on the fluidity of the management of expense reports within the company, and in particular, on the efficiency of the approval workflow put in place. On the employee’s side, any company may impose a time limit between the date of the expense and the date of submission of the expense report for reimbursement.


How to reimburse your employees’ expense reports?

Reimburse lump-sum expense reports

The reimbursement of fixed-price expense accounts consists of paying the employee a monthly lump sum determined according to the URSSAF scales. The advantage of this solution is that the employee does not need to provide systematic proof of expenses. For the company, it allows for better control of expenses related to employee reimbursements.

Reimbursement of actual expenses

Conversely, the reimbursement of business expenses advanced by the employee or manager, i.e., the exact amounts of the sums incurred, is called reimbursement of actual expenses. During a professional mission, the employee must keep all the receipts showing the expenses incurred for travel, meals, and accommodation. The company does not have immediate visibility into these expenses.



How to manage employee expense reports in accounting?

Calculation rules, specificities, and accounting, we tell you everything!


What are the rules for calculating VAT on expense reports?

The company can recover the VAT on the expenses necessary for its operation and its development. When the employer reimburses the expenses of his employees, he can benefit from a VAT deduction on certain expenses, such as meal expenses: the receipts provided must therefore show the VAT rate applied, its amount, as well as the amount of the invoice including VAT. Please note that all catering invoices paid in the framework of a professional mission allow the recovery of VAT. For other types of expenses, there are specificities.


What are the specificities of VAT on expense reports?

For meal, accommodation, or travel expenses, there are some specificities to take into consideration.


Specificities for travel expenses

Only certain travel expenses are eligible for VAT recovery, including motorway toll tickets, maintenance or rental fees of a utility vehicle, parking expenses in some specific cases, and fuel fees with some restrictions. If the employee uses a passenger vehicle, VAT recovery is only possible at 80% on diesel and E85 and at 50% on LPG. There is no VAT recovery possible on gasoline, SP95, and 98, E10. In the case of a commercial vehicle, gasoline, SP95 and 98 and E10 do not allow VAT deduction either.

On the other hand, VAT recovery is 100% on other types of fuel. The mileage allowances paid to an employee who uses his own vehicle are not affected by the recovery of VAT. Train, bus, airplane, and boat tickets are not subject to VAT recovery, nor are regular parking tickets or car rental fees.


Specificities for meal expenses

Meal expenses incurred throughout a professional trip or mission, as well as during business meals and receptions, are eligible for VAT recovery. However, the invoices must be made out in the name of the company and mention, if possible, the names of the guests, the name of their company, and their position within their company.


Specificities for accommodation expenses

VAT cannot be deducted for any kind of accommodation expenses: neither hotel nor apartment rental bills can give rise to a VAT recovery for the company. The meal portion of a hotel bill, on the other hand, can be claimed as a deduction, provided that it is shown as a separate line item on the invoice.


How to account for expense reports?

Expense reports are recorded in the company’s accounting or purchase journal. Their total amount must be entered in the journal and then the expense accounts must be debited accordingly. If applicable, the deductible VAT account must also be debited. Finally, the employee’s account 467 is credited with the reimbursement of the expenses incurred.



How to reduce the processing time of expense reports?

There are 5 concrete ways to reduce the time spent on processing expense reports in your company:


1 – Audit the expense report expense item

Conducting an expense audit is the first step in optimizing expense report management. The purpose of the audit is to identify the sources of expenses and analyze their distribution. This will give you a better view of your company’s cash flow, particularly of the business expenses item. The audit report will allow you to adjust any excesses and open up communication with your employees on the subject.


2 – Define an expense ceiling

Cost control requires clear rules, which can then be customized according to the different types of positions and the constraints they entail (field agents, sales representatives, sedentary agents, etc.). Meal expenses, in particular, can be capped to avoid the excesses of the biggest spenders. Travel expenses can also be better controlled, with recommendations for more economical choices, such as public transportation beyond 200 km, for example.


3 – Establish a clear spending policy

To ensure that the rules are respected and management of expense reports is optimized, it is important to set up a clear expense policy, made available to employees in the form of a document (in any format) that will specify: The types of expenses that are eligible for reimbursement, The procedure for obtaining reimbursement, The deadline for submitting expense reports after payment, As well as any other rule or ceiling that is useful to simplify the processing of expense reports and better control this expense item.


4 – Optimize the approval process of expense reports

To streamline the approval process and save time in managing expense reports, it is indispensable to reduce the number of participants in the processing chain as much as possible. For most standard operations (meals, travel, accommodation), inputs from an operational manager, such as the employee’s direct supervisor, and a manager in accounting/administrative, are sufficient to assess the validity of the expense report against the company’s spending policy. More steps may be necessary in the exceptional cases of an overrun of expenses or if an expense is to be re-invoiced.


5 – Opt for the dematerialization of your expense reports

Managing expense reports is a time-consuming task for a company’s finance department, and it often interferes with the core business of accountants, management controllers, or administrative managers. Dematerialization of expense reports using specific management software saves time by simplifying and streamlining the low value-added tasks of entering, validating, and processing expense reports. Moreover, the storage of expense reports represents a significant cost for a company as receipts must be kept for up to 5 years in case they need to be presented one day in a tax audit. The secure dematerialization of expense reports offers the possibility of digitizing receipts. Paper versions can be thrown away (and recycled). The solution is ideal for both employees and managers, with a reduction in storage space, costs, and the risk of losing critical documentation.



Benefits of paperless expense reports

The dematerialization of expense reports is an important step in the digital transformation of companies: thanks to its many advantages, it contributes to making companies more competitive and efficient in their management. The simplification of expense report processing, for example, results in savings in time, money, space, and security.


Savings for the company

Expense reports processing represents a significant cost for the company on several levels. Financially, paid work time is invested in the manual management of the reports, while storage of physical receipts also generates additional costs. In the case of traditional processing, a lot of time is also lost in the manual entry of data in an Excel sheet, the unreliable approval workflow, the frustrating back-and-forth between the employee and the accountant, and the physical archiving of all the receipts. This time-consuming process is also costly for the company. It can be completely curbed however with an expense report automation and dematerialization software:


Time-saving for the company and its employees

An expense management solution automates as many steps as possible between the creation of the expense report to its archiving, thus considerably saving time for both the employee incurring the expenses and the ones involved in expenses validation and related accounting processes. The number of people needed in the process chain is reduced, and automation of the data entry process eliminates the need for double-checking. Data can be exported easily, which also simplifies the work of the accounting department and avoids double entries. Reimbursements can be made more quickly, with a positive effect on the company’s image and employee retention.


Reduced risk of errors

Automated data entry through optical character recognition helps avoid data entry errors, while dematerialization of receipts and centralization of data related to business expenses eliminate the risk of lost documents. A good expense management software supports the work of managers with duplicate detection and automatic control of the expense claims’ conformity with the company’s expense policy. Automatic processing of recoverable VAT and automated reading of scanned receipts also ensure that expense reports are managed in full compliance with tax and social security regulations.


A simplified approval workflow

The management of expense report approval from the cloud facilitates the transmission of reimbursement requests by your employees and streamlines the approval process. By choosing a configurable software, you will be able to design the approval flows to precisely fit the needs of your structure, with, for example, specific workflows depending on the type of expenses, the amounts incurred, or the concerned departments. Personnel involved in the validation process are automatically notified when an expense report has been sent to them. This facilitates the entire management of expense reports, from their validation to their accounting integration and reimbursement.


Digital storage of expense reports

Paper archiving is no longer mandatory since the law of March 2017 legalized digital archiving through a certified solution. Known as digital archiving with probative value, documents archived in digital format now enjoy the same legal value as paper archives. The advantages of dematerialized archiving are multiple: the durability of documents is ensured thanks to low risks of loss and alteration. Document storage on a server offers considerable time and space savings, while expense reports and receipts remain easily accessible in the event of an audit. Finally, limiting the use of paper is a key ecological issue.

The management of professional expenses is a must in a company, but oftentimes it involves significant cost and time-consuming tasks with little added value. Software have been developed to simplify the whole process of validation and reimbursement of expenses incurred by employees or managers. A major turning point in the growth of companies, digital transformation involves the automation and dematerialization of HR management. Current solutions dedicated to the processing of expense reports are part of this digital transformation which has become crucial for companies to remain competitive and optimize their administrative and accounting management.

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