The Compliant Receipt
Adam Bamford, Expedite Services Manager says Finance Directors need to work more closely with payroll and employees to increase awareness and knowledge of what constitutes a compliant receipt for business and VAT purposes. By doing so, FDs can save time and money for the business.
Have you ever considered how long it takes each of your employees to find, check and file their expenses receipts; to unfold each receipt and check it for dates, VAT numbers, and item descriptions? Even if it only takes 45-60 seconds per receipt to check the basics, can you imagine how much time that adds up to for your entire workforce over the course of a month or a year? What’s more, have you ever thought about how long it takes your team of line managers and payroll officers to review and approve each of those receipts?
The good, the bad and the ugly
In our own receipt handling facility, our rate of return i.e. receipts we return to our customers’ employees for extra checks, is anywhere between 10 - 60% of total receipts. This does depend on the ‘expenses maturity’ of the business, or how well educated the employees are in terms of what can and can’t be claimed. If your line managers or payroll teams are returning receipts and asking staff to re-submit claims, it’s adding extra time to the already unnecessarily lengthy process.
How to get compliant receipts and reduce lost productivity
Assuming you handle receipts in-house, firstly, you can save time for the payroll team and line managers by providing suitable staff training on expenses receipts. It’s sensible to build a team of champions; people within business units that can be trained in receipt handling and who can be relied upon to pass on best practice.
Second, if you’re not already using an electronic system, get one. A good expenses management system will help collect the supporting data needed for accurate reimbursement, help you to reduce expenses costs, speed up the entire process for claimant and payroll and increase VAT recovery.
Third, to reduce wasted time for payroll and line managers and, to improve compliance, ensure that your employees are providing receipts which meet these 16 validation checks:
- Is the invoice total/total amount paid visible?
- Does it include a supplier name and address?
- Is there a VAT number present?
- Does the receipt cover multiple VAT rates [a composite rate]?
- Does it have a date of purchase?
- Is there an item description and does it match what the claimant is claiming?
- Can you be confident that the receipt is original?
- Is it actually a receipt [i.e. not a photo of a coffee cup, for example]?!
- Is an invoice number present?
- Is the recipient business name visible?
- Is the Amount Excl. VAT visible?
- Is the VAT amount visible?
- Can the VAT rate be identified?
- Is the Amount Incl. VAT visible [item totals]?
- Does the receipt only relate to one expense item, a single receipt?
- Total [if UK non VAT receipt]?
Sharing examples of good receipts and providing information on the validation checks should form part of your training programme for employees.
There are other checks which relate to VAT reclaim and should be performed by a competent payroll officer. These are:
- If the spend is up to £25, a basic six- point check is sufficient, unless it is made up of composite VAT rates. 0% and 20% are fine, but VAT rates of 5% and 20% would need to be separated
- Spend of £25 – £250 needs more supporting evidence and must apply to a single expense type
- £250+ is classed as a full invoice and needs to show all 16 points are there and can’t be composite
Lastly, consider a completely outsourced service to handle your staff expenses receipts. Although this service would cost money, it will be small in comparison to the indirect and direct costs you are already incurring handling receipts yourselves.
The outsourced service should be able to reduce the time your employees and payroll teams spend on expenses by managing the receipt scanning, receipt validation process, payment/reimbursement and compliance information to ensure you’re fully up-to-speed on current HMRC legislation.
It should combine simple processing technology where claimants can input their expenses data and receipts [such as via a mobile app], and make it possible for them to simply put their receipts in the post. The service should take care of the rest.
A good outsourced service should also help to reduce the re-validation rate too. In our own centre, we find that generally after 4-5 months of working with us, receipts being returned to employees goes down to 10%, i.e. a 90% pass rate.
The complexity of information receipts contain and, details required by HMRC for compliance, is growing. Your employees and payroll teams are wasting time, and money, through lack of training, poor understanding of the compliant receipt, lack of digital systems and being too slow to grasp professional, outsourced services. Now is the time to change.