Several of our clients have recently had problems being able to produce all
the required receipts to substantiate their employee business deductions.
Our research indicates that keeping up with paper receipts can be
eliminated, or significantly reduced if you go electronic.
To initiate an electronic reimbursement arrangement, you as the employer
should get in touch with a credit card company to provide business credit
cards to anyone within your company that will be travelling for business
reasons. Instead of having to write everything down, all the information that
you require about the employee’s expenses will be automatically sent by the
credit card company to you.
Important information about transactions such as the date of the charge, the
amount of the charge, and the name and location of the merchant all appear
on the electronic receipts that the credit card company will provide you.
Once you have all the electronic receipts, you’ll want to enter them into a
database. Instead of paper expense reports, your employees will log in to
this database and create an electronic expense report. Your employees will
fill out the necessary information such as descriptions of each expense, the
purpose they served, other parties involved (for entertainment expenses),
and so on.
Once you approve an expense report, you’ll need to pay the credit card
company for the expenses as laid out in the report. Any charges that are
made to the credit card that aren’t mentioned and approved on the expense
report should not be reimbursed to the employee. Since non-deductible
business expenses should be considered as wages paid to the employee,
personal expenses should not be reimbursed either.
If an employee incurs a business-related charge but for some reason does
not pay with the business credit card, they are responsible for submitting
paper receipts and a paper expense report. Also, if a merchant provides a
receipt that does not itemize all the items within the charge, your employee
is also responsible for providing a paper report describing each item within
the charge. To eliminate as much paperwork as possible, make sure your
employees are aware of this.