Before the outbreak of the pandemic in 2019, working remotely was a luxury that only a few employees could afford. However, the situation in the marketplace has changed drastically since then.
Today, according to Statista, 45% of companies have gone completely remote, and 29% offer a hybrid workspace, revolutionizing how businesses operate.
However, the freedom that remote work provides entails several challenges. One of them is maintaining efficient communication, which can be tricky, especially if employees work across different time zones. Another is managing and tracking your business expenses.
When it comes to the former, many companies successfully navigate complexities using tools such as Slack, Trello, and similar instant messaging programs that allow teams to stay connected and track any task's progress. With regards to the latter, the picture isn’t so clear-cut.
In this article, we’ll shed light on the best practices for expense reporting in a remote work environment to ensure that you’re finances are always on track.
Let’s jump right into it.
Expense Management Challenges in a Remote Setup
Before we dive into the practices, let's first understand the challenges employees working in remote teams encounter regarding expense management. Most of these challenges wouldn't be such a big deal in a traditional office environment, but in remote settings, they can have a massive impact on the performance of employees and even lead to their disengagement.
- Lack of clear expense policies: Remote workers may have difficulties understanding company expense policies, especially if they are not clearly communicated. This can lead to confusion and uncertainty about what expenses are eligible for reimbursement.
- Tracking and capturing receipts: Handing receipts in remote work environments often requires using special digital tools and mobile apps, which can make collecting and organizing receipts stressful for non-tech-savvy employees.
- International expense management: Dealing with foreign currencies, navigating varying tax regulations, such as remote work taxation, and understanding local compliance requirements can be additional hurdles in managing expenses for employees who work across countries.
- Time zone differences: Timely expense reporting is another challenge for remote teams across different time zones. Delays in approval processes can impact the reimbursement timeline and create frustration for remote employees.
- Limited oversight and accountability: Since there's less oversight from managers or supervisors regarding spending management, employees may find it challenging to track their spending and ensure compliance with company policies.
- Delayed reimbursements: Due to administrative bottlenecks, lack of streamlined reimbursement processes, or inadequate communication channels, employees may experience delays in receiving reimbursements, impacting their morale.
See how TST Construction reduced their reimbursement cycle from ~2 months to 20 days with Fyle
- Inconsistent expense tracking tools: In companies that use different expense tracking tools, employees may face the problem of inconsistency, making it difficult to consolidate and analyze expense data for financial reporting or auditing purposes.
- Security and privacy concerns: Finally, the growing reliance on digital tools and online transactions means the added risk of potential data breaches and cyberattacks, which can make many employees uncomfortable when it comes to sharing financial data.
See how Fyle keeps your expense data secure
Also Read:
What Expenses Do Companies Pay For Remote Workers?
Here are some common expenses employers pay for remote workers:
- Home office setup: Remote employees often need to set up a dedicated workspace at home. Expenses associated with this include furniture, office supplies, and technology upgrades such as laptops, monitors, or printers.
- Internet and telecommunication: Companies often reimburse a portion or the entire cost of an employee's monthly Internet bills. If an employee heavily relies on a mobile phone, a company would reimburse these expenses, too.
- Visual meeting tools: In remote work, companies often cover the costs of video conferencing platforms, project management software, and team messaging apps to enable seamless communication and collaboration among teams.
- Remote training and education: Similarly to traditional work environments, remote companies allocate budgets to cover expenses related to online courses, webinars, certifications, or any other training required to support employee growth, including leveraging fintech software development services to enhance the learning experience and provide specialised training in financial technology solutions.
- Travel expenses: Although remote work eliminates the need for daily commuting, some companies may still have occasional in-person meetings, conferences, or team retreats.
- Home utilities: Since employees work from home, some home utility costs may be eligible for reimbursement. These include electricity, heating, cooling, and water expenses directly related to the home office area.
- Office supplies: Remote employees may require office supplies such as paper, ink cartridges, stationery, or other consumables to perform their work effectively. On most occasions, companies reimburse these costs.
- Health and wellness programs: Lastly, to promote the overall well-being of remote employees, companies may provide wellness benefits or reimbursements for fitness memberships, mental health resources, or ergonomic assessments.
- eLearning Tools: To support continuous professional development, employers often cover costs for eLearning platforms and online courses. These tools enable remote workers to access training, enhance skills, and stay updated with industry trends, all from the comfort of their homes. This not only aids in employee growth but also keeps the team adaptable and knowledgeable.
Also Read:
Best Practices for Expense Reporting in a Remote Work Setting
Now that we’ve covered the common challenges, the question is, what can and should companies do to overcome them and provide effective cost tracking without stress for both parties involved? Further down, we’ve compiled a few strategies you can implement to ensure that you’re a few steps ahead of the rest regarding expense reporting.
1. Establish Clear Expense Reporting Guidelines
One way to ensure there’s no confusion on your team is to establish clear policies and procedures for remote expense reporting. According to a survey conducted by Deloitte, 82% of organizations with remote employees reported having expense reporting guidelines in place. These guidelines should outline the following:
- The types of expenses that can be reimbursed
- Submission timelines
- Documentation requirements
Additionally, companies must communicate the reporting policies clearly and, if necessary, provide training sessions to ensure that all employees understand and adhere to them.
2. Choose an Expense Tracking System
Another step is to choose an expense tracking software. Make sure that you use one software across the board to alleviate the risk of any bias that can make reporting for remote employees confusing.
Research by Aberdeen Group indicates that companies using automated expense management systems reduced expense report processing time by 50% and decreased the average cost per report by 60%.
When choosing an expense tracking system, consider features such as:
These features enable employees to conveniently capture expenses on the go and provide real-time visibility into spending patterns.
3. Automate Receipt Management and Documentation
As we’ve stated earlier, handing over receipts is a task that most remote employees find pretty challenging. Is your team struggling with managing receipts? You might not know for sure, but embracing digital solutions can certainly streamline this process for everyone.
Adopt mobile apps that allow employees to receive and store digital receipts instantly. This also ensures a centralized cloud repository for storing receipts, simplifying expense tracking, and reducing the risk of lost receipts.
Accurate documentation is equally important. The Global Business Travel Association reports that 19% of reports contain at least one error, and it takes, on average, up to 18 minutes to find it, which makes it a challenging job for organizations to reconcile them.
With this in mind, it should be your priority as an employer to emphasize the importance of thorough documentation to avoid compliance issues and ensure timely reimbursements.
4. Define Expense Categories and The Approval Process
It’s also necessary to define clear expense categories specific to remote work for accurate reporting. Now that you know what expenses are common for remote work environments, you should break them into categories, such as home office equipment, internet expenses, virtual meeting tools, and so on, to manage remote work-related expenses more effectively.
Streamlining approval processes is another critical aspect. In this regard, the best thing to do is implement automated approval workflows based on predefined spending limits. This will help expedite the reimbursement process and reduce administrative burdens.
5. Managing Currency Exchange and International Expenses
Companies that work with employees across different countries often find dealing with currency exchange rates and international expenses challenging. However, you can make things easier for everyone. All you need is to take advantage of one of the automated expense management systems featuring tools and resources that simplify currency conversion.
6. Focus on Security and Data Privacy
Managing data security and privacy is of paramount importance in a remote work environment. Therefore, it is essential to implement robust security measures to protect sensitive financial
information, such as:
- Encryption protocols,
- Multi-factor authentication.
It is also necessary to regularly update software and educate your employees about cybersecurity best practices so that they only use secure VPN connections when making any transactions online.
7. Have Timely Reporting and Reimbursement Deadlines
Timely reporting of expenses is critical for accurately tracking finances and effective reimbursement processes. This is where employers should establish specific deadlines for their team to submit their reports. Organizing the workflow in this manner helps prevent delays and ensures accurate budgeting.
Furthermore, it is a good idea to implement direct deposit or digital payment methods to streamline the reimbursement process for remote teams. In today’s increasingly digital world, relying on traditional checks is no longer an option. Not only is it inconvenient, but it can also result in unnecessary delays and potential security risks, causing additional stress for the team.
8. Regularly Audit for Compliance
To maintain financial integrity and ensure compliance with company policies and regulatory requirements, it’s important to conduct regular audits. In fact, due to the decentralized nature of expense recording in a remote work environment, doing it is necessary to alleviate the risk of fraudulent activities.
Compliance with local tax regulations and reporting requirements is also essential. Companies must stay updated with tax laws and guidelines in relevant jurisdictions to avoid penalties and legal complications. The safest way to do this is to consult with tax professionals or reputable resources who know everything about tax obligations.
See how Fyle helps you be audit-ready and eliminate fraud through automatic policy and compliance checks.
Final Words
To bring it to an end, with remote work being the new form for many companies, effective expense reporting is a critical aspect of maintaining financial control and transparency. By implementing the best practices that we’ve shared in this article, companies can overcome the challenges of expense management and ensure that they are tracked accurately.
As an additional bonus, the financial transparency provided in remote teams leads to increased job satisfaction and budget efficiency, making it equally beneficial for both the employer and employees.
