A Friction-Free Staff Expense Process

Staff Expenses can be an enormous source of friction in a business. The objective of this article is to provide the reader with the best options to manage this process with as little cost in administrative time as possible.

Xero’s Staff Expense Feature

Xero’s expense claim feature via the mobile app is by far the most efficient staff expense submission method on the planet. This is the golden standard by which we measure all other processes so let’s aim for this. I’d highly recommend having one system that your staff enter their expenses for reimbursement into and making it as fiction-less as possible. If your staff don’t incur job related costs then use Xero’s Staff Expense feature – easy.

Set each staff member up as a Xero user with Invoice Only ‘Draft’ permissions. This is enough permission to allow them to submit expense claims and not much else. Ensure they download the mobile app and organise a 15min session with each team to take them through adding a receipt and submitting a claim.

How Staff Expenses affect Job Profitability

If your staff incur costs on your behalf, then you need an easy way of reimbursing them with the appropriate internal controls in place to prevent exploitation. If your staff incur costs in delivering their work then you MUST be recording these costs against the jobs and projects they relate to in order to measure job profitability.

Unfortunately because job costs MUST be entered into WorkflowMax or a similar job management system we’re stuck between our objectives of job profitability and efficient staff expense processes. One solution is to have all job costs incurred on a company credit card or series of cards. All job related costs need to be entered into WorkflowMax so I’d recommend encouraging staff who incur costs in delivering their services (parts, disbursements etc.) to use a company credit card instead of their personal funds. This will simplify the expense claim process and allow them to use Xero’s mobile app which is by far the easiest way for staff to submit expense claims on the planet.

How to submit staff expenses using WorkflowMax

If having staff incur job costs with their own funds is unavoidable below is the best method to manage it. We still want all staff to submit expenses in one place which means we must first create an admin job that non-client costs can be associated with. From there staff can enter their job costs through their dashboard against the appropriate jobs.

Next we will use the Purchase Order Manager’s ‘Bulk Purchase Order’ feature. When receipted, this will result in each expense being tracked to the respective billable or internal job and a summary invoice payable to your employee being created in Xero.

To do this follow the steps below:

  1. Firstly set up your employee as a supplier via Clients – Supplier Manager – New Supplier
  2. Set up some standard costs which employees can select (Expense Claim – Taxis, Expense Claim – Hotels, Client Entertainment, etc). You can allocate Xero Revenue and Cost of Sales/Expense Codes to each of these cost items, as well as tracking categories, if you wish.
  3. Issue a Bulk PO with the employee as the supplier.
  4. In the PO Description field you could Enter “Expense Claims for John Doe for the month of Dec2018′ for example.
  5. Add their reimbursable expenses assigning each expense to the correct job.
  6. Issue and receipt the PO.
  7. This will push the invoice over to the Accounts Payable Tab in Xero. You now have an ‘Account Payable’ in Xero to your employee-supplier (as opposed to an Expense Claim Payable’) , with the costs allocated in WorkflowMax to the correct jobs.
  8. When you pay the employee this transaction can be reconciled against the Payable Invoice in the same way as any other supplier invoice.

It is possible to map individual cost items to specific codes in Xero which will further automate this process for you.

The above method achieves both accurate job reporting, a single point of entry and the internal controls necessary to prevent double-payment of staff expenses or payment without approval. The two biggest weaknesses of this method are its lack of mobility (you can’t enter costs via the WorkflowMax mobile app) and paper receipts. Your staff will still need to collect and submit their paper receipts prior to approval of their expense claim.

If you’d like to discuss the best staff expense process for your business I’d recommend booking a quick session with us using this link.

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