Paying Employee Expenses in 2023: Is payroll your best solution?

Paying Employee Expenses in 2023: Is Payroll Your Best Solution?

While we all aspire to accelerated business growth, it often comes hand-in-hand with some challenges and adjustments – particularly in the finance department.

Typically, as a business expands, so will the payroll. During this transition, it is important to keep all systems running smoothly, and if needed, look into solutions to keep the cogs turning more efficiently.

One example of your finance department’s key tasks is managing expenses. And while typically most larger companies who cover these payments through their payroll, do so without issue. However, for SMEs or new businesses, this can sometimes backfire and leave not enough funds to cover wages, which puts your business at risk of staff resignation.

Another downfall of using payroll to cover expenses is that it doesn’t necessarily provide enough transparency for the finance team to monitor company spending.

So what are the other solutions?

Understanding Payroll

Payroll’s key purpose is to manage and distribute monies given to contracted, salaried employees per their regular income – and that’s it. It wasn’t designed to be used to cover other funds, such as expenses.

The overall process of payrolling involves fund calculating, recording, and transmitting certain data and information (such as national insurance payments) to employees and government bodies alike.

Why Paying Employee Expenses Via Payroll is a Bad Idea

While it may seem like a simplified, no-nonsense way to manage expenses – using your payroll to pay these funds is a fool-hardy idea. Here’s why:

  • All employee expenses need to be tracked and traced to the specific retailer/supplier, which can be tedious and time-consuming, especially if employees regularly use expense-covered products or services.
  • Some employees aren’t 100% reliable when it comes to submitting expense forms on time, which can cause big hiccups for the finance team because the expenses will need to be verified and signed off, which may cause delays in staff receiving their wages.

Other Solutions to Manage Employee Expenses

One of the best solutions you can implement to manage your team’s expenses is the Xero Expenses app.

How it works is this app allows you to seamlessly and effortlessly manage your organisation’s expenses by:

  • Taking photos of receipts and scanning them into the app, which is quick and easy, and also helps your company make steps towards being completely paperless.
  • Reimbursing expenses quickly and without delay or faff, and without slowing down your payroll process each week/month.
  • Monitor employee spending by using tools that aim to analyse and manage expenses.
  • Manage expenses while on the go. This means you can log in to your app anytime and anywhere to log/track mileage and other spending.

Benefits of the Xero Expenses App

Business apps are designed to make our working day smoother and to save precious time that would otherwise be spent performing menial tasks in an outdated, manual way. Some of the benefits of the Xero Expenses app include:

  • Uploading key receipt details in seconds, as the app’s tools scans the particulars and logs them into autofilled expense claims.
  • Expense claims and receipts can all be submitted electronically, saving time and money (and preserving the environment!) by being a paperless solution.
  • Receive notifications as soon as claims have been submitted.
  • Keep all expense info stored in one (online) place and access it at the click of a button.
  • Pay expense claims quickly.
  • Have accurate reports on employee spending.
  • Have the analytics to forecast budget and spending.

Find out about app plans here.

Other Financial Support

Managing all aspects of a company’s financial dealings can, and often is, a full-time job, which, for smaller companies, or companies looking to keep the headcount in the lower numbers, can be a challenge.

We provide SMEs with services that cover:

  • Accounting and bookkeeping
  • VAT
  • Payroll management
  • Advice for new businesses (both sole traders and LTDs)
  • Additional services, including Xero training, cashflow, budgeting, and forecasting, and one-off bookkeeping.

Book your free consultation here.

Disclaimer: The information presented in this blog post is accurate to the best of our knowledge and based on the latest available information as of the date of posting, which is 21 April 2023. However, please note that information, laws, regulations, and circumstances can change over time. Therefore, we cannot guarantee the accuracy, completeness, or currency of the information provided. It is always recommended to verify any information independently and consult with relevant professionals or experts for specific advice or updates. The authors and publishers of this blog post shall not be held liable for any errors, omissions, or outdated information, or for any actions taken based on the information provided in this blog post. Readers are encouraged to use their discretion and exercise due diligence in evaluating the accuracy and reliability of the information before making any decisions or taking any actions based on it.

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