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How to get executives to complete monthly expense reports

I have a VP that is not accustomed to submitting monthly expense reports. The previous CFO didn't require this person to submit them so when I request the details of his expenses he always says why could the last CFO get the necessary information without me turning in a report. How do I stress the importance that he must turn in a monthly expense report. I plan to terminate his card, however I have done that before and this was his second chance. However, we are repeating the same cycle again. I am open to any suggestions.

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

It seems you've tried the nice way, then do it the not so nice way (enforcing the policy), but do it in a way its not you against the VP.

Put out an updated T&E policy that specifically spells out the reasons why a report is needed, why it must be signed (digital or otherwise, unless you're using one of the myriad of expense reporting SaaS products) and the timing of reports.

Be sure to include at what point the company will not reimburse (time-limit). This is especially poignant if you are using a SaaS product, since there are very few places that have zero internet connectivity, and add a proviso for prior arrangements.

Amazing how this works... BUT the CEO must be on board!

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Start by getting your CEO on board with the background, the impact of late reporting and the efforts you have made to date. Get his/her support on what your plan of action is going to be so that the VP realizes you are serious, and that the CEO does not really want to be spending time with this.

Example: ask your CEO to consider saying to the VP: What's the real reason you can't file reports on time like everyone else in the company? In case the subtlety is lost in text, this really is a rhetorical question:)

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Read this thread from just the other day:)
https://www.proformative.com/questions/why-does-employee-have-sign-their-expense-report.

I think it helps make your case easier.

Joe Collins
Title: Office Manager
Company: AFS-USA, Inc.
LinkedIn Profile
(Office Manager, AFS-USA, Inc.) |

I deal with 5 VPs who love to be late. I approach it by using my rapport that I have built up with them. Humor helps. I'll offer to help in a small way and of course they don't want the embarrassment of someone else doing it for them. I also created step by step directions as well as a screencast video of each step. There's no excuse of "I don't know how" or "show me this". Consistency in applying the controls to all staff, including them, shows they are not above anyone else when it comes to reconciling. My constant and persistent escalating email reminders let them know it won't be forgotten and they won't stop being harassed until done. Over time, I am down to 1 VP who is doing much better btw.

Mark Matheny
Title: VP - FInancial Planning and Analysis
Company: Novolex (formerly Hilex Poly)
(VP - FInancial Planning and Analysis, Novolex (formerly Hilex Poly)) |

Establish a clear and properly communicated travel and expense policy with defined time limits and requirements for reimbursement. Have CEO sign off. Enforce consistently.

Richard Archer
Title: Director - Governance & Risk Advisory
Company: Hill International
(Director - Governance & Risk Advisory, Hill International) |

For your long run relationship, Joe's approach makes a lot of sense. It may not work, but it may be worth another try.

Based on your question and the history with the previous CFO, there are other things you may need to consider before pushing hard on this issue.

1. Is there a formal expense reporting and reimbursement policy? If so, how old is it? As Wayne points out, you may be in need of an updated policy that explains why the reports are necessary, as well as defining the procedure. As everyone pointed out already, the CEO will have to be on board with the policy change. Trying to change it on your own will probably alienate your peers and get you classed as a "bean counter who doesn't understand our problems and isn't part of the team."

2. Was the VP the only one the former CFO let slide or was everyone else allowed to be late or not file? He may have just not wanted to get into a battle of wills with other execs. However, by trying to be the good guy and letting even one person slide, he may have been putting the company's deductibility of travel expenses at risk. Because of the amount of travel expense fraud and false reporting of deductions, if the company is ever audited in detail, the IRS will take a strong look at travel expenses, especially where the amounts of any individuals are out of line with the averages. One thing that may get the guy on board is a reminder that if any of his claimed expenses on his company card charges are determined to be non-deductible by the company for tax reporting or ruled to be his personal expenses, not only will the company lose the deduction, but the IRS could attribute income to him. In a worst case scenario that could result in him being assessed both penalties and interest.

3. You mentioned the threat of taking away the VP's company card. Are all the VP's travel expenses on the company card with no reimbursements being claimed for other payment methods? If so, does he turn in the receipts? If yes, does he provide all the information required in Chapter 5 of IRS Publication 463 to document the expense? If the answer is Yes to all, what he is doing may by accident comply with the documentation requirements for travel & entertainment expenses and a specific expense report would not be required. If the answer to any one of them is No, an expense report is probably required. If he isn't filing a timely expense report, then there could be problems in a tax audit.

BTW1 - If the only thing you are getting to document the VP's expenses is the monthly company credit card statement, that is unlikely to be adequate documentation in a detailed IRS audit. Credit card companies are notorious for misclassifying the category of expenses, even when the other information is captured correctly.

BTW2 - Table 5.1 from Publication 463 could be worth including in your new travel & entertainment policy.

4. If he is already keeping receipts and putting the required information on the receipts to justify the expense, something that could make your life and the VP's life easier is to move to one of the cloud-based travel expense reporting platforms, such as Expensify, Concur, Certify, or others. Almost all have the ability to capture expense data from phone camera or scanned images of the receipts. Also, the data from the company card can be downloaded into the reporting app. The completed expenses can be automatically summarized and transferred to your accounting department for your ledger postings after you and the VP's boss have reviewed and approved the expenses. All he has to do is review the expense report summary and sign it electronically to submit.

If the CEO and most of the other execs and employees are filing expense reports, the CEO will probably support a policy update and strict enforcement, especially if failing to keep the proper records would mean losing a tax deduction and incurring penalties and interest.

In a "carrot and stick" approach, if the VP won't respond to gentle encouragement (the carrot), then the threat to reject expenses for reimbursement if the report isn't filed within a reasonable time OR threat to treat unsupported and unreported company credit card charges as a personal expense reimbursable to the company OR the potential of having improperly documented expenses attributed to him as income by the IRS may be the kind of 2x4 sized sticks that are necessary to get his attention.

Vik Agrawal
Title: President & Co-Founder
Company: ExpensePath, Inc.
(President & Co-Founder, ExpensePath, Inc.) |

If the VP has an executive admin and your process/solution has a proxy capability, what you need can actually be done for them and they can review/verify it quickly.

Other than that, you just have to stick with it consistently and firmly as the CFO regardless what your predecessor did. I do think providing the IRS guidelines can help - especially that expense reports with supporting data/documentation are actually supposed to be submitted within a "reasonable" time (the IRS suggests 60 days) and the result of not complying is supposed to be that any reimbursements become taxable income to the employee.

However, it seems most if not all his expenses are on a company card where they don't pay the bill. There are solutions to reduce the cardholder's work to nothing to fulfill their part (including the proxy capability I mentioned before) so that would eliminate any excuse. If that fails, terminating his card or making him responsible for the bill would put enough of skin in the game to care (but you need CEO support so he doesn't just appeal to get it back over your head).

Craig Millis
Title: Finance Director
Company: Anonymous
(Finance Director, Anonymous) |

Why does your VP need to submit a monthly expense report? Isn't their time better served pursuing sales for the company, that is, actually working? What is the so-called "importance" of turning in a monthly expense report?

The outdated view is that expense reports must be completed by an employee to verify the employee's use of company funds - to safeguard the company's assets.

This is a waste of the company's resources (ie your time and your employee's time).

Why not just grant the employee a monthly budget for business expenses that you and he/she develop at the beginning of the year; and, just periodically audit their purchase card? If the employee goes over the amount, they must explain the variance with detail; and, if they spend it on non-business related items, terminate their employment. Treat your employee like the professional that they are.

Provided that the CEO approves the policy, you're happy, your employee's happy, and the company's assets are still protected.

Anonymous
(Manager) |

Interesting. Do you have this practice in place? How does it work - who determines the coding/classification of the expenses? An assistant? An accountant? Or are you suggesting no coding/classification and just lumping it into one account?

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Today's user friendly expense reporting solutions make it so easy to report expenses as you go; so the perception of doing expenses "monthly" (which conjures up images of searching for receipts and spending hours) is dated.

With a smart phone, you can snap a picture of your receipt, upload it into the T&E app on your phone, and dispense with the entire entry within seconds, maybe a minute. Done. Little pain, always up to date, no excuses.

I agree with your view that if a person violates the card use policy, they need to know the consequences are severe.

Anonymous
(VP of Finance and Administration) |

Thanks so much for your feedback. This has actually been very helpful for me. I feel that I am on the right track on my thoughts. This is a family owned company, so I had a discussion with the owners and the owners followed up with the VP (family member) and informed him that the reports must be turned in.

I just assigned him an administrative assistant so that the assistant can complete the expense report for him. I have made it as easy as possible for him to be in compliance. I think it is very important to lead by example and you can't force your direct reports to do something you don't do. In addition, since it's a small company although I don't discuss the issues I have with executives as it relates to expense reports. I have heard that many employees are aware that what I apply to them I apply to executives so it should show that I enforce the rules across the board, no matter who what.

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