You may be surprised to find that your travel policy is impacting your VAT recovery. Travel and entertainment (T&E) policies may seem simple at a high level, but when you dig into travel policy and the travel-related processes, you’ll find there is much to be considered.
T&E policies and processes have layers of approvals from the point of deciding travel is necessary to the steps for wrapping everything up after the employee returns from the trip. Depending on how streamlined your process is, there may be several junctures where issues can arise and negatively impact your business’s ability to recover VAT. And when it comes to VAT reclaim and compliance, no amount should be considered insignificant.
Potential issues to watch out for
Here are some signs that your travel policy and processes may need to be updated:
- Employees are submitting incomplete and/or error-filled travel documents after their trips
- Employees never actually submit documentation after their trips or they submit it late
- Finance/Accounting has towering stacks of paper receipts and documents on their desks
- Travel-related documentation gets lost on people’s desks for days, weeks, or even months
- Finance/Accounting maintains several different spreadsheets and systems to track travel expenses and reimbursements
If you see any of the above signs, you are not alone. It turns out that 60% of small businesses, 51% of mid-size businesses, and 29% of enterprise-level businesses still have manual processes for tracking travel and entertainment expenses. In fact, 10% of businesses reported using a pen and paper process, 33% reported using spreadsheets, 6% had a home-grown solution, 35% use a web-based solution, and 17% reported using an ERP or accounting package.
Regardless of which solution or combo of solutions a business uses, paper receipts, paper backup documentation, paper expense reports, and manual routing for approvals are all part and parcel of an outdated T&E policy. If you find yourself in this boat, it may be time to look at your policies and processes.
The costs of inefficiencies in T&E processes
You may be wondering, why does any of this really matter though? So what if the process is a little cumbersome?
Can you guess how long it takes to complete a single expense report? Up to 23 minutes. Then, once the report is complete, it takes nearly as long to correct errors, averaging 15-22 minutes for corrections. How many of those expense reports actually have errors though? On average, more than 1 in 5 reports has errors. These are costly, time-consuming tasks. And just think, preparing expense reports is only one of many such tasks that are involved in T&E.
Aside from the time and energy costs of manual processes that take resources away from more vital tasks, these inefficient processes are also impacting your Finance & Accounting staff’s ability to process business VAT returns. This means your Finance & Accounting team has to perform acrobatic feats of wonder in order to comply with foreign VAT and ensure all filings are accurate and timely.
When they receive documentation late, missing receipts, riddled with errors, and in a paper format, it takes extraneous effort for them to track and file the relevant expenses, which also includes filing VAT. This, in turn, can lead to rushed work because they do not have adequate time to be thorough.
Rushing leads to missing errors in the traveler’s documentation, overlooking fraudulent charges, and even introducing new errors. Manual entry into spreadsheets and databases also opens up the possibility of typographical mistakes, forgetting to update one or more of the systems, and general chaos when under pressure to meet a deadline for VAT filing.
To make matters worse, VAT can be an afterthought when it is a seemingly insignificant amount on an invoice. Without an efficient process and clear policies for T&E, your skilled financial acrobats may not have enough time to even think about VAT. This can lead to non-compliance with VAT filing, errors and delays in returns, and reduced profits when VAT is not recovered fully.
Improving Travel policies and processes
The first step to improving anything is to assess where you are now. Take an inventory of your travel policies and processes, ask questions about pain points and challenges from the perspective of both travelers and Finance & Accounting staff, and determine how costly your manual processes really are.
There are many expense tracking solutions on the market that can actually save you money by making your processes more efficient and less painful for everyone involved. Another upside is that once you improve your expense reporting system, you will open up the possibility of automated VAT recovery with VATBox, saving your staff even more time and hassle.
Connecting your expense tracking solution with VATBox is simple because data can be extracted easily, taking stress out of the process and ensuring your VAT reclaim is accurate, complete, efficient, and less costly. As a bonus, you will have helpful business insights at your fingertips, such as reports about VAT spend, supplier insights, and data analysis.
Who knew improving your T&E policy could have so many positive effects downstream? Simplifying travel for both travelers and Finance staff is just the beginning.
If you’d like to learn more about how your company can achieve total compliance in VAT related transactions, VATBox can help. VATBox is an automated, enterprise-wide, cloud-based VAT recovery solution that has successfully streamlined the global VAT recovery process, providing businesses with unrivaled visibility, compliance, and data integrity, and ultimately boosting its bottom line. Let us show you how your company can thrive in today’s complex financial times.