Whether your business operates within one country or across multiple jurisdictions, there’s no question that keeping up with the latest legal requirements and accounting standards is no easy feat. With tough penalties for non-compliance, it’s essential to ensure processes for financial reporting are robust and transparent.
When it comes to managing business expenses, finance teams can sometimes struggle to gain clear oversight over employee purchases – whilst ensuring spending meets both company policy and governmental regulations for travel and expenses. In this blog post, we provide an overview of accounting compliance, paying particular attention to best practices for expense management.
Accounting compliance requires organisations to have clear and transparent processes for handling financial transactions, ensuring reporting is accurate and meets local regulations. It also involves adhering to a set of agreed accounting standards which promote accurate record-keeping and minimise the risk of financial wrongdoing.
There are two internationally recognised accounting standards: GAAP and IFRS.
- Generally Accepted Accounting Principles (GAAP): A rule-based set of standards and procedures governing the accounting standards of US-based businesses and the requirements for completing financial statements. It includes 10 accounting principles for businesses releasing financial statements, and publicly trading companies, alongside four guidelines for ensuring consistency and accuracy.
- International Financial Reporting Standards (IFRS): Jointly developed by the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB) the IFRS sets how private companies must report specific transactions and events in financial statements. IFRS has been adopted by the EU and is currently used by more than 100 countries worldwide.
Find out more about how IFRS is continuously developed by watching this short video:
The Benefits Of Compliance
There are two aspects to accounting compliance: recognising the need to follow the appropriate rules and regulations, and putting processes in place to ensure this is carried out, and that risks are mitigated.
To avoid being hit with financial and reputational penalties, compliant accounting is simply non-negotiable. However, far from being a necessary evil, staying compliant with accounting standards and government regulations also has a number of key business benefits:
- It demands a reliable and robust system for financial tracking and reporting.
- Greater transparency enables businesses to spot financial irregularities sooner.
- The right processes can help mitigate the risk of penalties for noncompliance.
- Ensuring compliance in accounting helps your business avoid potential legal issues.
Financial And Tax Regulations
Whilst globally recognised accounting principles help to standardise accounting practices, local rules and requirements within specific industries mean that in most cases, businesses need a local expert to ensure they comply with the reporting rules within a specific country or region.
Alongside reporting, one of the biggest challenges facing finance teams is ensuring compliance with current tax regulations. This is especially true of expense reporting, where in countries such as the UK, there are clearly defined rules around what constitutes a business expense – something an employee needs to do their job – and what’s considered a benefit in kind – something that’s not ‘wholly, exclusively, and necessary' required for them to perform work-related duties and therefore subject to income tax and national insurance contributions.
For finance teams, keeping on top of changes in accounting regulations within different countries can be challenging, and means keeping track of when they take place – typically, but not always, 1st January.
To start with, many businesses use manual methods to manage their expenses. Over time, they develop their own methods for handling expense claims. This typically involves recording expenses in a spreadsheet and then manually entering amounts into a bookkeeping system.
In the long run, this approach isn’t scalable, and for both those people reporting expenses, and the finance team processing them, it’s not the quickest, most accurate, or user-friendly way of doing things – and often leads to delays in reimbursement.
Put simply, handling expenses can quickly get complicated, especially when trying to track what’s taxable and what’s not, and when working out what’s deductible and non-deductible in terms of expenses, mileage, and per diem.
Whilst accounting procedures and tax regulations differ from country to country, when it comes to handling and reporting expenses, there are some common principles that any business can apply when trying to ensure compliant expense management:
- Policy: Provide employees with a clear and accessible policy for business expenses to help alleviate any ambiguity over the limits of what can and can’t be claimed.
- Acceptability: Define what an acceptable claim looks like, and at the same time, be clear about what constitutes an unacceptable claim. This might involve providing a list of approved suppliers.
- Relevancy: Optimise the claims process by only asking for the information necessary to process the claims, and make it easier to turn in receipts and reports.
- Accountability: Implement a simple and streamlined approvals process, which can be easily handled from any connected device.
- Punctuality: Make the reimbursement process as efficient as possible and remove bottlenecks to provide faster payments and create a positive employee experience.
Simplifying Expense Management
No matter what accounting and financial tools you use, Findity is an agnostic expense management solution which is simple-to-use and easy to integrate with your existing setup. Once we’ve got you up and running, all the complicated work is done for you. There’s no ongoing need to manually update your system with the latest expense regulations – Findity does it for you.
Keeping track of regulatory changes throughout the year, and updating accordingly, Findity allows you to rest assured that when it comes to expenses, your accounting is fully compliant. Say goodbye to time-consuming regulatory work and take advantage of a single, universal solution that can handle all the expenses, mileage, and per diem incurred by your business – and at the same time, keep you compliant.
Looking to stay compliant and streamline your expense management processes? Find out more about our product.