They are your face to your customers. They're funny, and nice, and work their tails off to make your company a success. But, man-oh-man can they spend money!

Business travelers can wreak havoc on your budget and drive up your cost of goods sold. Over the next few entries we'll discuss a few easy steps to help you keep spending in check.

If you don't have a written expense policy, write one. If you have an expense policy, and are finding that employees ignore it you need to review it and make changes. One of the easiest ways to make sure your expense policies are adhered to is to have employees sign a document stating that they have read and understand the policy, promise to adhere to it, and recognize if they don't they will face consequences (i.e. non-reimbursement, curtailed travel, reduction in bonus, or even termination).

We have an expense policy template that can get you started or give you a few ideas to improve the one you already have. Click%20here%20to%20download%20the%20expense%20policy%20template.

Labels: Budgeting, Finance Tips, Per Diems, Travel Expenses

What do you need to know as you decide on a per diem rate for employees or negotiate a per diem rate with consultants and contractors? It can sometimes seem like a random number pulled from the air, but there a number of per diem rate considerations that you should be aware of.

Federal Rates
As we’ve mentioned here before, the federal per diem rates can play a significant role at tax time. On the plus side, they provide valuable guidelines. That said, it may be easier to work with only one rate, or maybe you don’t feel the federal per diem is adequate. But beware - any amount above the federal standard rate is considered additional compensation, and with that comes all the tax implications of wages.

Receipts
No matter what you decide on per diems, make sure that the actual spending and recuperated funds are accounted for. This is for your own records as well as for the IRS. Without them your system will not be considered an accountable plan, and you and your employee may be getting a tax bill.

Electronic Payments
The big advantage of having a per diem rate instead of reimbursable expenses is that you pay a flat fee and don’t have to worry about all the incidentals. Take it a step further and manage your per diems electronically to improve allocation and recuperation documentation.

Labels: Accounting, Expense Fraud, expense management, IRS, Per Diems, Travel Expenses

For a company to run smoothly, employees must be able to make the purchases they need, whether that involves supplies for the office or T&E on the road. To keep expenses from getting out of hand, employees should have spending limits, enabling the company to minimize costs and the employees to know the budget they’re working with. This system works extremely well if the spending limits are appropriate and well thought out. The process of setting employee spending limits can be complex, but there are some tips and tricks that can help make this task easier.

Allow for Flexibility
Spending needs may fluctuate from week to week and month to month, so recognize that limits can’t be set in stone. Have a way to alter spending limits at a moment’s notice so that unexpected, but essential expenditures can be made.

Get Informed
In order to set spending limits, you need to know what is being purchased. Ask employees for their opinion regarding necessary spending. And look into the IRS policies when setting limits, particularly on things like per diem rates.

Create a System
Prices will go up, employees will be hired, and spending needs will change. Have a system in place to periodically evaluate and adjust spending limits as needed. Then you can be as accurate as possible without having to worry about things like daily authorizations.

Labels: Budgeting, Per Diems

Does your per diem rate fall under the local GSA rate for New York City? How about Oklahoma City? Do you have all the receipts you need for every employee’s business travel over the past year? Does your documentation meet all the substantiating requirements for tax purposes? For a company too busy doing business to keep up with all the IRS fine print, there is an easier way.

Use the high-low method so that you only have to set two per diems. Then use a corporate card, enabling you to access a detailed list of transactions. This way, you can automatically have a record of expenditures to substantiate meals and incidental expenses (M & IE) if you ever have an audit. There’s no more chasing down receipts or figuring out what is considered a "timely manner" for substantiation. Since all transactions are listed on the card statement, all you’ll ever have to do is produce those statements when the government comes knocking.

You need an accountable plan for monitoring business expenses and this is a great way to meet the IRS substantiating requirements for per diems.

Labels: IRS, Per Diems

The government sets maximum regional per diem rates that can be allotted to employees without companies having to treat the per diem as extra wages. Since wages are subject to income tax and employment tax, it is worthwhile to stay under this limit.

Be sure to keep an eye on the per diem amounts for your employees’ destinations throughout the year. It is sometimes not enough to check at the beginning of each year since January is not the only time the rates are adjusted. The General Service Administration (GSA) sets these rates and they have changed the per diem allotments for areas in Alabama, California, Illinois, Missouri, New York, and Texas as recently as this past March.

Given this information, how do you know what your per diem rate should be? Visit the GSA website to see the full list. The tax code differs by state and city, so it’s worth finding out exactly what applies to your company’s travel needs. Having the information now instead of waiting until tax time can make all the difference.

Labels: IRS, Per Diems

Business travel can become a headache for the accountant; tracking down receipts, collecting expense reports, and cutting reimbursement checks. When frequent travel is a necessary part of doing business, an easier way to manage travel expenses is to establish a per diem rate. The only problem with going the per diem route is keeping abreast of the tax implications. However, by keeping up to date on IRS rulings regarding per diems, it's possible to enjoy the benefits of having a per diem rate without tax drawbacks.

One of the biggest IRS rulings on per diems in the last couple years relates to companies with per diem rates above the General Service Administration's (GSA) set rates. If you are over the limit, carefully document how that money is spent. If all funds are accounted for, then the amount up to the federal limit can be considered travel expenses and the amount over the limit must be considered extra wages. On the other hand, if part of that money is unaccounted for, i.e. the per diem is more than the total cost of documented travel expenses, the extra either needs to be returned by the employee or else the entire amount of the per diem, not just the amount over the maximum, will considered fully taxable wages.

For more information on new rulings as they come out, visit the IRS per diem website and look under "What's New." Or, just keep reading this blog. We’ll be sure to keep you informed about the latest per diem news and how it affects your company.

Once the complex tax code is deciphered, having a per diem rate can be an efficient and easy way to compensate employees and contractors for travel expenses.

Labels: IRS, Per Diems