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Expense reports

Expense report accounting: the essentials

Professional expenses are expenses incurred by an employee (or a company director) in the course of his or her duties: meals, travel expenses, accommodation, etc.

Person who keeps track of his expenses

Expense report accounting: the essentials

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Professional expenses are expenses incurred by an employee (or a company director) in the course of his or her duties: meals, travel expenses, accommodation, etc.

The expense report is a summary of the expenses incurred by the employee (or the employer), submitted to the company for accounting purposes. It is mandatory, as is the reimbursement of expenses, because it allows the accounting team to record the operating expenses in the company's accounts.

In terms of timing, the employee must submit the expense report to the company within a reasonable period of time (legally 3 years but in practice the company can reduce this interval and notify it in its expense policy). The company must then reimburse these expenses within an acceptable timeframe (usually one month).

What methods should be used to record an expense report?

The nature of the expense may lead the company to choose one or the other method. Some expenses must be reimbursed using the lump-sum method, while others may be reimbursed on an out-of-pocket basis.

Mileage expenses for employees using their own vehicle, travel expenses (particularly for long-distance travel), professional mobility and meal allowances while on the road are assessed on a flat-rate basis.

Other types of costs can be estimated based on the actual value spent.

However, there are exceptions: field sales representatives, for example, can benefit from a flat-rate reduction of 30%.

Regardless of the method used, the deduction of expenses from taxable income must be applied.

The real value method

This method is based on expenses that have actually occurred: to be entitled to reimbursement, the employee must be able to justify his expenses:

  • A meal must be supported by a bill or receipt
  • Reimbursement for travel requires the invoice for the train or plane ticket, or the transportation ticket
  • Accommodation expenses are accompanied by an invoice issued by the hotel

The flat rate method

This method consists of granting an amount of expenses (lump sum). If the expenses incurred are greater than this amount, the employee will be responsible for the difference.

The lump-sum method should be applied in the following cases:

  • telecommuting expenses
  • purchases of new technology for business purposes
  • moving expenses due to geographical mobility
  • allowances paid to employees under foreign contracts on assignment in the territory
  • excessive meal expenses: URSSAF considers that beyond one business meal per week, the expense must be considered as a benefit in kind

The company determines a fixed amount for each type of expense based on the URSSAF scale and the company's internal policy. Excess expenses cannot be reimbursed. They will be subject to social security contributions for the employer and to income tax for the employee (like benefits in kind).

There is, however, an exception for minority managers of limited liability companies and non-salaried executives, who may not record their expenses on a flat-rate basis.

In short, the fixed-price method makes it possible to lighten the management of invoices, and offers real time savings to accounting teams.

Please note that the company must be able to prove (by an appointment confirmation, a validated expense report, a proof of expense...) the professional nature of each expense covered by the lump sum allowance.

Good to know: setting a scale below that of the URSSAF exposes the employer to possible lawsuits from an employee who feels aggrieved and asks for an appeal to the Prud'hommes council.

What accounts should be used to record an expense report?

An expense report should be recorded in the company's purchase journal and credited and debited to the appropriate accounts.

The amount of the fee (excluding VAT) should be debited to the expense account corresponding to the fee.

Here are some examples:

  • 6251 "Travel" for business travel expenses (train, plane, cab, parking, tolls)
  • 6256 "Missions" for transportation, lodging and restaurant expenses (excluding client invitation)
  • 6257 "Receptions" for a customer invitation or a reception within the company
  • 626 "Postage and telecommunication" for telephone calls
  • 6064 "Buybacks" for administrative supplies
  • 6234 "Customer gifts" for customer gifts

You can create as many subdivisions as you want within each expense account.

If the VAT is deductible, then you should debit the VAT amount to account 4456 (Input VAT).

If the expenses are subject to social security contributions such as mileage allowances (IK), you should record the amount of the contributions in account 6414 (Miscellaneous Allowances and Benefits) or 647 (Other Social Security Charges) for commuting.

You should then credit account 421 (Personnel - Remuneration Due) or 467 (Other Receivables or Payables). If the company has made a down payment on the expense report, you will need to charge the expense to Account 425 (Personnel - Advances and Downpayments).

If the expense report is from the manager, the amount should be credited to the manager's credit account: 108 (Manager's account) or 4551 (Partner's current account) as appropriate.

To close the posting, you will only have to balance account 467001 in the bank journal.

In principle and according to the Labor Code, the reimbursement of expenses must appear on the pay slip. Please note: there may be a time lag between the monthly pay slip and the reimbursement of actual expenses, which is not necessarily done at regular intervals.

Reimbursements that occur at the same time as salary payments will appear on the pay slip. If the employee can be reimbursed as the receipts are presented, they will not necessarily appear on the pay slip.

Finally, in order to avoid an adjustment from the URSSAF or the tax authorities, here are some suggestions:

  • Design and disseminate a clear and comprehensive travel (or expense and purchasing) policy
  • Collect the appropriate supporting documents according to the nature of the expense
  • Keep sales receipts and invoices for at least 10 years
  • Respecting deadlines
  • Define a payment method to be used for business expenses
  • Suspend reimbursement if proof is missing
  • Control and validate expense reports with a clear process

Simplify expense reporting with Regate

Regate simplifies the management of expense reports by offering an application that digitizes, stores and retains receipts via data extraction (OCR). A dedicated team then verifies the data. And the icing on the cake: once digitized, the receipts have evidential value for the tax authorities. No need to keep the paper version.

Regate then allows you to process the supporting documents from start to finish and generates the correct accounting and analytical charges for integration into your accounting software. The tool also allows you to optimize the management of prepaid expenses (CCA) and, very soon, non-received invoices (NRI).

You can then set up approval rules according to a wide range of criteria: suppliers, amounts, analytical allocations, etc.

With Regate, you can also make business payment cards available to employees who are regularly on the road, to ease the burden of managing their expense accounts.

In addition to managing expense reports and employee bank cards, Regate also simplifies the management of your expenses (purchase requests, budget tracking, etc.), making the platform a true financial cockpit.


Implementing effective expense control in SMEs

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