FinOps handbook

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Payroll, Pension & Expenses

Expenses

Expenses Policy

An expenses policy is a component of a successful business. For instance it helps management decide what expenditure is a priority and why.

The rules are clear for all employees and sets expectations eliminating grey areas. This also saves management time dealing with ad hoc expenses questions or having to make judgement calls. Staff can also find the answer for themselves freeing up time for management.

🔑 Keys to a successful expenses policy

An expenses policy should be bespoke to the Company but here are some suggestions on how to create a successful expenses policy:

Create clear categories and budgets.

Be fair. Consistency is key.

Keep it simple.

Update often.

Check the regulations!

System

Description

Preference

Xero Expenses

Simple expenses system that has the advantage of living in Xero

Our preferred system for very small businesses

Expensify

Sophisticated approvals flows

Our preferred system for very businesses with complex approval flows

Receipt Bank

Easy to use with basic approval flows

Our preferred system for businesses who prefers handing off the autonomy to their employees

There are no rows in this table

⁠

Xero Expenses

Like Xero Payroll, Xero Expenses is a simple, no frills, option for allowing employees to capture expenses, send the information to the accounting system and have them reimbursed.

As with other competing apps it uses digital receipt scanning to estimate expense amounts and categories. However in our experience issues with the speed and reliability of the scans mean that many employees prefer to enter data manually.

Xero introduced it's expenses module in 2018. At the time the move was considered controversial as Xero owed much of it's earlier success to it's app partners like Expensify and Receiptbank, and this was the first time it directly competed with them. Since then Xero has introduced

products and acquisitions⁠

that compete with several app partners.

'Old' Xero expenses

Before Xero introduced it's expenses module in July 2018 it's mobile app already contained a simpler expenses module.

This system had no approval limits and it was accessed in the same place as the rest of the business information, so it was only really appropriate for owner-managers.

In July 2018 Xero originally removed this free subscription, before U-turning and leaving it free after customer backlash.

Advantages of Xero expenses

It lives within Xero - no need to set up a new integration or enter manual journals

You can mark where several expenses have been reimbursed in one payment, making life easier when reconciling the bank (some other systems assume that all expenses are reimbursed individually, adding an additional layer of manual intervention).

How much does it cost?

At the time of writing Xero expenses costs £2.50 per user per month. This is relatively cheap compared to Expensify for example which charges from £4 per month.

Triggers for switching to something more complex

You need multiple different approval flows for different members of staff (eg expenses approved by team leads)

You want to add automatic accept / reject rules

Expensify

Advantages

Sophisticated approval process

Ability to create expense rules where only expenses above a certain amount needs to be reviewed and approved

Integrates to most accounting systems

Disadvantages

Not as cost competitive as Xero Expenses and Receipt Bank

Receipt Bank

We've already discussed Receipt Bank as a data extraction tool.

Pleo

Summary

Pleo provides pre-paid cards to employees, alongside innovative and user-friendly software that makes life easy for the accounts team. Everything is controlled from a centralised portal, meaning that you can set spending limits on an employee-by-employee basis.

More info:

Pleo – Smart Credit Cards For Your Business⁠

⁠

How much does it cost?

Essential Plan – £5 per user, per month

Access to most features incl. both plastic and virtual MasterCards, and ability to instantly capture the name of the merchant, size of the transaction, and spending category every time a purchase is made

Pro Plan – £10 per user, per month

Includes additional features such as limits and reviews on each user, as well as notifications when a user goes over a predefined limit.

Pros

Virtual cards for online spend, as well as physical cards

Seamless integration with Xero, Quickbooks etc means very little manual work for finance team

Integration with G-mail pulls receipts automatically from emails

Consistently praised for great customer support

Cons

Occasional issues with some merchants not accepting prepaid cards

Can be expensive for large teams

If not managed properly, can cause staff to spend more money than they otherwise would

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