3 Essential Expense Reporting Best Practices for Canadian Organizations

Whether you work for a for-profit business, a Crown corporation, or a non-profit organization, managing employee expenses are a part of life. For some employees, it may just registering for, and driving to, the annual continuing education seminar, or a quick run to replenish some office supplies. For others it could frequent trips around the country or even the world.

Regardless, companies need to ensure that they manage expenses as efficiently and stress-free as possible – both for the end-users and also the finance team who need to process the expenses and ensure reimbursement is both accurate and rapid. Organizations also need to ensure that they can effectively control their organizations’ travel and other out-of-pocket expenses, to avoid wasteful and even fraudulent spend. The key to this is to deploy a mobile-friendly expense management solution, which allows employees to easily capture and submit expenses, while streamlining the approval process with efficient workflows and business rules.

If you are still using a manual process with hard copy receipts and spreadsheets, your first step needs to be to automate the process! Estimates suggest that moving expense submission and processing to an automated solution can cut costs by approximately 75%, and with an increasingly mobile and technology reliant workforce, a solution which makes it easy to submit expenses from any mobile phone is key. However, not all expense solutions are set up specifically to work with Canadian organizations, which can often have very specific requirements for employee expense and other technology solutions.

Here are three areas to consider when implementing an expense solution.

How do we manage tax reclamation?

Travel and other out-of-pocket expenses are bound by a wide range of sales taxes, and these can differ significantly depending on the type of purchase and also the province or territory where the transaction occurred. Many of these taxes can be reclaimed which, although they can potentially save millions of dollars for an organization, can be incredibly time-consuming to calculate and submit.

You should therefore ensure that any expense automation solution that you choose can effectively manage GST, PST and HST. In practice, this means that it can automatically calculate tax payable on each item amount at a line item level, dependent on the category and location of the transaction. This enables AP teams to simply create reports within the expense system that can then be exported into the organization’s GL system, ready for submission. If your organization isn’t doing this, you could not only be spending countless hours reviewing shadow spreadsheets, but it could also mean that you could be missing out on significant reclaimed tax dollars.

Are we correctly calculating our automobile allowance?

Tracking automobile allowance for personal vehicle use can be a challenge. Not only do the three territories have differing rates than the provinces (62c per km versus 58c, recently updated for 2019), but these rates change after an individual has driven more than 5,000 km in their personal automobile (56c per km in the territories and 52c in the provinces, again, an increase over 2018 rates). For both the individuals submitting their expenses, and the organizations who need to reimburse these expenses and then submit the deduction request to the CRA, it can be a time-consuming task to keep track of these.

An automated expense solution can streamline this significantly. Users simply need to enter the locations/addresses where they drove when submitting expenses, and the solution will map these and automatically calculate the distance driven. It will then track the cumulative distance driven for each user, and will automatically adjust the reimbursement rate once the annual 5,000 km threshold has been reached.   

Given that these rates also change each year, you must ensure that you keep track of this. Again, a modern expense solution should do this automatically, so you remain compliant. On top of this, if your organization has overseas employees, you should also check that your expense solution has similar capabilities to ensure regulatory compliance in each market.

Where is our data hosted?

All Canadian organizations – whether they are private-sector corporations, federal or provincial agencies, or Crown corporations – are bound by a wide range of data protection regulations. For the private sector, PIPEDA governs how organizations collect, use and disclose personal information in the course of business, while the Privacy Act regulates how the federal government handles and stores individuals’ information. Even though employee expense data is “business” information, it contains personally identifiable data, and as such is bound by these regulations. As a result, there are several requirements that organizations need to adhere to for data storage.

One of these, which is applying to greater numbers of private and public-sector organizations, is that expense data needs to be hosted within Canada – the physical data center must be located in the country. Therefore, even if your organization isn’t currently required to store its data in Canada, best practice (and also to future-proof yourself for future regulations) is to find an expense provider that uses domestic data centers to house its data).

To learn more about these issues, and other broader best practices in expense management, download our white paper: 12 Best Practices in Modern Expense Reporting.