Paying Expenses to Non-Employees: Your Guide to Navigating Ad Hoc Costs
When it comes to financial management, addressing the expenses of non-employees, such as volunteers, student union members, and research participants, is crucial.
These individuals often dedicate their time and effort, sometimes unpaid or minimally compensated, to support organisations. Ensuring they are promptly reimbursed for out-of-pocket expenses is not just a matter of financial integrity, but a testament to the organisation's respect and appreciation for their contributions.
However, the unpredictable nature of ad hoc expenses can pose challenges, potentially complicating the reimbursement process. The good news? There's a way to simplify this.
By adopting a streamlined system, organisations can offer a hassle-free reimbursement process, making life easier for both the finance team and the non-employees. This not only fosters stronger, more transparent relationships with external partners, but also underscores the organisation's commitment to those who support its mission.
We'll be covering:
- What are Ad Hoc Expenses?
- Types of Non-Employee Expenses & How to Pay Them
- Best Practices for Efficiently Paying Expenses to Non-Employees
- Paying Expenses to Non-Employees: Final Thoughts
What are Ad Hoc Expenses?
Ad hoc expenses are one-time, irregular costs that arise spontaneously.
These expenses are commonly incurred by non-employees like research participants, student union members or charity volunteers while participating in activities on behalf of your organisation or institution.
Unlike the structured, recurring expenses often associated with full-time employees, ad hoc expenses are less predictable and can vary widely.
Key Characteristics of Ad Hoc Expenses for Non-Employees
Unpredictability: One of the defining features of ad hoc expenses is their lack of regularity. Unlike full-time employees, who often have recurring expenses like monthly travel allowances, non-employees' expenses can arise unexpectedly and are usually not part of a regular schedule.
Simplified administration: When dealing with non-employees, ad hoc expenses usually don't require the finance department to set up individual profiles in the accounting system. This is in contrast to full-time employees, who are typically integrated into payroll.
Diverse expense types: The kinds of costs that qualify as ad hoc expenses can vary widely. They might include anything from travel and meals to supplies needed for a project. This is different from employees, who often have clearly defined categories of reimbursable expenses.
Types of Non-Employee Expenses & How to Pay Them
When it comes to paying expenses to non-employees and volunteers, understanding the types of expenses and how to claim them is crucial.
Here’s a breakdown:
Travel expenses: Bus tickets, fuel costs, parking fees, taxi fares, and bike-sharing services.
Meal allowances: Costs for meals, such as breakfast, lunch, dinner, and coffee breaks.
Equipment or supplies: Costs for materials, software subscriptions, or equipment required for the activity.
Miscellaneous costs: Any other costs like printing or small gifts for participants.
The Framework for Paying Expenses to Non-Employees
Collect physical receipts: Whenever possible, collect original, itemised receipts.
Photograph receipts: In cases where a physical receipt isn't available or practical, a clear photograph of the receipt can suffice.
Digital receipts: For online transactions, save a PDF or screenshot of the digital invoice.
"Document every single receipt my volunteers submit? Do I really need to?" If this thought is running through your mind right now, you're not alone. But let me assure you, the answer is a resounding yes, and here's why.
First off, it's all about transparency. When you keep track of every pound spent, you're making it easier for everyone to be on the same page. This isn't just good practice; it's how you build trust within your team and with anyone you work with.
Those receipts you're collecting from your non-employees are also your financial backup. Whether you're going through an internal audit or need to settle a dispute, a solid paper trail makes your life a lot easier.
And let's not forget compliance. Rules and regulations around expenses can be difficult to navigate, but when you've got every transaction documented, that maze becomes a walk in the park.
Proper documentation is your safety net, your trust builder, and your rulebook all rolled into one. So, keep it organised, and you're setting yourself up for success.
1. Hand in receipts manually:
Convenience: A traditional method where non-employees physically submit their receipts to the finance department.
Risks: This method can be time-consuming, prone to loss or damage of receipts, and lacks an efficient tracking system. It also requires additional storage space and can be challenging to manage as the volume of receipts grows.
2. Spreadsheet log:
Simplicity: A well-organised spreadsheet can be a powerful tool for smaller organisations or for those who are new to managing non-employee expenses.
Risks: Lacks real-time tracking and can become cumbersome, leaving more room for human-error, as the volume of expenses grows. Version control can also be an issue if multiple people are updating the spreadsheet.
3. Digital storage:
Ease of access: Cloud storage services like Google Drive or Dropbox offer an easy way to store digital copies of receipts.
Risks: Doesn't offer an integrated workflow for approval or tracking, and can become disorganised if not meticulously maintained (again, leaving more room for error). Digital storage solutions can potentially also pose a security risk if the provider doesn’t comply with data protection regulations.
4. Online expense management system:
Efficiency: This is the most streamlined method, especially for organisations that regularly deal with a variety of expenses.
Features: Modern systems offer real-time tracking, approval workflows, and integration with accounting software.
Accessibility: These systems are often accessible on mobile, making it easy for non-employees to submit expenses on the go.
ExpenseIn: Your Secret Weapon for Managing Ad Hoc Expenses
Now, managing all these documents and processes can be a logistical nightmare.
That’s where expense management software like ExpenseIn comes in.
Designed with the unique challenges of ad hoc expenses in mind, ExpenseIn offers a specialised module tailored for organisations like charities, student unions, and research facilities.
With features like token-based authentication, ExpenseIn ensures that non-employees can securely and easily submit their expenses.
ExpenseIn Features You'll Love:
Quick account creation: Register effortlessly on our user-friendly platform, specifically designed for non-employees such as volunteers and external participants.
Instant expense logging: Allow users to draft and submit expenses digitally, eliminating the need for outdated paper methods.
Brand personalisation: Make the platform your own with white-label options, including the ability to add your logo and brand colours.
Token-based authentication: Non-employees receive a unique token each time they need to log in, ensuring security and ease of use.
In-depth reporting: Gain real-time insights and make informed financial decisions with our smart, sector-specific reporting tools.
Automated policies: Set rules that are tailored to the unique needs of non-staff members.
Customisable approval flows: Tailor the approval process to align with your organisational structure, ensuring a seamless and compliant experience.
Can an Organisation Refuse to Pay Expenses to Their Non-Employees?
The short answer is yes, but with caveats.
If an expense doesn't align with the agreed-upon terms in the contract or lacks proper documentation, an organisation has every right to refuse reimbursement. That's why it's crucial to set clear guidelines from the get-go.
Best Practices for Efficiently Paying Expenses to Non-Employees
Alright, you've made it this far, which means you're serious about mastering the art of reimbursing non-employees.
You've got the basics down, but how do you go from good to great? That's where best practices come in.
1. Transparency is a Two-Way Street
First and foremost, be transparent.
Clearly outline what can and cannot be reimbursed in your contracts. This eliminates guesswork and sets the stage for a smooth reimbursement process.
Pro Tip: Create a reimbursement policy guide that you can share with non-employees before they start any work. This guide should clearly outline what is and isn't reimbursable, and it should be easily accessible - perhaps even as a downloadable PDF on your company intranet.
2. Encourage Timely Claim Submissions
Encourage your non-employees to submit their claims promptly. No one appreciates delays, especially when finances are at stake.
For a seamless reimbursement experience, advise them to submit their expense claims within a set timeframe, ideally within a month of incurring the expense. This practice not only speeds up the reimbursement process but also stays in line with HMRC guidelines.
Pro Tip: Implement automated reminders tailored for non-employees, prompting them to submit their expenses a few days before the deadline. This ensures accountability and a swift reimbursement cycle.
3. Keep It Organised
Organise expenses into categories like travel, meals, and supplies. This makes it easier to track spending patterns and can also simplify the accounting process.
Plus, it can help you identify areas where you might be able to negotiate vendor discounts.
Pro Tip: Use expense codes for different categories of spending. For example, "T001" could be for travel, "M002" for meals, and so on. This makes it easier to sort and analyse expenses at the end of each month or quarter, giving you valuable insights into spending patterns.
4. Audit, But Don't Overdo It
Regular audits are essential for ensuring compliance, but don't go overboard. An overly aggressive audit process can strain relationships with your non-employees.
Find a balance that ensures accountability without creating unnecessary tension.
Pro Tip: Implement a "spot-check" system where you randomly select a few reimbursements each month for a detailed audit. This keeps non-employees on their toes without overwhelming them or your team with constant, exhaustive audits.
5. Leverage Technology for Efficiency
These days, there's no reason to get bogged down with manual processes.
Consider adopting advanced expense management platforms, such as ExpenseIn. With features tailored for both regular employees and infrequent users like volunteers or agency staff, it offers a comprehensive solution for all expense needs.
The ad hoc module, for example, is designed for sporadic users, allowing them to submit expenses without the need for regular logins. This ensures that even non-regular employees can easily and efficiently submit their claims.
No more manual complexities; just a streamlined system that works for everyone.
Pro Tip: Opt for cloud-based platforms. They ensure you have access to real-time data anytime, anywhere, making management and oversight more effective.
Paying Expenses to Non-Employees: Final Thoughts
Handling expenses for non-employees like volunteers and research participants might seem like a small task, but it's a big deal. They give their time and effort, often without expecting much in return. The least we can do is make sure they're paid back quickly and without fuss.
Doing this right shows we value their contribution. It's also good for your organisation. A smooth, clear process means fewer headaches for everyone involved.
So, as you work through the details of paying expenses, remember: it's not just about money. It's about showing respect and appreciation. And when we get it right, everyone benefits.
Ready to revolutionise your ad hoc expense management? Book a demo with ExpenseIn today and discover a smarter, faster way to handle non-employee reimbursements.