When your staff need to drive as part of their job, getting them to maintain accurate and up to date logs of their journeys is not always easy. They will need to enter the reason, together with the start, waypoint and end locations for every journey, and of course, the number of miles travelled. All of this will then need to be checked for accuracy by their managers and probably reviewed a second time by the finance team, who will also need to apply the correct rate per mile considering vehicle details and HMRC thresholds.
Why is it important to get it right?
In the UK, any amount paid to the employee to cover personal mileage is a ‘benefit in kind’ and is liable for taxation. Therefore, it is key to maintain logs of business journeys to prove that they were not personal.
The impact on your finance team
It may not surprise you that in a 2015 YouGov survey, 56% of UK employees who drive a car for business purposes didn’t know the HMRC rules for reclaiming mileage. The same survey found that almost a third of employees updated their mileage log less than once a fortnight, no doubt increasing the chance of inaccuracies.
Experience has shown us that fraudulent claims such as rounding up or adding extra miles are common and sometimes excessive. Identifying such claims is an important but time-consuming task putting further strain on the finance teams already managing what is an onerous manual process. And how easy is it to check that the mileage entered is accurate?
Therefore, it is no surprise that for many companies, all these minor adjustments, rounded amounts and inaccuracies equate to high processing costs and unnecessary compliance risk.
Improving mileage expense management with GPS tracking
Using an online expense management system is a great way to solve almost all of these problems, and a system that comes with a smartphone app that has GPS tracking enabled for business mileage capture is a good place to start. This will allow your drivers to capture accurate journey details and the dates and times that they occurred.
Reducing workload and increasing compliance
With accurate location data captured via GPS, you can eradicate rounded or inaccurate mileage claims completely. The workload required to effectively audit the process will be significantly reduced. What’s more, when users finish each outing, a fully compliant expense app will prompt them to add a reason for the journey, thus allowing the manager approving the claim, and the finance team, to easily verify that it was a genuine business trip.
Will the change cost more than the savings?
If your drivers are rounding up each journey by just 3-4 miles (a small amount and hard to spot), even though it may seem negligible, it can easily equate to an increase in total mileage spend of 5% or more (assuming the average journey is under 70 miles). In this scenario, for a total mileage spend of £250k per annum, automating your process with a suitable expense management system can yield a saving of £12,500 – for mileage alone.
For more information about making expense management easy, and to inquire about business mileage case studies, please get in touch.