Despite the challenges of Brexit and the Covid-19 pandemic, employees will need to travel abroad again in the near future.
We look at how to streamline foreign payment processes and gain greater control and insight into expenses.
One of the problems with expenses incurred abroad is exchange rate fluctuations. By the time employees get round to making a claim, exchange rates can shift and the cost to your business can increase.
The claim, days or weeks later, might be made using an entirely different exchange rate and could cost your business unnecessarily. Another way it can cost a business money is through Dynamic Currency Conversion, where the merchant offers to process the transaction in either GBP or in the local currency. If you opt for GBP, the exchange rate will be set by the merchant and their provider, with the margin applied potentially being as much as 6%, according to UK Finance. Employees should opt for paying in the local currency wherever possible.
Also, when abroad, banks can charge fees for transactions or cash taken out of ATMs to pay for business expenses, and it is usually expensive at high volume locations such as airports or hotels. Your policy should cover whether employees are allowed to obtain cash abroad or whether all transactions should be made on a company card.
Paying on a card typically makes it easier to consolidate and submit expenses, as well as being more transparent for the business and employee.
A core problem with exchange rate fluctuations is that it is awkward for employee and employer to manage and verify that the right amount is reimbursed. Consider this conundrum:
An employee converts £500 at a bureau de change (or ATM) to €575 (based on a hypothetical conversion rate of 1:1.15) and pays £3 in commission.
They spend €20 the next day for a taxi, €300 the following day on the hotel stay and €100 the next day on dinner.
They convert the remaining €155 back to £160 GBP (based on a hypothetical conversion rate of 1:1.03) and pay €4 in commission.
The easiest solution is to ensure that from the outset, the employee doesn’t need to convert into local currency themselves. With a card-based solution, each purchase automatically has the relevant exchange rate applied for that day and time. It also avoids the employee needing to deal with commission costs as part of their expense claim, making reimbursement far simpler through being able to match receipts with the card statement.
With some fuel cards, using them abroad can be as much an adventure as the actual journey. In the UK, businesses may have chosen a particular provider because the network suits their operational purposes.
But that’s not to say in other countries the same situation applies, and an employee searching in vain for a suitable brand of supplier is wasting both time and money. Instead, it pays to be using a card that has universal acceptance from a trusted issuer such as Visa, which makes journeys less stressful, and those transactions will be reported back in real time, and converted at a transparent exchange rate.
Foreign business is open to abuse: employees are far from home, spending where there is often an assumption that because they are travelling on the company’s behalf, there are more relaxed rules on what gets paid for.
For employees, having a clear expense policy in place means less stress when conducting business abroad and can improve the convenience and speed of getting things done. A good expense management system will ensure employees can upload receipts digitally and then match directly to transactions.
An expense management system also allows businesses to put in place proper controls at card level and analyse, review and change all aspects of overseas business spend in real-time. This makes it easier for businesses to correct any issues as they arise rather than for the problem to be noticed weeks later when receipts are submitted manually.
Using an expense management system, companies can monitor spending in real-time to ensure expense policies are enforced and tweak levels of spending for certain cost sources and controls for individual employees.
The account administrator can then see what employees are spending abroad through digital receipts. The result is complete transparency over the cost of foreign travel.
That insight can be focused still further: users can run reports to carry out in-depth analysis of expenses which compare costs, so they can see if employees or departments are overspending on hotel rooms or entertaining, and the data can be extracted and uploaded into accounting systems quickly and easily.
This can fundamentally change the reactive nature of foreign business travel costs, where it is only after the event that a business knows what it has spent on any particular trip. It allows a company to proacti