Cloud Computing: Policy Compliance And Control

By Author: Web Expenses
Total Articles: 8
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Britain’s recent enactment of the toughest anti-bribery laws in the world, has thrust the management of business employee expenditure into the legal spotlight. The persistent threat of a double-dip recession and a tottering euro-zone will push the need to reduce business’s second largest controllable cost to the forefront of the business mind.

The days when businesses could put their faith in employee honesty are fast fading as society takes its moral lead from those at the top. Years of political expenses scandals and perceived corruption in the banking sector have set a dangerous moral precedent, triggering dramatic changes in the culture surrounding corporate expenditure. Studies show that most employees now have no qualms about committing expenses fraud and that many do not trust their own managers to behave ethically.

Recent trends towards worker empowerment, workforce mobility and the increasing use of personal consumer-IT devices to perform corporate duties, meanwhile, have rendered the task of in-house expenses-management yet more difficult. And this is at a time when business is striving as never ...
... before to reduce admin costs.

Finance Departments need the tenacity and the right tools to take control of the situation. They need to be responsive to legislatory change and less reliant on employee behaviour - only through taking control of the situation will they be able to avert the escalating legal risks and mounting costs associated with policy compliance.

What’s Changed?

Britain’s recent introduction of “the toughest anti-corruption legislation on the planet” and a major clampdown on tax evasion should compel business to place stringent expenses-management at the heart of the corporate agenda. The threat of limitless fines and 10-year jail terms for corporate Directors has transformed expenses-management from a cost-cutting exercise to a legal imperative.

POLICY

• Tax Liability
The scale of Britain’s national deficit has prompted a major HMRC clampdown on tax evasion, to close a £42 billion “tax gap”. HMRC has been equipped with a £900 million budget to pursue companies for false expenses claims, and common employee practices such as “rounding up” trips, are now a priority target.

HMRC says that employers should have “appropriate systems in place” to verify that any business mileage claims made by their employees can be paid free of tax. Should such claims turn out to be false, both the employer and employee may be liable to action taken by HMRC.

HMRC’s focus is on encouraging corporate responsibility for expenses-management, by holding employers liable for the actions of employees. But, the legislation also includes a crucial loophole for victims of employee expenses fraud, as long as the company can show they had “appropriate systems in place”.

• Anti-Bribery
The Bribery Act blurs the line between legal and illegal corporate hospitality by defining bribery as “a financial or other advantage offered” and incorporates three specific corporate offences: bribing any person to induce or reward them to perform a relevant function improperly: bribing a foreign official to gain a business advantage and, crucially, the failure to prevent bribery.

The Act also widens the Serious Fraud Office’s (SFO) punitive scope to include foreign businesses deemed to have any business connection with the UK, including a listing on the London Stock Exchange. Company Directors can even held liable for the actions of business “associates” or subsidiaries.

If businesses are to avoid harmful prosecutions they will need to fully exploit a crucial loophole in the legislation: the introduction of a defence for the failure to prevent bribery “if the organisation had adequate procedures in place”.

Businesses can avoid any risk of prosecution for improper corporate hospitality, as long as they have procedures adequate to abide by five key SFO criteria: the company has a clear issued policy regarding gifts and hospitality: the amount of employee expenditure is within policy limits and any claims that exceed the limit are referred to a high level within the organisation: the expenditure was “proportionate”: the company has evidence that all employee expenditure was recorded, and the recipient was entitled to receive the hospitality under the relevant legal jurisdiction.

BUSINESS TRENDS

Seismic shifts in the nature of business travel and the global regulatory environment offer both threats and opportunities for corporate Finance Departments.

• The rise of the “i-worker”
This year, Gartner predicts 80% of the enterprise workforce will soon be mobile and the implications of this for 21st century expenses-management, are wide-ranging.

Increasing workforce mobility and worker empowerment are being fed by legislation emphasising work/life balance and the increasing consumerisation of IT. Employees now expect not only to be able to work and access corporate data on personal devices but to be able to shop around online for the best T&E deals.

An increasingly mobile workforce means claims are splintered among multiple sources, making the money trail harder to follow. Businesses can no longer take a paper-based or PC-centric approach to expenses-management, but must operate systems that can capture claims and receipts across the modern array of personal devices.

• Globalisation
The increasing internationalisation of the modern workforce means that businesses must be able to rapidly adapt to a wide range of changing regulations and make it easier for line-managers in one country to swiftly verify and approve claims made in a different currency, under different rules, in a foreign subsidiary of the company. For businesses that are capable of making the necessary adaptations, more international travel brings more opportunities to take advantage of discounts for company loyalty to specific travel companies, and favourable VAT rates on business travel.

• A Changing Culture:
A YouGov poll found that one in five people think it is acceptable to inflate or falsify expense claims, vividly illustrating the scale of the recent change in the moral climate around honesty in financial dealings.

A number of factors have precipitated this trend: employees tend to take their moral lead from those at the top and studies show that one in four workers no longer trust their managers to behave ethically with expenses: many employees believe the rules are inconsistently enforced which makes them less likely to comply: honest employees may feel their honesty is no longer rewarded or even noticed because the procedures for monitoring employee expenditure are becoming so lax.

Businesses need to find new ways of ensuring employees abide by the rules. If employees trust the system to treat everyone fairly, identify wrongdoing and reward honesty they are far more likely to co-operate with the rules.

CLOUD COMPUTING: COMPLIANCE AND CONTROL

Modern cloud-computing software empowers Finance Directors to reduce T&E costs and guarantee regulatory compliance across the full array of international jurisdictions and currency zones, while reducing corporate vulnerability to human error and fraud.

It is prohibitively expensive for in-house teams to monitor, record and check a global expenses trail across myriad payment methods, currencies, fluctuating exchange rates and regulatory frameworks. Outsourcing to software-as-a-service models reduces an organisation’s dependency on employees, by offloading the number-crunching and data storage into the cloud.

• Easy Implementation - Laws with international scope, like the UK Bribery Act, can be centrally incorporated into one online policy framework, then pushed out to all employees, through a rigid and auditable process which automatically factors in varying currencies and exchange rates and checks claims for compliance against international tax rates and regulations.

• Improved Compliance - Claims and evidence are remotely captured, recorded and assessed for compliance, employees are instantly notified if a claim is non-compliant before it is entered, and excessive claims are instantly re-routed to Head Office, automatically fulfilling all the criteria of the toughest bribery legislation in the world today as well as your own business policy guidelines.
Automated software encourages voluntary employee compliance: it makes the system fair and transparent, by taking human subjectivity out of the process of policy enforcement, checking all claims, for compliance from the CEO to the admin team, and rapidly reimbursing genuine claimants.

• Policy Enforcement - Storing claims details online, where they can be viewed in real-time from remote locations, helps organisations identify and reward honest and frugal employees and punish individual extravagance and non-compliance, by allowing organisations to compare spending patterns between individuals and Departments. Point of Entry reminders and configurable rules ensure that only expenses that meet company policies can be submitted.

• Claims Verification - Software-as-a-service allows businesses to identify where they can claw back VAT on travel, and where they are in breach of HMRC rules, because GPS tracking uses postcode data to provide precise distance calculations for every business journey, while the software then works out how much of the journey is taxable.

• Person- centric - Modern “i-workers”, accustomed to technology built around ease-of-use, will not tolerate rigid expenses systems that make it hard to choose the best travel deals or submit claims on the move. Businesses can turn the trend for worker-empowering consumer-IT to their advantage, by making it easier for employees to book T&E and submit claims and evidence “on the road”. Claims can be made and checked swiftly through smart-phone apps, integrating with phone cameras to capture electronic receipts. This removes any excuse for losing evidence or adding on late “extras” and helps remote Finance Departments keep track of expenditure, even while global employees are on the move.

• Bullet proof audit trail - Because the data is instantly uploaded to the cloud, companies can see complete records of spending patterns and spot opportunities for discounts on volume bookings with the same airline or hotel chain. Special features allow companies to pre-book and approve trips online in advance, avoiding the risk of “unbundled” travel deals with hidden “extras”, and ensuring every aspect of the journey is policy-compliant. The software populates directly from company cards, so the spending patterns of card-holders are instantly viewable.

Working Towards A New Model Of Financial-Governance

An unprecedented Government crackdown on corruption, combined with the increasing impact of expenses fraud on the bottom line, will compel the private sector to adopt a radical new model of ethical financial governance.

By introducing a new offence of “failing to prevent bribery” the Bribery Act moves responsibility for all expenses fraud directly to the top, placing a new obligation on Directors to lead the transformation in how employee transactions are governed.

The increased punitive power and reach which the Bribery Act gives to the Serious Fraud Office will compel organisations to overhaul the way they capture, check and record all employee expenditure to generate an up-to-date, bullet-proof audit trail. Companies will need the flexibility to respond to a highly-unpredictable regulatory environment and keep a globally-dispersed workforce informed of the rules.

At a time when legislation is growing tougher, the process of compliance is growing ever more complex. A revolution in consumer IT means most modern employees are now armed with personalised devices, triggering a new era of worker empowerment, and greatly-increased workforce mobility. This will render the process of capturing receipts ever more complex, as employees claim for expenses on the move, across different currencies, using different devices and different payment methods.

Businesses can either recoil from this new trend, or embrace it, by empowering employees to book their T&E and upload the resulting claims and evidence “on the go”, thus simultaneously empowering business to capture and check claims at the pre-entry stage.

The future is a person-centric approach to expenses, whereby claims and bookings sourced to personal devices, will enable companies to swiftly identify, reimburse and reward the most honest employees. Conversely, excessive or fraudulent claimants will be more easily spotted and monitored. This automated system, which treats the Director the same as the admin team, will see expenses-management play a greater role in the HR function, incubating a culture of fairness and transparency which encourages voluntary compliance.

Software-as-a-service models will give companies a live portal into global employee expenditure, enabling them to identify the best opportunities for savings through bulk discounts or VAT rebates.

With software that tracks the employee carbon footprint alongside the money trail, companies will soon begin using using pre-trip approval not just to find low-cost journeys and comply with Government expenses rules, but to plan low-carbon Travel & Entertainment that complies with Government emissions targets.

A post-recession drive for savings, combined with tougher anti-corruption laws, and billions lost due to expenses fraud or unclaimed VAT, will see greater numbers of businesses turn to outsourcing as a means of guaranteeing regulatory compliance, while cutting the admin costs and the risk of human error.

ABOUT WebExpenses

WebExpenses is an award winning provider of web-based expenses solutions software serving customers across a diverse range of industries and sizes.

Trusted by over 300 clients and used by thousands of employees in more than 60 countries our expenses solutions process £millions in travel and entertainment spend a year.

Customer implementations range from small organisations with a handful of users to those with several thousand users scattered across multiple divisions across the globe. Delivering rapid ROI, WebExpenses helps organisations increase efficiency, control employee spend, drive down operational costs and stay compliant.

All of our solutions are customised to your business needs.