Because of the nature of the industry, most agencies have employees who will need to make purchases or incur other expenses on behalf of the business. These might include conducting business travel, taking clients out to lunch or even ordering last minute supplies. Developing a proper system to manage these staff expenses can have a positive impact on employee morale, agency efficiency and even client retention. Proper accounting for advertising agencies starts with good expense management.
Develop a Robust Spending Policy
The first order of business is to implement a policy concerning transactions conducted by your employees. These guidelines apply to both personal credit cards and business credit cards.
If you have several employees who consistently conduct business transactions or incur expenses on behalf of your advertising firm, then business credit cards will likely be a good solution because it offers convenience for everyone involved. Employees won’t have to worry about maxing out their own credit cards while waiting to be reimbursed and your agency can benefit from the following:
Create a Credit Card Policy
This written policy should be reviewed by your legal counsel and should cover how to handle any misuse of the company’s credit card (e.g. if an employee makes personal purchases using the card). The employees that you wish to add as cardholders should also sign an agreement stating that they understand the rules and requirements of this policy.
Use a Card That Links Staff to Your Account
Some business credit cards allow you to link multiple staff members to a single credit account. This simplifies the process of tracking transactions and offers transparency to business owners responsible for the account.
Require Expense Reports
While your business credit card statements will provide an overview of spending, employees should still submit individual expense reports to substantiate expenditures and ensure accountability.
Don’t Forget About Cash Flow Management
Cashflow is the lifeblood of any agency. Using QuickBooks, you don’t need to wait for expense reports or statements to come in to see how credit card charges will impact your cash flow. Instead, this easy-to-use platform allows you to download them directly into the system, and apply them to specific projects for better accounting insights.
If you prefer to allow employees to use their own credit cards, then keep these best practices in mind.
Understand IRS Rules for Handling Reimbursements
IRS Publication 15, (Circular E), Employer's Tax Guide, states that expense reimbursements do not have to be included in an employee's wages, if the business creates an “accountable reimbursement plan”. Said another way, once you have an accountable reimbursement plan, you can reimburse employees on a tax-deductible basis.
In order to satisfy the IRS requirements, the plan must meet the following requirements:
Choose User-Friendly Expense Management Software
While QuickBooks doesn’t offer its own expenses management solution, the software does allow for easy integration with many affordable third-party vendors like Expensify (compatible with QuickBooks Online). This cloud-based platform helps you save time by uploading expenses on the go while ensuring that costs are passed on properly. In addition to uploading receipts, users can also capture additional data such as mileage, parking fees, meals and other reimbursable expenses. Once you create an Expensify account, all Quickbook Online expense accounts will be automatically imported into Expensify as categories.
Communicate Reimbursement Process Flow to Employees
Ironing out the various steps involved in the reimbursement process ahead of time and clearly communicating them to employees helps encourage an environment of transparency. In addition, creating open channels of communication will help to reduce the potential for employee frustration in the event of delays in processing reimbursements.
Here are some key points to communicate to your team:
Expense management for an advertising agency is one of the most powerful ways to fuel growth and maintain the correct profit margins. As your firm grows, you’ll need to give your staff the ability to make purchasing decisions that benefit your mission all while giving you transparency into how the cash is being used.