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Advataxes, an only employee expense software with a strength on handling recoverable GST/HST/QST has been nominated by the firm PayStream Advisors for a Technology Innovation Awards in the ”Travel & Expense” category. The handling of meals & gratuities in this video is an example on how Advataxes has been designed to address GST/HST & QST rules. Optional tips is not subject to the GST/HST/QST, so we ask all users to put optional tips in a separate field. We also ask users to include the total before tips in a separate field and select the province and the date in which they incurred the meal expense. Once that is done, the rest is automation. It is much more efficient that asking employees to select a tax code (i.e CAON, ER, EN, etc..) since your typical employee filing out an expense report is not a tax expert. Furthermore, due to the added precision, it allows organizations to easily use the exact method, which is much more beneficial in terms of saving and managing recoverable taxes. On this issue refer to our webpage entitled “Exact Method Versus Factors Method”. At the end of the day Advataxes was designed to address the Canadian sales tax environment first because there was nothing out there really designed to address this to the extent we’re doing and second there is a lot of money involved, see our “simulation” page.

The use of the spreadsheet to fill out and submit employee expenses is as old as the day that the Excel software and other similar ones (e.g. Lotus 1-2-3, VisiCalc) were put on the market in the 80’s. A few simple formulas on one tab, a minimum description, stapling receipts in the back, and the expense report is ready to be sent to the supervisor for review.

We have to keep in mind that whatever tool is used to fill out and submit an employee expense report, either a spreadsheet or an employee expense software, it has to be practical. For instance in its design, it has to take into account the chart of account of the organization, its internal policies, and all the tax rules. It should include invoices to back up a refund claim, and an area to allow the employee to insert some explanations.
When organizations are expanding their operations, adding internal policies, and when the regulatory environment is more complex than ever, such as the current rules governing the GST, HST & QST, handling the traditional spreadsheet while attempting to remain efficient can be rather challenging. Here is a list of nine factors to take into consideration:

1) Employees Expenses; not your Typical Supplier
Although it is common to have an approval process for a given trip that an employee will participate in, it is rare that there is an approval process for the selection of each supplier during the trip. The suppliers’ selections by employees are not your typical suppliers; employees have some latitude in the selection of their suppliers. The documentation supporting those expenses such as parking, tolls, purchases over the internet, may not always be at its best. In the case of allowances, such as KM, meals and clothing, there is simply no documentation since the nature of an allowance is that it replaces an expense receipt or a series of expenses in the case of KM allowance.

2) Allocating Expenses Incurred by Employees to a Project
It is common to encounter organizations that have to allocate some expenses incurred by employees to a given project. An organisation may want to control costs relating to a given activity, or it may have to charge back some expenses incurred by employees to clients.

3) Allocating Expenses to the Chart of Account
Identifying every accounts for a given expense for an employee is not that easy when the Excel Spreadsheet is “one size fits all”.
In several organizations, there is an account segment that relates to a division that an employee is working for. Others have to assign expenses to a cost center.

4) Ratio of Travel Expenses over All Expenses
In a typical company, travel expenses represent 10% of all expenditures. We are not dealing with an expenditure that is insignificant. So a proper management of those expenses is required in order to ensure the reporting is adequate, the GST, the HST and QST are fully recovered, the organization’s policies are respected and expenses are not reimbursed twice.

5) Volume of Employee Expenses Reports
The fact that an employee expense system is managed by a spreadsheet, may be fine in situations where the volume of expense reports submitted by employees is low. But as soon as the volume of expense reports increases, the lack of a central database to provide an insight into spending is problematic.

6) The GST-HST & QST Rules are Numerous and Changing
Technically there could be as many tax rates as there are provinces in Canada. In that respect; it is a moving target. In 2016, three provinces changed their HST rate. As for the tax rules; they are rather numerous and of course they also change periodically. Currently in Ontario, the HST is at a rate of 13%, yet for large businesses, the recapture rate on input tax credit on the provincial portion of the HST on expenses such as meals will be lowered on July 1, 2017 to 25%. If you take into consideration all the various rates across the country and all the different rules, this is an area where the Excel spreadsheet, may not be the most efficient tool. Since GST, HST & QST are by and large, recoverable taxes, not having a good employee expense system can result in a loss.

7) Mismanagement of GST/HST & QST on Employee Expense may Represent a Significant Cost
It is important to properly manage recoverable taxes since they are an asset that can be materialised if the tax rules are followed. It is common to encounter tax registrants who got GST/HST QST significant assessments on employee expenses, even in the six digits, due to the difficulties to manage these rules in regards to the limitation of their spreadsheet.

8) Rectifying an Excel Spreadsheet may be a Time Consuming Process
To modify a value on an expense report stored on a server in the cloud is easy. You only need an internet access, and the value that is on a centralized database can be modified for all (e.g. the employee, the supervisor and the accounting department). But to modify a template when it is sent back and forth by e-mail or by internal mail between an employee, the accounting department and the supervisor, is just not efficient. Keeping track of the different versions on a given expense report can be a challenge, and may lead to errors. Different studies abound to quantify the time loss on managing the manual employee expense process.

9) Old Versions of the Employee Expense Template Still Used?
Any changes to an Excel Spreadsheet, due for instance to new projects, new divisions, new tax rules, may results in errors resulting from having multiple employee expense template versions available in an organization. This is one of the several issues of not having all the employee expense located on a centralized database.

CONCLUSION
With a significant volume of employee expense reports, and dealing with the complexity of the structure of a chart of account, changing Canadian sales tax rules, the policies of an organization, then the spreadsheet limitations can be costly for your organization.