The UK Bribery Act 2010 is ushering in a new era of tighter control over corporate hospitality and employee entertainment.
For any business built on wining and dining customers and business partners, the introduction of the Act this July will have a significant impact on its behaviour.
To ensure they comply with the law, and minimise the associated personal and corporate risk, organcisations will need to put in place robust employee expense and entertainment recording, analysis and reporting mechanisms. Companies cannot afford to take a wait and see attitude.
Spotlight on employees
The UK Bribery Act 2010 introduces a new crime of failure to prevent bribery, which means organisations will need to demonstrate they have adequate procedures to prevent corrupt practices both internally and by third parties. Failure to do so could expose the business and its senior managers to unlimited fines, debarment from government business or even a jail sentence.
Industries that rely on entertainment and strong inter-personal relationships should look to ensure every instance of corporate entertainment received from a customer, supplier or partner – from a casual coffee with an IT supplier to an invitation to speak at a conference – is rigorously recorded. Information must include not only the time and date of the event, where it occurred and what was received, but also the names of all individuals attending.
Recording expenses
Against this scenario, it is clear that existing methods of logging entertainment and hospitality expenses are inadequate. The systems currently used in most businesses have no way of picking up trends in spending behaviour or patterns of entertainment.
Information is usually recorded on a spreadsheet and summarised into a few lines on the general ledger. Senior managers can only see rounded up expenditure figures. With no link between expense claim and finance or purchasing systems, systemic abuse and significant overspending could occur. Most significantly for businesses, such an approach will not comply with the Bribery Act.
To impose greater control over the recording employee activity, streamlined processes are needed, preferably that can carry out automated reconciliations to reduce the workload on senior staff. Some employee expense management systems, for example, provide a note area, enabling an individual to list those people entertained, including client company name and individuals.
An alternative is to offer a drop down list of clients from a database, so that only relevant, proven contacts can be included. Either way, the organisation has a complete record of employee activity so activity that falls outside corporate guidelines or legal requirements can be immediately flagged for review.
A change in hospitality culture
Regular lunches, long term relationships and interaction with new clients are set to come under intensive analysis. The introduction of the Bribery Act does not simply raise the spectre of negative publicity. The Act allows a prosecution of senior individuals if with their ‘consent or connivance’ a bribery offence was carried out by the company.
Organisations have no choice but to enter a new era of tight employee control and rigorous expenditure analysis and assessment. But given the massive cultural resistance across various industries, just how fast will companies respond?
The new Act has been in place since July, but will it take a high profile prosecution or two before companies really wake up to the implications and put in place the processes and tools required to impose real control over employee activity?
Gary Waylett is chief executive of business management software provider, Eclipse Group. This article first appeared on our sister website, www.AccountingWeb.co.uk.
