Employee advances and settlements
Clear rules for employee advances stop old balances from hanging around in the books.
Employee advances can be practical, but they become messy very quickly if no one follows up the evidence and settlement. For UK small businesses, a short routine is usually enough to stop these amounts becoming old open balances.
What should be in place?
- advances are approved before payment
- settlement has a clear deadline
- receipts are tied back to the advance
- open balances are reviewed regularly
Where do mistakes happen?
| Area | Typical problem |
|---|---|
| Evidence | the advance sits without support or explanation |
| Balance | the amount stays open too long |
| Process | advance and ordinary expense claims are mixed together |
A practical routine
- Handle advances with the same discipline as Business expenses guide , but keep them separate from normal expenses.
- Use the same evidence rules as Record keeping tips .
- Review open advances alongside Cash flow management , so they do not disappear inside a busy period.
- If only small residual amounts remain, clean them up using the same approach as Small balance write-offs in bookkeeping .
In summary
Employee advances stay manageable when they move quickly from payment to settlement. That is what stops them from turning into old unexplained balances.