When I discussed this over a year ago, I wanted to stress the importance with knowing your company’s expense policies and to stress avoiding even the most correctable errors.   Proper personal expenses management is that part of your sales activities that merely helps you maintain your credibility and gives managers confidence that you will do the right thing when no one is looking.

Following the program correctly won’t necessarily get you a lot of additional points, but it will secure you in the mind as someone who can be trusted. Be smart and in control of the process.  Knowledge counts here.  Read this and remember, ignorance of the policy is no excuse.  Read on…

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Business entertainment, especially customer dining, is an event that we may take for granted.  It is important for most businesses but always suspect as an expense that can be smartly trimmed in terms of cost, and even frequency.

Business entertainment is a tool that when used wisely can aid in relationship building.  When done correctly, this can result in far greater returns than the business meal or entertainment actually amounts to.

If you desire to claim a business lunch, dinner, or other entertainment, these expenses should be directly related to the business purpose.  The meal or refreshments should be related to the legitimate image business activity, and should be able to stand the test of proof.  Technically, only then would you and your employer be allowed to treat these expenditures as expenses, and not as income when the burden of proof comes along.

Getting Technical

The IRS sets some basic rules that individuals and business follow.  A quick review of the rules that the IRS as set forth will show a couple of rather simple tests:

Directly Related Test

To qualify for reimbursement under the directly-related test for entertainment, including meals, you must be able to prove the following:

• The main purpose of the combined business and entertainment was the active conduct of business.
• You did engage in business with the individual during the entertainment period
• You had more than a general expectation of getting income of some other business benefit at some future time

The Associated Test

If the expenses meet the directly-related test, they may qualify under the associated test.

This test states that entertainment is:

• Associated with the active conduct of your trade or business and,
• Directly before or after a substantial business discussion.

This test includes the Substantial Business Discussion rule that is a requirement of deductibility for your employer.

According to Publication 463 – Travel, Entertainment, Gift, and Car Expenses for 2010 from the Internal Revenue Service, “A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific benefit.”

Keeping Credibility

Accuracy and truthfulness are at the heart of professional credibility for the Black sales professional.  Even greater is the fact that only one instance of inaccuracy or untruth can do away with years of work establishing the credibility.  There is more on credibility in the last Black Sales Journal 3/31, Credibility – A Goal of the Black Sales Professional.

I am going to cite some basics, and these are truly basics for expense report integrity.  Here are some suggestions for keeping your standing and credibility intact regarding expenses:

• Be timely – Submit your expenses no later than 1 week after they are due.
• Be organized – Keep information in a system that allows you to produce your receipts and expense forms as is necessary.
• Insure accuracy - If you do your expenses regularly, you will be under no time pressure.  The accuracy in your reports builds confidence.
• Be honest - Above all, there is truly nothing worthwhile to gain by having your employer pay for a lunch for you and your friend.  It is frankly not worth it!  Only claim what you can prove using receipts.
• Be Knowledgeable – Know intimately your organization’s expense policy.

Some Business Entertainment Specifics

We all have a particular responsibility when it comes to business entertainment, and especially meals.  We should make sure that the meal or event matches the business purpose.  There should be no instance where entertaining at the most expensive restaurant in town happens for a casual business discussion.  Remember, being modest and practical is prudent and a sign of good judgment.

Here are some basics entertainment do’s and don’ts that you may benefit from:

• Take Ownership – Forget the roulette that takes place where you the participants of a meal wait for the bill to come, then “wait” each other out to see who will pick up the check.  Unless the customer has advised that they are picking up the meal, they are probably not going to do it.  “Own” the event and then the rest of these strategies will be possible.
• Wine - If you are the host, only you should order the wine.  You may not realize why if you have never been burned, but the ordering of wine is an extremely high expense at an upscale meal.  If you are unsure you can accept someone’s counsel, yet your job is to order, and replenish the wine.  Feel comfortable stating to the server, or wine steward that you are responsible for the meal, and you will be responsible for the wine.
• Cordials and Liqueurs – If you open up to your guest having these, you could be in for a surprise.  Once you open that gate, you are hard pressed to control the cost of any one of them.  An aged port could definitely be in range, yet some of these items could be the price of a small pony.
• Order First – It may seem like bad manners, yet the host ordering first begins to set the tone.  When you order a fairly simple strip or filet, you are sending a message that the ‘market-priced’ lobster, which then attaches itself to a filet to make surf and turf, is probably above the price point.  Now, they may still do it, but the majority of people get the hint.
• Know When to ‘Cut it Off’ – This is always uncomfortable, yet practical.  After the meal, when the laughter and libation goes on, know when to say to the server that you need the check.  That does cut it off…at least for you.  If someone else wants to pick up the tab, it can start there.  This is responsible, and practical.  If it seems like it is wrong, think about the bill you are going to submit, and how management is going to react to it.
• Tip Correctly – If you tip correctly you will always find those who serve you eager to have your table.  Great service deserves 20% or more.  Good service deserves 15-20%.  I have had some mediocre service at times, yet did believe that 15% was warranted, because of the size of our group.  I cannot ever believe that a tip should be stiffed unless the server was rude, insensitive, and downright awful.  If that were the case, I would be having a conversation with the manager as well.  If you are unwilling to talk to a manager, then stiffing a tip is more retribution than anything else.
• Treat Wait Staff Properly – When you are entertaining, much can be ascertained about your view on your staff and others by the way you treat the wait staff.  They are not perfect, and you are not either.  I have seen customers make a decision to avoid a formal business relationship with a vendor when that vendor launches aggressively into a server for forgetting something small.  That is about rudeness, and even sometimes about power.

Use Good Sense

It is all about using good sense.  When you do it, the most common mistakes are avoided.  Don’t feel peer pressure, or the pressure that makes people do those things that are regrettable.

Build a relationship with your customers, not a game of one-up.  Be modest when they treat as well.  You will build a relationship with your consistency.

Your comments are welcome.  You can reach me at Michael.Parker@BlackSalesJournal.com.

Entertaining your clients can be both fun and productive.  It can be used as a tool to strengthen relationships, and at the very least increase your familiarity with the customer’s key people.  Used incorrectly, it can reveal things, right or wrong, about you and or your company in regard to your class, morals, and standing that will be indelibly etched in your customer’s and co-employee’s memory.

Be Smart and Practical

In the universe of entertainment options your choices should be safe and time proven.  Fine dining, spectator-sporting events, golf and other sporting events are time proven.  Relaxing activities such as spas, manicure/pedicures, makeovers, and other activities are making a strong showing as well.

There is, of course, some areas best left out.  Engaging the customer at gentlemen’s clubs, also known as ‘strip clubs’, is totally off limits!  It lacks class, and is far from harmless.  There is no activity, which is in poorer taste than this, whether you are supporting (paying for) the activity or you have the gall to have your company pay for it.  For the most part it is in violation of most expense policies (see Black Sales Journal 4/4/11 Business Entertainment – Some Do’s and Don’ts).

Stand for Something!

Black sales professionals beware: Company expense policies should be observed, and the letter of the law in an expense policy is important, but more important is understanding the intent.  The intent should be followed without fail.  In establishing and retaining credibility sales professionals don’t need to run afoul of what is, or what should be, socially acceptable.

Gone are the days when sales professionals and executives can entertain at gentlemen’s clubs without scrutiny.  Everyone should be held accountable for relationship building that is socially acceptable and open to both genders, all ethnic groups, and all sexual orientations.

Even if your customer asks to participate in one of these activities, you should show an unwavering stance and say that it is not something that you want to do.  I think that you should have the confidence to say, “No, but I have something else that we can do that will be great.”  That effort to redirect will probably be accepted, but even if rejected, I think you will have shown your character.

Stand up for yourself in this.  A mentor of mine told me once, “If you don’t stand for something, you don’t stand for s—!”  Think about it.  What do you stand for?

The Real Costs!

When men get together and consider the gentlemen’s club option, just think how offensive and exclusionary that is, or can be, to female customers, or co-employees.  It is discriminatory, and totally unfair!  You lose your integrity, your credibility, and respect.  Hmmm!  I am not sure you have much left that is considered universally of value.

The same is true for female sales professionals.  Taking clients to an ‘all men’ review is equally poor in taste.  Protect your image as well.

I am not sure which would be worse, to leave your female counterparts or customers behind, or to be as ridiculous as to ask them to attend.  Show your character and avoid mindless activities.  Keep everyone engaged an involved.  Treasure everyone’s feelings in the process.

A Personal Example

I was once a regional sales manager in the Michigan/Ohio market.  This market is dominated by the auto industry, but also focused in southeastern Michigan, basically Detroit.  I enjoyed the 6 year stint there, but was continually asked to go either to 8 Mile, an area replete with gentleman’s clubs, or to Windsor, Canada, another area brimming with strip clubs and other attractions.

An executive vice-president of my organization visited our office with one of his direct reports, a senior vice president, in tow.  After the requisite meeting they ask me to take them to Windsor.  I will be honest, I felt some pressure as this was two steps up from my manager, an important company officer, and very influential.

I said to them, “I will not be going there, but you can use my vehicle to go if you are sure that is what you want to do.” It was met with the quick reply, “Come on, we are going to talk business with you!  You need to be there for us to talk about this stuff.”  The Senior VP then said, “Don’t give me this s— that you don’t go to strip clubs….”  I retorted, “You don’t want to hear it, but I don’t go to strip clubs.”

They smirked, but found someone else to take them.  I always wondered whether it would affect my career, but it did not do any long-term damage, although it was known in the short term that I was not one of the ‘boys”.  Remember, you have to stand for something!

Stand Tall

Find comfort in standing tall in situations like this. Don’t do anything because the ‘crowd’ thinks you should.  Whether you are male or female, Black or white, gay or straight, be you and eventually you will be appreciated for your stance.  If you partake of these activities currently, you should consider your image and take this opportunity to change.  See the light!

Your comments are welcome.