Entertainment expenses are a category unto themselves in the world of business expenses. Useful, sometimes strategic, but always sensitive, they must be managed methodically and rigorously. Long associated with media groups, these expenses actually affect many sectors of activity. Whether you run a service company, a technology start-up, or a communications agency, you are likely to encounter them.
But what exactly do these expenses cover ? How can they be managed to avoid errors ? And above all, how can the right tools be used to manage them effectively and in full compliance ?
1. What are entertainment expenses ?
Entertainment expenses include all expenses incurred in the context of professional or commercial relationships. The objective is straightforward : to maintain relationships with customers, partners, influencers, or institutions. This can range from a business lunch to organising a seminar, or purchasing professional gifts.
Specifically, this could involve :
- Business lunches or dinners
- Customer events, cocktail parties or partner evenings
- Transportation or accommodation costs related to external appointments
- Corporate gifts for business use
- Invitations to cultural or sporting events
These expenses are intended to represent the company, strengthen its image and develop its network. They are therefore common in sectors where customer relations and image are important: communications, consulting, luxury real estate, technology, institutions, etc.
2. Strict tax regulations
Even if they are part of a legitimate activity, entertainment expenses are not automatically deductible. For the tax authorities, each expense must be justified by
- an explicit professional reason,
- clear proof of payment (invoice with date, amount, nature of service),
- and proportionality in relation to the company’s activity.
For example, a business meal with a client or partner is eligible, provided that you can explain the context, provide the full invoice (including VAT) and indicate the names of the guests. Otherwise, the expense may be reclassified as a benefit in kind or rejected as a business expense.
Another point to remember : VAT on these costs is generally non-recoverable, except in certain specific cases. This detail has a direct impact on the overall budget.
3. Properly justifying expenses : an essential requirement
For entertainment expenses to be considered compliant, more than just a credit card receipt is required. The expense must be documented, contextualised and tracked. This involves :
- A valid invoice
- A verifiable professional context (client, prospect, partner, etc.)
- A clear internal policy (ceilings, types of authorised expenditure, specific practices)
Some companies go even further by requiring the use of approved restaurants or prohibiting alcoholic beverages on expense reports, precisely to avoid any disputes with URSSAF or the tax authorities.
4. What to avoid at all costs
Poor management of entertainment expenses can be costly. Here are some pitfalls to avoid :
- Lack of supporting documents : without a complete invoice, the expense may be rejected during an audit.
- Personal expenses included by mistake : a dinner with friends or a personal purchase slipped into a business expense report, even if done by mistake, can cause serious problems.
- Excessive amounts : a luxury hotel or Michelin-starred restaurant may be frowned upon if not justified by the nature of the meeting.
In any case, these errors may result in tax non-deductibility or even penalties if bad faith is proven.
5. Why adopt an expense management tool ?
This is where expense management tools come into play. Platforms such as Vertical Expense enable you to automate, centralise and secure the entire process.
1. Easy and immediate entry
Employees can take a photo of their receipt, enter the reason and guests in a matter of seconds from their smartphone. The data is automatically archived and filed, preventing loss or oversights.
2. Integrated internal rules
Vertical Expense allows you to set up authorised expense types, require certain mandatory information (such as the name of the guest customer), or set limits by profile or event type. This reinforces rigour without weighing down day-to-day operations.
3. Real-time monitoring
Finance or HR managers can track expenses by department, employee or type of event. The data is exportable, auditable and ready to use for accounting purposes. This makes it possible to quickly detect discrepancies or abuse.
4. Guaranteed compliance
In the event of a tax audit, everything is traceable: supporting documents, reasons, beneficiaries. The management of entertainment expenses becomes clear, documented and defensible. It is no longer a black box, but a controlled expense item.
Entertainment expenses are not incidental expenses. They are tools that promote growth, reputation and customer loyalty. But to take full advantage of them, they must be managed seriously, methodically and transparently.
By combining a clear policy with the right management tool, you can reduce your risks while saving time and gaining peace of mind. When used properly, entertainment expenses become a strategic lever — rather than a source of administrative stress.
