Expense reimbursements are a financial process companies should handle properly. Learn how to reimburse employees for expenses through this article.
Complete Guide to Reimbursable Expenses and How to Manage Them
Reimbursable expenses are purchases and payments by an employee to be paid by the company. Spenmo helps to manage expense claims and reimbursements.
Businesses in Singapore are no strangers to expense claims fraud. In a report, an employee gets four years of jail time for submitting $800,000 worth of false travel claims from 2014-2019. If an employee continuously submits fraudulent claims or false reimbursable expenses, then the company is bound to take the course of bankruptcy in the next few months.
Manual processing of reimbursable expenses can be challenging. The tedious filing of papers and keeping them may lead to delays in reimbursement and errors in the filing of expense reports. Efficient recording, tracking, and managing business expenses can help secure the company finances and save business owners from the hassles of filing a court case.
What are reimbursable expenses?
Reimbursable expenses are company payables to employees or suppliers who incurred company-related expenses or billable expenses. Traditionally, employees travel or buy office supplies and pay from their pocket or credit card. The employees are then paid back by their employers after submitting expense claims. Travel expenses or spending for business purposes care are considered reimbursable expenses.
Almost every employee within a company can make reimbursable expenses. However, most of the time, the company can only reimburse expenses stipulated within the reimbursement policy.
|Reimbursable expense||Non-reimbursable expense|
|Business phone calls||Annual fees of personal credit cards|
|Advertising costs||Laundry or valet services during travel|
|Company car repairs and maintenance fees||Rental car upgrades, or accommodation upgrades|
|Conference, education, training||Traffic violation fines|
|Office supplies||Personal entertainment|
|Local transportation costs||Travel gadgets|
The table above shows in detail the examples of expenses that may or may not be reimbursable depending on the rules set by your company. There are also expenses that companies can reimburse and which can be considered deductible expenses according to the guidelines of IRAS.
Such expenses should also be stated in the company policy before allowing employees to reimburse.
What are the types of reimbursable expenses?
In general, here are a few types of primary reimbursements employees are allowed to claim:
1. Travel and mileage rate reimbursements
Travel reimbursements are made for expenses incurred by employees who go on a business trip. Usually, the company pays for airfare, hotel accommodation, and food allowances per diem for the entire duration of the trip. Mileage, on the other hand, refers to the expenses incurred on business trips within the city and the employee uses his car. Mileage reimbursements would cover gas refill costs, parking tickets, and food if the employee uses a personal vehicle. The employee should take note of the car’s odometer to record the distance it traveled for the business trip. Remember, the computation of the mileage rate depends on a template set by the company.
Meals and entertainment paid for by the employee during the business trip may not be reimbursable.
2. Business expense reimbursements
Most business expense reimbursements are made when an employee pays for supplies, subscriptions, services, and other requirements for the business to run or operate. An example of a business expense would be the company’s spending on marketing efforts like advertisements and content creation. Employee expenses on digital tools and marketing platform subscriptions should be reimbursed, too.
3. Medical reimbursements
Employee healthcare should be a company’s priority and any spending covered within the healthcare policy of an employee will be reimbursed by the company. Treatments and health insurance premiums can be included as reimbursable expenses. Some health-related spending is non-reimbursable depending on your health or medical insurance policy.
What is the difference between reimbursement and disbursement?
Disbursement and reimbursement are two different processes. In disbursement, the company delivers payment to a third-party supplier of goods and services. This can be in the form of electronic fund transfers, checks, cash, and more.
Reimbursements, on the other hand, is the process of paying any expenses incurred by a member of the organization to fulfill any business-related task. In essence, reimbursement is a payment or refund of the original disbursement.
For reimbursable expenses, employees disburse their own money for office expenses, which the company reimburses later on.
How to record and prepare proofs for reimbursable expenses?
Claiming for reimbursement of expenses follows a process, which can be a little complicated if you are not aware of the documents required to support an expense claim. In general, the accounting department would ask for receipts and invoices as proof of expenses validity. Here are the steps to process reimbursable expenses:
Step 1: Scan the documents
All receipts, invoices, and other papers that will provide information on the expense should be scanned. You may also take a photo of these documents to secure a digital file. The documents should indicate dates, location, price, and other information which the accounting department may require. If employees used their personal credit cards, the statement of account within the same period of travel should also be kept.
Step 2: Keep your original file with you and store the scanned files on your computer
Step 3: Upload the files upon submission of your expense claims.
Make sure you comply with the company’s standards in terms of size, formatting, and other expense claims requirements.
How to manage reimbursable expenses?
Companies have a crucial task in managing reimbursable expenses. For one, the terms of reimbursements should be clear from the beginning. This will prevent employees from submitting invalid claims and will save the accounting personnel’s time from eliminating invalid requests. Below are a few tips on how you can efficiently handle reimbursements and claims.
Define what expenses are reimbursable
From the start, employees should know what types of expenses can be paid back by the company. Make a list of what can be or cannot be reimbursed because you can not pay for all types of expenses made during the trip. For instance, the business should cover the cost of a regular hotel room. If the employee wishes to upgrade into a deluxe or rockstar suite, he should be paying the additional cost. Travel costs may also include rental cars and other related expenses.
Standardize and centralize reimbursable expenses claims
You can create a standard way of processing reimbursable expenses. An expense claim template can help a lot in synchronizing documents submitted to the accounting department.
Automate tasks within the expense claims process
The use of an expense management platform can eliminate all the painful aspects of manual reimbursement. Employees can get rid of concrete receipts and other documentary requirements and can immediately file scanned copies online. With a platform that’s easily accessible, employees can also automatically upload the receipts without the fear of losing those during the trip.
Monitor and track expenses
Most fraudulent expense claims sneak through unprofessional and disorganized monitoring and tracking. Set a process on how submission can be checked and verified. Assign authorized staff to ensure expense claims comply with the company policies and rules.
Companies should also keep a record of the reimbursed expenses to compare future spending on the same business trip or marketing project.
Safeguarding your business with expense automation
Creating a guideline for reimbursable expenses and implementing a systematic process for expense claims can safeguard your company’s finances against fraud. Seamless expense claims will not only hasten the reimbursement process but will ensure error-free reports and employee efficiency. You can also consider the use of corporate cards which can be controlled and customized depending on your employee’s needs. Most corporate cards are different from credit cards because these can be pre-loaded with a budget which can prevent employees from overspending.
Technology has surefire ways to ease manual tasks related to business processes. Automation of reimbursable expenses will not only improve employee compliance but make it easy for companies to prepare expense reports for tax purposes mandated by the IRS. will also help business owners keep track of their expenses and protect the company’s financial health.