How Should I Track Employee Reimbursements?
With the new year comes a new chance to review your internal business practices and get a fresh start. A lot of business owners operate relatively ad-hoc when it comes to internal tracking and processing for payments, especially reimbursements for business expenses that employees pay for with personal funds.
Many people will use basic services to get the job done, such as QuickPay/Zelle or Venmo. This technically can work, but it doesn’t do a good job of avoiding scrutiny if an audit were to ever come your way. Not to mention, these methods don’t keep good records. It can easily look like company money is being distributed to employees outside of payroll, and without a trail of what it was for you don’t know your true expenses. On top of that, small business owners are often somewhat random in when reimbursements are made, if at all, and there is no clarity for employees on what can be reimbursed and if there are any limits.
A simple first step for doing reimbursements well is to outline company policy on what and how much can be reimbursed. A reimbursement policy doesn’t have to be complex, but having something in place in your employee handbook will allow for clear expectations before an incident arises. For example, perhaps an employee is travelling for business and is booking their own hotel, which the company will pay for. You might want to outline in your policy that hotels for business travel will be reimbursed up to $100/night. If the employee wants to book the $350/night luxury suite, that’s up to them, but you will only pay the first $100. If they come to you with the receipt wanting reimbursement for the full amount, you can clearly point to the handbook to avoid an awkward exchange.
Another aspect to outline in your policy is timing. If an employee makes a business purchase in February but doesn’t come to you until October wanting reimbursement, will you pay it? Requiring reimbursements to be submitted on a monthly basis is a great way to ensure timely processing. Let employees know when they can expect reimbursement after the month ends, whether it’s on a set date or with the next payroll, etc. Along with prompt submission, employees should be required to include receipts in order to get reimbursed.
These are obviously a lot of aspects to handle on your own. Luckily there are several softwares available that can facilitate the employee reimbursement process, including following spending limits/rules, an approval process, the ability for employees to attach receipts directly to a claim, direct deposit reimbursement from within the program and integration straight to your accounting software.
One software that does this well is Expensify. Each employee gets their own user ID and there’s even a mobile app so they can take pictures of receipts and submit expense reports on the go. You can set up an approval workflow if multiple people need to approve the claim before reimbursement, and Expensify will even direct deposit the funds to employees’ accounts for free. Now you’ll have clear records of what was spent, an easy submittal process, and it all ends up in your accounting software so you can track your expenses accurately. Additionally, you can get 15% off the cost of Expensify, when you use code: firstname.lastname@example.org when you sign up here at Expensify.
If you have any questions on your company’s specific scenarios or just want someone to manage all this for you, let us know! We’ll be glad to help.