Processing reimbursable expenses can be quite a tedious task. Filing papers and keeping them organized can be quite a challenging task. Efficient recording, tracking, and managing of business expenses can help secure the company’s finances and save you, as a business owner, the hassle of filing court cases. But getting a better understanding of what reimbursable expenses are will help you as a business owner to manage them better, so let’s take a look at what exactly reimbursable expenses are.
What are reimbursable expenses?
Reimbursable expenses are money that you pay back to your employees when they pay a business-related expense out of pocket. In simpler terms, when an employee buys office supplies or travels for business and pays for these from their pocket, the business needs to pay back the money later; this is called reimbursable expenses. Almost every employee can make a reimbursement claim. However, companies can only reimburse expenses as per the reimbursement policy.
Difference between reimbursement and Disbursement
Reimbursement and Disbursement are two processes that are often confused together. As a business owner it is necessary that you know the difference between these two processes. Disbursement is payments made to a third-party supplier of goods and services. This could include any form of payment, such as electronic fund transfer, check, cash, or more. On the other hand, reimbursement, as mentioned before, is repaying your employees for any business-related expense that they paid for. In essence, reimbursement is a payment or a refund of the original disbursement.
Now that we have covered reimbursement let’s examine some expenses that are considered reimbursable and those that are non-reimbursable.
Reimbursable expenses:
- Business Phone calls
- Company car repairs and maintenance fees
- Office Supplies
- Local transportation costs
- Advertising costs
- Conference and Training
Non-reimbursable expenses:
- Annual fees for personal credit cards
- Laundry and valet services during travel
- Rental car upgrades and accommodation upgrades
- Personal entertainment
- Traffic violations fines
- Travel Gadgets
How should companies manage reimbursable expenses?
Managing reimbursable expenses is crucial for a company; otherwise, there is a high chance that employees may submit a invalid reimbursement claim. Expense claim frauds are quite common for Singapore businesses. In a report, an employee received four years of jail time for submitting SGD 1,042,080 worth of false travel claims between 2014 and 2019. At this rate, companies may go bankrupt if employees keep making false reimbursement claim so below are a few tips that businesses can follow to handle reimbursement claims efficiently.
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Define what expenses are reimbursable to your employees:
Employees must be informed about the company’s policy on reimbursement claims. Make a list of reimbursable expenses for your employees to see so that they can refer to it before they make any business-related payments. One such example would be travel costs via plane, but if they opt for an upgrade, that is not eligible for a reimbursable claim.
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Standardize a process of reimbursing expenses:
You can create a standardized way of processing reimbursement claims. Having an expense claim template can help with this. An enhanced expense management platform can eliminate all the painful aspects of manual reimbursement. Employees don’t have to store concrete receipts and other documentary requirements and can immediately file scanned copies of the receipts online. With an easily accessible platform, employees can also upload the receipts automatically without the fear of losing them during the business trip.
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Monitor and track expenses:
Most fraudulent claims stem from unprofessional and disorganized monitoring and tracking of reimbursement claims. Set up a system where claims can be checked and verified. Assign a team to check and verify whether the claim complies with the company’s policy and rules. Tracking these claims can also help compare expenses with future spending on the same business trip or marketing project.
Efficiently managing the reimbursement expenses process safeguards a company’s financial health. By clearly defining the reimbursable policy, standardizing a reimbursable process, and closely monitoring claims can save a company from fraudulent claims and ensure compliance with the company’s policy. Implementing an expense management platform can further narrow down the process, which in turn allows employees to submit their claims promptly and safely. Overall, a well-structured reimbursement system not only protects from financial losses but also promotes transparency and trust between the business and its employees.
