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Employees need to spend money to work effectively. Some businesses provide company cards so employees can make purchases directly with company funds.

But employees can also pay for business expenses out of pocket using personal payment methods. In this scenario, the employee requests a reimbursement from their employer afterwards, along with proof of their purchase.

They file an expense claim, and receive reimbursement according to the company's internal processes.

What are expense reimbursements?

Employees spend on a wide range of things to support everyday operations and grow the company. Some companies have a single corporate card that is passed around to team members when necessary. Other companies issue individual cards to select employees whose responsibilities require frequent spending.

Out-of-pocket expenses are purchases made with the employee’s own funds.

Companies are legally required to reimburse employees in full for these types of payments. Businesses can pay employees back with cash, or via direct deposit to their bank account.

However, employees cannot automatically claim reimbursement for every payment they make. Companies create their own expense policies to define what is considered reimbursable expenses on behalf of the company. These rules help keep employee expense spending fair and transparent.

A first rule in most policies: expenses must be business-related to be reimbursable. That means the purchase should be for something that an employee needs to do their job.

Types of expense reimbursements

Specific expense management processes depend on the company’s individual expense policy and how their teams spend. Examples of reimbursable business expenditures include:

Business travel expenses

  • Hotel, accommodation, restaurants, client entertainment

  • Transportation costs: taxi, bus, train, plane tickets, car rental, gas

  • Office and workspace supplies

  • Co-working space fees

  • Workshops or professional training

Marketing and advertising expenses 

  • SaaS subscriptions or tools

  • Event materials, ticket fees, promotional gear for attendees

Medical expenses

  • Covered by HRA (health reimbursement arrangement) programs

  • Health insurance, home tests, etc depending on the company’s health plan

  • Insurance company premiums (Medicare, Medicaid, etc)

As companies grow, manual employee expense reimbursement can become overwhelming and unmanageable. At this point, many finance teams choose to implement automated spend and payment management solutions. 

These platforms allow companies to easily issue every employee their own physical or virtual company cards for convenient, transparent spending. They also enable businesses to submit, process, and approve expense reports and reimbursements much quicker than before.

The expense reimbursement process

Traditionally, the expense reimbursement process involves several manual steps for both employee and the finance team. When left until end-of-month closing, employees hastily submit reimbursement claims and finance teams have to chase down missing paper receipts.

Spend management tools like Spendesk simplify and streamline the expense reimbursement process. This makes business spending more secure for everyone involved.

1. Employee makes a purchase

The employee pays for an out-of-pocket expense. With mobile receipt capture, employees can immediately snap a photo of their purchase receipt using their cellphone. The payment is logged and reconciled in the spend management app.

2. Employee submits a reimbursement claim

The employee submits an expense report to their manager to claim reimbursement for their purchase. Paper expense reports and lack of documentation leave companies vulnerable to fraud. Individuals can claim more expenses than were actually spent, or use funds for a different purpose than reported.

With finance automation, employees can generate and submit digital expense reports in a few clicks. They add additional details like amount, date, and purpose of the purchase. The completed form is instantly sent to the related manager and finance team for approval.

3. Manager reviews expense report and approves reimbursement

Many approval processes involve multiple people across different teams. Expense reports are easy to misplace when they’re passed around from person to person for review.

Centralized finance management consolidates all documentation and processes into one place—from mobile receipt capture and expense reports, to approval and repayment. The responsible manager receives a notification for the expense claim and once approved, the next person in the approval process is automatically pinged. No paperwork or email attachments necessary.

Once the expense is completely approved, the finance team can then reimburse the employee effortlessly and securely within the same platform. Processing reimbursement claims in real-time keeps employees happy and saves finance teams from a mad rush at month-end close.

Consolidated expense reporting

Automated spend management platforms allow finance teams to consolidate expense reimbursements alongside all other company spending. There are different tools available on the market, and the best streamline everyday processes in expense management. Look for:

  • Digitized expense reports: Employees can create 100% digital expense reports in seconds, managers can approve and reimburse just as quickly.

  • Automated receipt capture: Employees take a photo of the receipt after purchase for instant reconciliation. OCR technology automatically extracts key purchase details into the spend management app.

  • Automated mileage and per diem allowance calculations: Depending on the country they’re based in, companies can calculate mileage, meal and hotel allowances for their employees.

  • Real-time spend data: All expense claim history is documented, and can be pulled up at any time.

Benefits of automated employee reimbursement

Many companies are implementing automation softwares to support smarter and safer employee reimbursement processes.

Save time

Centralized spend management platforms give finance teams greater control and visibility while managing company-wide expenses. Finance professionals can save hours of time each month with automated expense reconciliation and payment processing.

End-to-end traceability

Companies can stay compliant and prepared for audit at all times. Process automation and real-time data collection creates a complete audit trail from approval to payment on every expense claim.

Mitigate risk

One easy-to-use tool and zero manual data entry significantly reduces the risk of errors and duplicate payments. All expenses and transaction details are digitized and stored safely in a single place, ready to access and reference at any time.

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Last update: 2 February 2022