In a previous article on this blog, we explained the basics of setting up an expense policy. There was just one thing that we left out — the kinds of expenses you should include. That’s what we’re looking at today.
So which costs should be covered and which ones shouldn't? Let's find out by taking a deep dive into reimbursable expenses.
What are reimbursable expenses?
Reimbursable expense examples
Now that we know more about the characteristics of valid expenses, it's time to dig deeper into the various categories that your company could consider reimbursing.
As one of the biggest sources of employee reimbursement, company travel covers a large number of things. Traveling for business purposes means making a lot of payments, and most of these should be seen as valid expenses.
While all of these expenses are relatively common, there are also some less known travel costs that are worth mentioning. For example, visas or other travel documents might be needed when traveling to some parts of the world, while others could even require employees to get vaccinated. Both of these things don't come cheap, and seeing as they’re an unmissable part of the business trip it makes sense to cover them as expenses.
Check out how to set up a stellar travel expense policy in a previous blog post.
(For UK readers, here's our guide to HMRC travel expenses.)
Meals and entertainment
If an employee is having dinner on a work trip, it should automatically be covered as a travel expense — of course. But then there's the possibility that an employee wants to treat a client or contact to dinner, because they think it would positively impact the business relationship. In this case, covering these costs would definitely be in the interest of your business.
The scope of these kinds of “networking“ expenses should include most entertainment, like going to a music or sporting event — but it only counts if the client is actually present.
(We explain HMRC's meal allowance rates here.)
Make sure to pay attention to the specific rules per reimbursement category. For example, if UK employees use their private vehicle for business purposes, the HMRC has defined certain limits on how much you can pay them for it.
If you want your people to be able to do great work, it makes sense to give them access to the best tools. Nothing can mess with productivity levels like a slow computer or broken keyboard, so you should include these and other tools in your expense policy.
For companies that exclusively work with people in a single, local office, this might not be interesting — as always, make sure to think if this applies to your situation.
How to track employee expense reimbursements
For most companies, the hard part isn't defining what employees can claim reimbursement for. As we've just seen, these are mostly classic company costs, and staff will mostly be able to use their common sense.
The harder part - both for individual employees and the company as a whole - is staying on top of these costs.
For the employee
It's tricky for employees for a few reasons:
- The way they pay at work is different from how they pay in their private lives
- Costs can be small and irregular, and therefore easy to forget
- They need to understand the right way to report expenses, and especially what kinds of documents are required
Overall, the biggest issue is that there either isn't a clear, formal process. And if there is, most employees don't know about it.
For the company
In this case, we're really talking about the finance team (or in smaller companies, the office manager). They're the ones who have to deal with each employee expense claim.
For them, the problems are more glaring:
- Expense reports are often incomplete and full of errors
- Claims can arrive any time during the month or quarter, and employees expect to be reimbursed promptly
- Processing claims requires a lot of manual data entry, which is even worse when there are errors
To overcome these challenges, you'll need to make changes. And the single best way to improve expense claims for both employees and finance teams is to automate all of the worst parts.
This starts with a good expense management tool to help employees make claims. Most of these start with a mobile app that walks the team member through their claim. There will be mandatory requirements to ensure that no information is missing.
And the best part - the employee can simply take a photo of their receipt. They don't have to rummage through their wallet once a month and try to remember what every payment was for. Which is excellent.
But the real benefit of these systems is their impact on finance teams. For one, there is no data entry at all. The employee already filled in all the information, and there's no need to copy it to a spreadsheet.
The finance manager opens up their dashboard, does a quick check of the employee's claim, then approves (or denies) it for payment.
- This process takes seconds
- There's no need to search through your email inbox and open attachments
- Receipts are saved digitally to the correct folder
- Approved claims are sent to your accounting tools for payment
When you think about the sheer amount of your day spent on manual processes, it's alarming. Expense reports are probably already costing your travellers and finance team valuable time, simply because the system is awkward.
Reimbursable expenses made easy with Spendesk
Reimburse with Spendesk
We've built special tools to manage the full expense process for your teams. They can make a claim, receive managerial approval, and send the complete request to the finance team in seconds.
And the most exciting part: finance teams can now reimburse employees directly from the Spendesk platform. It's virtually instant, and teams no longer have to wait until payroll to be reimbursed for work expenses.
That's fairer, faster, and works better for everyone involved!