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Reimbursable Expenses: Managing Claims

Guess how much money employees effectively lend their employers every month in the US. If your answer was 1 billion USD, you’re still a bit off the mark. The answer is 1.6 billion USD, according to Conferma. Some of these expenses, of course, are necessary. However, without clear policies for reimbursable expenses, companies can find themselves staring down a valley of draining money.

In a previous article, we explained how to effectively control employee expenses. However, one thing we want to expand on is the kind of expenses that should be included in your expense policy.

Today, we’ll guide you through creating an expense policy that defines what your employees can consider as a business expense. This will help with claim managementand save costs.

What are Reimbursable Expenses?

Reimbursable expenses are payments and purchases made by employees on behalf of their company. It is the company’s legal and moral obligation to fully reimburse employees for such expenses promptly.

However, employees cannot claim reimbursement for all payments that they make. To maintain transparency and fairness, companies must lay out clear rules for what does and does not count as a reimbursable expense.

Managing Claims: What Should Count as a Reimbursable Expense?

What counts as valid reimbursement claims largely depends on:

  • Relevant legislations on tax, business reimbursements, and so on

  • The company itself

Companies that are competing in talent wars might decide to be generous and reimburse commuting costs, even if it is not standard practice in the region. However, they will still need to bear in mind legislations.

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For instance, in the UK, such travel costs will have to comply with legislations such as 45p per mile up to 10,000 miles, followed by 25p after. Any expenses above this will lead to tax liabilities for both the employer and the employees. Remaining in the UK, client entertainment is considered non-deductible for corporation tax and VAT.

So, how does a company decide what should count as reimbursable expenses? The following guidelines will help:

1. Business Character

That is, the expense must be related to the employee’s services – something that they have to do for their job. It should maintain business operations or drive value.

This is, of course, a broad definition. It could cover anything from a new monitor for a work computer to a two-night stay at a hotel on a business trip. Legislations vary from location to location, so ensure that you check the legal definition in your area.

2. Reported Quickly

For reimbursement claims, all payments should be reported within a reasonable timeframe (ideally clarified in the policy) to the relevant department.

Surplus amounts left over from the original reimbursement should, furthermore, be paid back to the employer in the same time.

3. Expense Receipt

It is crucial that employees provide evidence of the purchase in the form of an invoice, expense receipt, or other proof of purchase.

The information that needs to be shown for legal validity differs by country. However, at a minimum, it should include the full amount (tax included), description of the product or service, and place and time of purchase. Other VAT-related elements should ideally also be included.

If the expense meets the above criteria, it may be eligible for tax deduction.

And finally, we include a list of examples of what are not, by large, considered reimbursable purchases: Valet services during business travel, traffic violation fines, personal entertainment, accommodation upgrades, and annual fees for personal credit cards.

Reimbursable Expenses Examples

Many businesses, especially those that are starting out, are uncertain of the process of managing claims and what counts as reimbursable purchases.

The following expenses are often considered reimbursable: Company cars maintenance and repairs, conferences and training, business phone calls, office supplies, business travel expenses, and advertising costs.

Let’s dig a little deeper for further clarity:

Meal Expenses

Companies often foot the bills for multiple meals and drinks daily during business travel. This can include client meals and networking. The scope of networking generally includes most entertainment, such as sporting or music events, provided that the client is present.

Transportation Expenses

This encompasses taxi rides, parking garages, and luggage storing costs during travel. Most forms of transport should be covered.

However, your employees might also incur expenses when not on the road, such as when driving to the office daily or commuting using public transport. Whether you choose to cover these costs depend on various factors.

Successful, well-funded companies are encouraged to contribute to fuel costs. However, new start-ups might want to put their money elsewhere. And, if companies have sustainability as one of their ESG goals, it could make sense to offer something else, such as sponsoring bicycle purchases or covering carpools.

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Travel Expenses

This includes rail tickets, plane tickets, hotels, car rentals, visas, and even vaccines, depending on travel requirements.

Travel is one of the biggest sources of reimbursement expenses. Most travel expenses should be considered reimbursable.

It should be noted that, post-pandemic, business travel is not as crucial as it used to be. If cutting costs is important to your business, then you might want to consider hiring remote , employees who are stationed in an area where your staff travels to frequently for business.

That being said, travel expenses cover a wide range of elements, including but not limited to getting to the airport, flight tickets, in-flight food and drink (up to a reasonable amount), and lodging.

Reimbursement vs Disbursement vs Drawdown

Reimbursement, disbursement, and drawdown are different processes.

Reimbursements involve paying expenses incurred by staff members to fulfil business-related objectives. It is, as the term suggests, a refund or payment. Employees pay with their own money for business expenses, which the company later reimburses.

On the other hand, disbursement refers to the company paying third-party suppliers of goods and services. This can be via checks, cash, electronic fund transfers, and so on.

Disbursements can describe payments of dividends to stakeholders, payments into an operating budget, or a loan delivery to a borrower. Payments by intermediaries, such as lawyers on behalf of a client to a third party, may also be considered a disbursement.

A drawdown is often associated with a bank loan or retirement account, and is a consequence of a type of disbursement. For instance, if you withdraw money from a retirement account, you receive a disbursement, which represents a drawdown on your account balance.

Reimbursement Claims: Recording and Preparing Proof

Keeping track of business expenses is one of the biggest challenges for many companies. This can be due to various factors, such as employees submitting expenses at infrequent intervals, a lack of clarity in company policy causing confusion among employees, manual data entry (which is prone to errors), and reports being incomplete or submitted incorrectly.

Overall, the main problem is the lack of a clear, formal policy and process. Or, the lack of knowledge employees have about it.

For the finance team (or the office manager, in case of smaller companies), the problems are more conspicuous: Error-ridden, incomplete expense reports and manual data entry are the most common ones.

One of the best ways to streamline expense claims for both financial teams and employees is to automate expense management. This is done through expense management tools such as FreshBooks, QuickBooks, Expensify, Xero, and SAP Concur. There is no data entry. Finance managers can just open up their dashboard, check employees’ claims, and approve or deny them for payment.

Companies can also consider the use of corporate cards, which can be customized according to employee needs. Corporate cards differ from credit cards, since they can be pre-loaded with a certain budget, thus preventing employees from accidentally over-spending.


Claim management requires a clear and concise spending policy, and your employees need to be able to work with convenience and flexibility. We hope that, with the tips above, you will be able to better manage reimbursement claims.

NextGen Accounting offers credit card reconciliation services, bank reconciliation services, reconciliation automation, financial consulting, financial reporting, and audit and anti-fraud assurance. Our services are specially tailored to firms with vast amounts of data that are extremely difficult to reconcile.

To give you the fastest and most accurate reconciliation, we use our patented software CrushErrors, which you can also obtain as a product if you’d rather conduct reconciliations in-house.

NextGen Accounting’s management team has decades of experience and includes former executives of Barclays Bank, Bank of America, and ICBC. Contact us today for reconciliation solutions or book a free demo if you’d like to get CrushErrors!


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