How to simplify your expense reimbursement process

Perhaps because of how crucial it is to get right, expense reimbursement can be perceived as daunting by administrators. Before they can process payments, finance teams have to sift through piles of receipts, validate claims, and approve expense reports. What should be a simple series of steps becomes tedious and stressful if an organization’s reimbursement process is laden with inefficiencies. The result? Delayed reimbursements and disgruntled employees.

According to a study by the Association of Certified Fraud Examiners (ACFE), 15% of business fraud stems from reimbursements with a median annual loss of $26,000. Organizations cannot allow reimbursements to go overlooked–otherwise, they risk losing thousands of dollars to expense fraud.

If you’re looking for an easier way to manage this process while still maintaining the integrity of your data and expense management operations, here are some concrete methods for simplifying reimbursements for your team.

Identify reimbursable expenses

When employees incur expenses on behalf of the company and pay for it out of their pockets, the company is legally required to reimburse them in full. That said, employees can’t claim reimbursements for every single purchase they’ve made; only expenses that have a clear business purpose can be reimbursed. By setting clear boundaries around what is and isn’t considered a reimbursable expense, you’re much less likely to have employees submitting irrelevant reimbursement requests. Here are some common reimbursable expense categories: 

Travel and accommodation

Business travel and lodging expenses constitute the majority of employee reimbursement claims. Between transportation to and from the airport, air tickets, public transportation costs, car rentals, and lodging, there are a lot of expenses involved with just the logistics of a trip. This category also includes prerequisite items like visa processing fees or vaccination costs for travelers.

Meals and entertainment

All the meals consumed by employees on a business trip are automatically covered as reimbursable expenses. In the event that they’re treating clients or partners to a meal or meeting them at a networking event to positively nurture the business relationship or close a deal, then those expenses are also considered reimbursable since they’re incurred in the interest of the business.

Communication and office supplies 

If your team is constantly on the move and you want them to be available for collaboration, then it’s best to cover their cellular plans. This is especially applicable to sales, marketing, and business development teams. Office supplies like laptops or tablets, software programs, online subscriptions, training materials, and more are all considered reimbursable expenses as well.

Medical reimbursements

Your employees’ healthcare is a priority. This is why medical expenses incurred within the healthcare or medical policy and health insurance premiums are deemed reimbursable.

Implement an effective reimbursement policy

When employees are aware of the reimbursement policy and abide by it, you can avoid overspending and out-of-policy claims, which in turn helps the finance team process reimbursements faster.

To start, ensure your policy is comprehensive. Organize a company-wide brainstorming session that includes multiple stakeholders from the HR, finance, legal, and procurement teams. This will make it easier to draft the policy because you’ll be able to draw on their experiences and perspectives, ensuring the priorities and goals you set for the policy are strong right from the outset.

Here are some rules the policy must contain:

• What expenses can be reimbursed

• How to record and submit the different expenses

• Process for submitting receipts and other documentation for proof

• The time limit within which the expense reports must be submitted

• Steps to gain expense report approval

It’s important to emphasize that expense reports must get submitted on time since certain business expenses are tax-deductible, but only if they are accounted for within the appropriate timeframe. Also, your employees must have returned any excess reimbursement or allowance within that duration for the expense report to be processed tax-free. in

Once you implement the policy, promote adoption amongst employees and review your adoption rates periodically. Also, make your expense policy easily accessible. Emailing it to your employees, including it in your travel booking tool or expense management system, and putting it out on your corporate intranet are some ways you can make it easy for your employees to access the policy.

Determine reimbursement modes for timely payment

Issuing corporate credit cards to employees is a great way to stop worrying about them paying out-of-pocket for business expenses. From spending limits that prevent employees from abusing their card privileges to direct card feeds and rewards, corporate credit cards are a faster and more efficient way to track your expenses.

If you’re worried about the cost of getting corporate cards for all employees, try issuing them for your most regular travelers only, or try direct deposits. Direct deposits eliminate unnecessary processing steps by transferring approved reimbursement funds directly to an employee’s bank account. This has two main benefits:

1. Provide more visibility into the reimbursement process for your finance teams, making auditing employee expenses that much simpler

2. Separating reimbursements from regular paychecks can help save you and your employees’ additional expenses in income taxes 

Organize and monitor your expense report approval process

Now that you have all the necessary information in hand, it’s time to organize. Your finance team is bound to receive several expense report submissions in a day and is likely to be bogged down with 50-60 reports in a week. If left unorganized, these teams would resort to approving expense reports once a quarter and make their employees wait to collect the funds they’re legally owed. You can navigate this bottleneck by optimizing internal workflows for managing the reports and their attached documents, reviewing them within deadlines, and processing reimbursements immediately after reviews are completed. The finance team must be efficient enough to approve or reject expense reports within a few days of their submission in order for employees to be repaid promptly.

Once all of this is in place, it’s time for auditing. Audits are especially important for enterprises and mid-market firms where employees incur large amounts of expenses. Regular auditing can help uncover loopholes and fraudulent or out-of-policy claims from expense reports. It also helps the firm stay compliant with IRS regulations. Also, if there are no fraudulent claims uncovered, audits still help you analyze your business expenses and highlight areas that require attention, such as opportunities for cost-cutting or vendors you need to reassess.

Leverage automated processing

With digitization, you can re-engineer the way expense reimbursement is handled in your firm and better manage your finances. The right expense management software would automate and optimize end-to-end workflows within your T&E process. 

Firstly, it provides employees the ability to capture and record an expense as and when it’s incurred via a mobile app. Your employees no longer have to save receipts and wait until the business trip is completed to enter their expenses manually. Thanks to the defined workflows, each expense report is automatically forwarded to the approver, validated, and processed within minutes.

As for the finance team, any expense report submitted to them would have already been thoroughly audited by the software to fish out policy violations, notifying employees of any flags immediately. Also, the software provides your finance team with digital copies of relevant documents as well as notifications on approvals and deadlines to ensure they don’t miss out any report.

To enable seamless collaboration between your finance team and employees, most expense management solutions offer an employee portal. With it, your finance team can instantly communicate with your employees regarding fraudulent transactions or alterations to be made in the expense report without lengthy email threads. Furthermore, your employees can use the portal to check the status of their expense reports and reimbursements.

The finance team would also benefit from the in-depth analytical capabilities and increased real-time visibility offered by such software to manage costs more effectively. 

Here’s your takeaway!

Despite being a routine accounting task, expense reimbursement has a massive impact on your employees. The best reward for an employee who complies with the T&E policy is prompt reimbursement. We’ve built Zoho Expense to help accelerate the process of expense report submission, approval, and payments. Your employees can record claims and log mileage via the mobile app, receive approval, and your finance team can work on processing reimbursement — all in a few clicks. The entire software is built to minimize errors, cut overspending or overpayment at its source, and provide insights into discretionary spending to improve your firm’s productivity, cash flow, and overall financial health.