A deep dive on Reimbursable Expenses

As a startup company is not uncommon when your employees incur expenses on your behalf, this means that they will need to spend their money from time to time to get the work done. From buying goods to promote the brand to traveling for business purposes, expenses are the daily bread of a new business.

Even though they are really common, it doesn’t mean that your employees have to take them all. That’s why it is legally required that the company reimburses them for these payments on time. But your company doesn`t have to pay employees for every payment that they make, does it?

In this article, you will learn what reimbursable expenses are and which costs should be covered by your company and which ones shouldn’t. This way, you should be able to set clear rules for what counts as a reimbursable expense and how to manage claims from your employees. Let’s observe:

1. What are reimbursable expenses?
2. Which kinds of payments are considered Reimbursable Expenses?
3. How can you track employee expense reimbursements?
4. Benefits of using an expense reimbursement software
5. Reimbursable expenses made easy with ConnectHR

1. What are reimbursable expenses?

As a broad definition, reimbursable expenses are payments that your employees do on behalf of your company while delivering work. These expenses should be reimbursed by the company in full but this doesn’t mean that every payment your employees make is reimbursable.

First of all, to count as a reimbursable expense it must have a distinct business nature. It should be a purchase that is strongly related to the employee’s job. For instance, overnight hotels stay during a business trip for a client project, to an extra monitor for their work computer.

Furthermore, it’s crucial that they can prove it in the form of a receipt, invoice, or any other proof of purchase. The record should include the total amount with tax, the time and place of purchase as well as a description of the product or service provided.

At last, any reimbursable payment must be reported to the department in charge within a rational amount of time. And any surfeit that the employee has left from the reimbursement should be also reimbursed to the employer in the same time frame.

• Which kinds of payments are considered Reimbursable Expenses?

Now that we set the rules for what counts as a reimbursable expense, it is important to check the different categories you could consider reimbursing.

· Travel Expenses

Known as one of the typical sources of employee reimbursement, business trips cover a huge amount of payments, and most of these should be considered reimbursable.

It all starts with taking public transportation or a taxi service to get to the airport. Then, the cost of the flight itself also accounts for a large amount, including any food and drink purchases in-flight (up to a wise amount). Besides, lodging costs are another major expense that has to be covered.

On the other hand, some less typical expenses are worth mentioning.  For example, some destinations might ask for visas or other travel documents, while others could even require employees to get a specific vaccine.  None of these things are cheap and seeing them as part of the business trip it is important to cover them as valid expenses.

· Meals and Entertainment

Whether the employee is having dinner on a work trip alone or with a client, it should be covered as a travel expense.

“Networking” is a process that will positively impact your business so if there’s an opportunity and an employee wants to treat a client or contact to dinner, covering these costs would be in the interest of your business.

These costs should include most entertainment events only if the client is present.

· Transport Costs

Apart from business trips, where most forms of transport should be covered as a travel expense, employees might incur travel costs in their daily lives. For example, commuting by public transport or driving to the office every day.  Should you reimburse these?

It depends on the size of your company. A successful company might want to help out its employees with the fuel costs but a startup might not have the money to afford that yet.

· Office Expenses

For your people to be able to do awesome work, it is necessary to give them access to the best tools. So you need to make sure to include a fast computer, a good keyboard and a comfy chair in your expenses.

· Communications

If your team is constantly moving, you might want them to share everything with you right away. Especially for those positions like sales that involve talking a lot, that’s why covering your employee’s cellular plans might be a good idea for you.

Of course, if your company is not the one that needs to be on the road, this might not be necessary.

• How can you track employee expense reimbursements?

As we saw before, defining what employees can claim reimbursement is not so hard but staying on top of these costs surely is.

From the employee’s perspective

1. Asking for reimbursement is quite unknown.
2. Costs can be so small and irregular, and consequently easy to forget.
3. Besides, they need to understand out of nowhere the way to report these expenses.
4. The biggest issue is that either there’s no formal process or most employees don’t know about it.

 In the  Company case

 The finance team or the office manager, are the ones who have to manage each employee expense claim.

For them, the problems are more dazzling:

1. Reports incomplete and full of errors
2. Claims arriving out of payroll time
3. Having to process all these manually, is even worse when it’s full of mistakes.

The best way to overcome these challenges is to automate all of the worst parts. This starts with a good expense reimbursement software that can help employees to make claims without so much paperwork.

This expense reimbursement software usually uses a mobile app that guides the team member through their claim. Thus, the best part is that employees can simply upload a photo of their receipt and that’s it!

But the real benefit of this kind of software goes for the finance team. First off, there is no data entry at all because the employee already filled in the information, and there is no need to copy it to a spreadsheet.

 With expense reimbursement software, the finance manager opens up their dashboard, does a quick checkup of the employee’s claim, and proceeds to deny it or approve it. It sounds easier, right?

Learn about how much you can automate the day-to-day operations of your Company’s HR department, in one of our previous posts.

4. Benefits of using an expense reimbursement software

One of the biggest benefits of using expense reimbursement software is efficiency. The process takes seconds; you can have the entire receipts digitally in one place forever. And if you approve the payment request is sent directly to your accounting system.

But there are many more benefits than those above. Here is a little look:

· External acquiescence

Whether you like it or not, the legislative world has been moving from a paper-based to a completely digital world. The external systems that companies have to blend with are most of all set up for digital ways of working.

In the UAE, for example, all companies are required to issue electronic invoices. And since 2021, the UAE government is fully digitalized.

That’s why getting expense reimbursement software is something that you might have needed for a long time.

· Management visibility

You can’t manage what you can’t see and that’s a fact. Lack of visibility is the root of all problems when it comes to a traditional approach to expense management. In that sense, expense reimbursement software provides the power to help meet tight reporting deadlines and track performance.

Checkup how can an automated system ensure accuracy in your performance

· Enhanced Fraud Prevention

The software will ask for mandatory requirements to ensure that no information is missing. So that you can prevent mislaid information that usually leads to fraud.

· Simplified reporting

Reports have always been one of the most tedious chores that employees can face. It takes too much time to process and makes them stop the rest of the chores.

An efficient and simple system automates tedious tasks and changes the way that expenses are perceived within a workplace. Rather than being a feared task, it becomes a seamless part of everyday operations.

When you think about how much time your finance team is taking on expenses reports when they could be taking care of the budgets, it’s frightening. Why should you keep wasting time because the system is awkward?

5. Reimbursable expenses made easy with ConnectHR

Fortunately, successful spend management can make things a whole lot less awkward. We’ve developed special software to manage the full reimbursement process for your finance team.

With Connect HR, you can easily set up a Human Resource Management System (HMRS) and take advantage not just of what we talked about before but also managing leaves and so on. Leaving your HR management processes in our hands will allow you to focus on more important matters.

You should also request our other services to benefit your company’s growth. Or in case you want to improve your HR department, you can request us for insurance, or our payroll system.

Would you like to contact ConnectHR to obtain more information about the business setup process in the UAE? If you have any questions, call us on +97143316688. And you will talk to one of our representatives who will answer your questions.