How to Track Employee Reimbursements

Policies to track employee reimbursements should not be overlooked when it comes to bookkeeping practices. A clear policy that sets out a reimbursement process when dealing with employee expenses and receipts ensures there are no misunderstandings about claims and staff expenses. 

Setting an expense policy and procedure not only provides guidelines for your employees but is also of particular importance for accounting and compliance. You are required to keep a record of employee expenses to prove they are genuine so make sure you are doing it correctly. This article will take you through some guidelines to help you prepare an employee reimbursement policy.

1. Understand Employee Reimbursement Policies

There are a number of advantages to having an employee reimbursement policy. Firstly, a clear policy will ensure your employees know the rules and restrictions surrounding workplace expenses, ensuring they are compliant and can be reimbursed quickly. Further, your bookkeeping team will know exactly what claims are acceptable, making it easier to accept or reject specific claims.

Having a clear policy will also ensure that senior management can better keep track of expenses and manage the budget. On a broader scale, such a policy can also show that your business is capable of operating within regulations, which can be useful when applying for financing. 

When drafting a reimbursement policy, your guidelines should be short and concise. Your employees should not have to read a 50-page document before they jump into a taxi. Further, if you keep it straightforward, firm and fair, then your employees are more likely to comply with it.

2. Draft the Terms of the Reimbursement Policy

What your expense policy contains should be clearly explained and in alignment with the employee’s role in the business. The initial step should be to identify the expenditure that the staff member needs to complete their job role effectively. Often the business will include extra privileges that staff may expense, although this is at the employer’s discretion.

On the other hand, to better manage the company budget, businesses may choose to cap certain expenses. For example, you may choose to cap meals while travelling with a daily budget. Using capped budgets can give your employees a guideline of what is acceptable. If you do not set these policies and guidelines out, then you are unable to reprimand your employees for not sticking to the guidelines.

3. Record Expenses

You should also ensure you collect the right information from your employees when recording expenses. By capturing the appropriate information (such as collecting receipts), you can avoid unnecessary administrative delays and avoid problems with compliance later on. 

A great way to record expenses is to have your employees submit expenses online and remotely. For example, Xero is a popular platform that allows employees to submit and approve expenses on the go. Ensuring you are utilising technology not only helps with mobile workforces but also improves accuracy and provides data for analysis, which can be a vital business tool.

4. Approve Expenses

You should also ensure expenses are submitted and approved on time. It is a good idea to set in place deadlines so your staff know when they can expect expenses to be reimbursed. Setting these deadlines will also help you with your business cash flow.

You may also choose to enforce accountability for approving expenses. Make managers accountable and ensure they have the confidence to push back on non-compliant submissions. This should be a vital aim of your expenses policy as if one employee is allowed to expense their taxi home from the staff party, so should all the other employees. Having these parameters in place and ensuring you stick to them will ensure you avoid any potential employee bias and conflict. It is best practice to make managers approve expenses, especially as the business grows. This can be a vital aspect of your expense policy.

It is important not to forget the Goods and Services Tax (GST). If you are a business that is registered for GST with the ATO, then you might be entitled to GST credits for payments you make to your employees for their expenses. To be able to claim these credits, you will need to have the relevant documents and ensure that these documents comply with the legislative requirements.

5. Track Employee Reimbursements and Review the Policy

Finally, you should ensure you regularly review and update your expense policy and the procedures of how to submit expenses. This includes keeping up to date with new technologies and processes that can assist both your employees and your business with this process.

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Key Takeaways

You should have an effective policy to track employee reimbursements. Setting an expense policy and procedure is important for both your employees and compliance. To prepare a comprehensive employee reimbursement policy, you should:

• understand the need for an employee reimbursement policy;
• draft the terms of the reimbursement policy;
• record expenses;
• approve expenses; and
• track employee reimbursements and review the policy regularly. 

If you need assistance preparing a reimbursement and expenses policy, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

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