At a Glance
Expense reimbursement involves paying money to an employee or customer as a refund for a business expense, tax, insurance, or other costs. A company’s expense policy must feature what can and cannot be reimbursed to avoid disputes.
Expenses that can be reimbursed are directly related to the business to the extent that they are needed to get a job done. This can be a hotel stay during a business trip or an extra computer for effective working.
Reimbursable expenses must also be backed by relevant documentation such as receipts, invoices, purchase orders, etc.
Lastly, for expenses to be reimbursed, they ought to be submitted to the responsible person/department within reasonable timeframes.
Note: Your business expense policy should capture and define “reasonable timeframes” for reimbursements.
What expense reimbursement means for your businesses?
Businesses and employees both benefit from expense reimbursements. For example, both can use reimbursements to reduce taxes. Expense reimbursements can also build loyalty among employees as a result of healthcare, travel, and education reimbursements.
Repaying amounts paid by employees for certain expenses will also show that you care about your team leading to higher staff morale and retention.
The business uses expense reimbursements to take control of expenses. Responsible departments can use reimbursement patterns to identify areas of waste and implement proper cost-cutting measures.