As a business owner, you have to deal with the frustrating task of handling employee expense reimbursement claims. Whether it's for company lunches, mileage, or supplies, you'll always have to handle these pesky requests.
The good news is that with the right tools, processes, and technologies in place employee reimbursement can be managed much more efficiently.
Many companies send employees on business trips to conferences or meetings with clients. Employees are expected to stay for multiple days at a time, which means they have hotel expenses too.
Sometimes they rent cars or need transportation to get to the hotel. All of these things can be reimbursed by the company if they’re allowed and their expenses are worth it.
At its heart, expense reimbursement is just a formal process for giving employees back money that they spent as part of doing business with the company. The classic formula for this is:
Here are the various expenses that your business could consider reimbursing:
This is a broad category, but it includes things like stationery, postage stamps, and even coffee at the office. These expenses may seem marginal, but they add up because employees end up using them quite frequently.
Benefits like Health Reimbursement Account (HRA) and Flexible Spending Account (FSA) let employees claim tax-free reimbursements for out-of-pocket medical expenses.
Any expenses that employees incur when they go to a customer’s office or travel for business purposes can be reimbursed. This includes transportation, airfare, and hotel charges.
If one of your employees is meeting a potential client or attending a business dinner, they can claim reimbursement for the cost of the meal. This also includes things like tickets to a show or other forms of entertainment.
There are a lot of challenges associated with manual employee expense reimbursement, which include:
Processing paperwork is a time-consuming process, and it can be even more difficult when you're dealing with a mountain of receipts. This is why it's important to have strong tools in place that can automate as much of the process as possible.
There are always chances for human error when you’re dealing with paperwork. This is why it’s important to have systems in place that can verify data automatically and use technologies like optical character recognition (OCR) to make the process as smooth as possible.
In some cases, employees may submit duplicate claims or expenses that are not eligible for reimbursement. This can lead to lost money, and it’s inefficient for the finance team to spend time on this. It can also be difficult to verify that expenses are valid because they need to go through the same process every time.
As things stand now, employees receive reimbursements in separate checks which you may not even sign for. This makes reconciling payments difficult, and it can be easy to lose track of how much has been reimbursed to employees.
There is always a risk that employees will abuse the system and submit false expenses. No matter how much you trust your employees, it's essential to have a system in place that can monitor and flag unusual behavior.
Some systems aren't transparent for employees, as they don't receive updates on their submissions or know the status of their reimbursements which makes it difficult for them to see progress. This can be frustrating as most people would like to keep moving forward.
The best way to handle employee expense reimbursements is simple: automation. Using an expense management platform like Penny Inc can offer you several perks which include:
Automated systems work quickly and accurately, which means that employees will get their reimbursements sooner. This also frees up the finance team so they can focus on more important tasks.
Rather than ask employees to fill out separate forms every time they want reimbursement, automated systems make it easy for them to claim expenses. For example, if an expense is automatically detected then the employee doesn't need to do anything else.
Automated systems use tokenization technology which encrypts data so it can't be accessed by anyone who doesn't have permission. This means that information is safe and secure, which also makes it easier for employees to trust the system.
When you’re using technology like OCR (Optical Character Recognition) to read scanned documents, mistakes are less likely to occur. This means that employees are less likely to receive incorrect reimbursements, and the finance team will have less work to do.
Automated systems provide transparency for employees, as they can see the progress of their submissions and how much money they have left to claim. This makes it easy for them to keep moving forward.
Automated systems are designed to quickly process expenses with as little input from the finance team as possible. This means that employees get reimbursed faster, and it brings more money into your company. It can also reduce errors so you don't have to worry about lost money being claimed multiple times.
But signing up for an expense management platform like Penny Inc is only one step of the process. You'll need to implement more policies such as:
As with any policy in your business, you'll want to make sure that it is clearly stated and communicated to all employees. That way everyone knows what is expected of them and how they can be reimbursed.
When your employees know exactly what will be reimbursed, it's easier for them to make smart purchase decisions while on the road. That means you won't have to deal with needless expense reimbursement requests daily, which saves both time and money.
Creating a company expense policy helps ensure that expenses are handled efficiently within the business, preventing any misuse of company funds. It establishes guidelines for employees on what expenses are allowed and how they should be submitted for reimbursement – this can help to reduce any disagreements or misunderstandings about expenses down the line. In this blog post, we will discuss some tips for creating an expense policy that works for your business.
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