Reimbursement of expenses is an important process that some financial professionals may perceive as a nightmare, given their time-consuming and challenging nature. If your team considers expense reimbursements as a time-extensive process, it’s time that you introduce them to the modern reimbursement processes that are followed by thousands of businesses worldwide.
But first, let’s start by understanding what expense reimbursement means.
Expense reimbursement refers to the process of covering the costs incurred by employees when carrying out business-related activities, such as a business trip, lunch, or any other activity where an individual has to pay the beneficiaries on behalf of the business.
Why do financial teams find the reimbursement process difficult and time-consuming?
The answer may lie in the fact that the reimbursement process is not clear to most of your team members. To simplify the expense reimbursement process, there are several things that you can do, such as:
- Identify which expenses are reimbursable: Not all expenses incurred by an employee in place of the company need to fall under the reimbursable category. If your corporation currently has no guidelines for expense reimbursements, now would be the right time to begin forming the guidelines. To get started, the following tips could be helpful:
- Make a list: It could be a good idea to start by listing all the expenses your employees make on behalf of the company. Even if the expense is infrequent or appears scarce, do not exclude it.
- Research well: If you’re unsure about what expenses should be counted as reimbursable, consider conducting a simple Google search and a company-wide survey to gather your team’s opinions on this.
- Identify exceptions: If the survey outcomes identify any expense that is not traditionally considered reimbursable, but your team’s opinion strongly advocates for its inclusion, approach it as you would a unique concept that challenges norms if the expense is reasonable.
- Streamline request collection: If your team relies on the traditional paper-based request collection mechanism, it’s time to give it an upgrade through technology. Nowadays, there are numerous expense reimbursement software that can help your employees by sparing them from extensive paperwork. Let’s take a look at how such software commonly works:
- An employee registers a request for reimbursement, and the system relays it to the accounts department if the system considers the claim reasonable. The request consists of basic details such as the employee’s name, the amount to be reimbursed, the date when the expense was made, and the nature of the expenditure.
- The employee is then requested to capture proof of expense if it isn’t already sent along with the request.
- Once the accounting team receives all the necessary documents, they approve the claim instantly. By this, the financial team can save substantial time and focus on the other aspects of the business.
- The record of the reimbursement is kept in the system, which eliminates the occurrence of duplicate entries.
For an efficient expense reimbursement system to work, it’s essential for you first to make a clear demarcation between reimbursable and non-reimbursable expenses.
- Set up a dedicated committee: Other than setting up an automated expense reimbursement system, it is advisable to form a dedicated committee that overlooks the expense reimbursement system. The committee can have certain tasks like:
- Periodically reviewing the reimbursement policies.
- Making changes to the reimbursement policies if required.
- Report and handle cases of fraud or counterfeiting.
- Consider giving corporate cards: Corporate cards are physical cards that your employees can carry with them to make purchases on behalf of the business. This method eliminates the process of reimbursement filing as the expense is directly made through the business’ account. This approach has several advantages, including:
- Real-time monitoring: All expenditures are presented transparently through the expense tracking system. Basic information like the employee’s name, expense amount, and vendor information are automatically recorded.
- Spending limits can be set: Since an expense limit can be set, overspending is prevented, and a company can abide by its budget. Additionally, certain types of transactions can be blocked by the company.
- Each employee gets their unique card: They get their own corporate card, which prevents counterfeiting.
In essence, there are four main ways in which a company can simplify the expense reimbursement process. Following the above mentioned methods, a company can ensure its expense reimbursement process is robust, quick, and efficient.