Expense Reimbursement Report: Everything You Need to Know
An expense report is a document that an employee or manager submits to the company accounting department regularly. It lists the amount of professional expenses they have paid during a set period. Find out more about on it in this below.
Definition of an Expense Report
Professional expenses are expenses the employee or manager has paid out of pocket while performing work duties. These include expenses incurred for meals, accommodation, mileage, travel, etc. The employer reimburses these expenses to the employee once they are submitted for payment and approved. These expenses don’t form part of the employee’s base salary.
Rules About Reimbursement for Employment Expenses
Companies impose their own rules around employee expenses to avoid having to pay out for fraudulent claims made by employees or managers. The rules that companies impose help to make up the criteria of an expense report. For example:
- The expenses must be incurred in connection with company business.
- The expenses must be necessary to the employee’s work activities.
- The expenses must be reasonable.
- The employee must be able to provide receipts and supporting documentation to the employer when requesting reimbursement for their expenses.
These rules outline a formal policy that is fair to everyone around requests for reimbursement of work-related expenses. They can be applied equally to in-office employees and remote workers.
Types of Expenses Eligible for Employer Reimbursement
When employees incur expenses during the course of their employment, they may need to use their own funds. The company will then reimburse the employees for the money they have paid out of pocket, subject to the accounting department’s approval.
There are five types of expenses employees and managers may submit for reimbursement:
- Meal expenses
- Accommodation costs
- Travel expenses
- Mileage allowances
- Miscellaneous costs in conjunction with the professional mission
Meals and Entertainment
These expenses include an employee having dinner on a work trip. They also include an employee inviting a client or a contact to dinner.
Most types of travel should be eligible for reimbursement by the company. These include travel by plane or train and accommodation while away from home.
Employees who are expected to use their own vehicle to drive for work may be entitled to reimbursement for mileage costs. The exact amount to be reimbursed will be determined by the employer.
Miscellaneous costs in terms of employment expenses that are eligible for expense reimbursement would include office expenses. The company may choose to finance the employee’s computer as a necessary expense or pay the cost of a new keyboard. The employee would need to provide receipts in either instance.
Another miscellaneous cost for employees would be the employer paying the employee’s mobile phone expense. This recurring, monthly cost is something the employee needs for work. Depending on the employer’s policies, the employee could arrange to have it paid for by the employer.
How Companies Pay Employee Expenses
Most companies provide expense reimbursement on an actua-costl basis. Some businesses choose to provide their employees a lump sum reimbursement. This is a type of expense reimbursement that companies may choose for certain repetitive, monthly expenses. HMRC sets the maximum that can be presented for reimbursement. These maximums are set in the categories noted above. Some employers include the amount of expense reimbursement on the employee’s payslip.
How is an Expense Report Managed?
Expense reports are processed based on the receipts submitted by employees for their work-related expenses. Expense reports must be strictly managed by the employer. For example, if the employee presents a receipt for a meal on an expense report, the following information must be provided:
- Reason for the meal
- Names of guest(s)
- Name of restaurant
These rules are put in place to ensure there is no abuse of the privilege of paying for employee expenses. If the employee cannot provide this information, the employer will not provide reimbursement for this expense.
In exceptional circumstances, an alternate solution may be found:
- Contact the vendor to supply duplicate copies of the receipt.
- Use the lump sum reimbursement method as opposed to an actual reimbursement of the expense.
- Ask the employee to submit a sworn statement about the expense.
- Reimburse the employee by reclassifying it as a benefit in kind.
Employees are advised to submit their expenses to employers within a reasonable time for repayment. Businesses are advised to provide the reimbursement in a timely manner.
Fraud Prevention Tips When Reimbursing Expense Reports
Tax authorities are vigilant about the methods companies use when reimbursing expense reports. To limit occasions of possible fraud, they offer the following tips for companies:
- Define as quickly as possible the payment method you will use to pay employees for their expenses.
- Formalize a clear, detailed reimbursement policy for your company. To do this, anticipate any questions or concerns your employees may have about submitting expenses for reimbursement. Make sure these questions are addressed in your policy.
- Establish clear procedures for controlling, processing, and validating expense reports once they are submitted for reimbursement.
Posting of Expense Accounts
When posting expense accounts, consider the following categories:
- Under Expense Accounts: Travel and Displacement - Missions, Gifts for Clients, etc.
- Third-party Accounts for Employee Transactions - This transaction should be charged to - Other Accounts Receivable or Accounts Payable. Some companies may choose to post it to - Personnel - Advances and Installments - when the company has paid installments on expense reports.
If the expense report includes the manager’s expenses, Account 108 - Operator Account or Account 4551 - Associate Current Account can be used to process this expense.
Value-added Tax (VAT) may be deducted under certain conditions, such as when:
- The expense conforms to the company’s reimbursement policy.
- The expense is within the scope of deductible VAT.
- The expense report and supporting documents are complete.
VAT cannot be recovered on most travel costs. (This includes VAT for hotel costs, plane fare, rail fare, etc.). VAT rules for expenses can vary between countries; always check local rules when submitting a declaration.
Complete your Expense Report Correctly
Companies must establish a policy regarding how employees will submit an expense report for reimbursement to avoid wasting time in its processing and payment. Close to 75% of employees say they take time to complete an expense report during their work hours. No doubt management did not plan for them to spend their office hours performing this task!
However, this information underlines the importance of employees having clear policies for filling in their expense reports. The system should also include a list of supporting documents required for prompt processing. These documents include dealing with VAT.
Spreadsheets for Expense Reports
Many companies find setting up an expense report template is helpful for standardizing their employees’ expense reporting. A standard document on a spreadsheet, for example, should make processing all employees’ expenses a much more efficient process and save the company valuable time.
Spreadsheets give you the ability to use calculation formulas, which makes inputting data much easier. Calculation formulas also make it much easier to discover when something is missing from an expense report, such as a receipt. The employee should be able to discover missing elements before submitting the spreadsheet, which ensures that fewer incomplete spreadsheets end up in the accounting department. Accounting staff will spend much less time following up with employees looking for receipts, dates, names of people who attended meals, etc., and the expense reports will be processed much more quickly.
Deadline for Submitting Employee Expense Reports
Companies must specify deadlines for employees who wish to submit expense reports for repayment. The deadline is crucial, since they have an influence on the company’s recording of VAT on the correct date and its recovery by the company.
Elements that Must be Included on the Expense Report Template
The following elements must be included on the expense report template. These elements form a critical part of the accounting process:
- The employee’s full name and employee number (if applicable)
- The employee’s address and telephone number
- The date of the expense being claimed
- The type of expense being claimed
- The amount being claimed (excluding VAT and including VAT)
- A description of the costs incurred by the employee
Companies can adapt the model according to the type of expenses incurred by the employees. For example, a specific space for including mileage for travel expenses can be included on the employee expense reports. Employees will note their mileage traveled and use a calculation formula using the official scale.
The company should only accept one type of expense report and avoid each department submitting their own models. When there are several types of expense reports used within one company, the process becomes more complicated. A better solution would be to provide a template for one-time expenses and a separate template for recurring expenses for employees.
Regarding employees’ recurring employment expenses, the company must track them in a table with the number of employees’ professional expenses. The employer must also include a reference to the corresponding supporting documents.
This is a first step toward automating the process.
Manage Expense Reimbursement Reports with Ease
Mooncard offers a complete expense report management solution. It combines corporate payment cards and an online management solution.
The Mooncard solution has the advantage of complete automation of this process:
- The employee pays for the employment-related expense with their Mooncard payment card.
- The employee takes a photo of the receipt or supporting document. This step validates the information already in the system.
- The accounting entries related to the expense report are electronically submitted to the company’s accounting department for validation.
- The company’s accountant doesn’t have to re-enter any expenses as part of the validation process. The accountant can validate the employment expenses or return them to the employee for more information electronically.
The corporate card can be configured according to the type of expenses the employee is expected to charge to the company. The employee will not have to pay any card fees as a Mooncard account holder.
Since Mooncard automatically sends all employment expenses directly to the company accounting department and employees avoid having to complete expense reimbursement reports, your employees will have more time to spend on tasks with greater value.
No one needs more paperwork, and Mooncard saves time and money for your accounting department and employees who incur employment-related expenses as part of their work. Don’t wait any longer, contact Mooncard today to discover more details or request an online demo.