The reimbursement process
- Set the rules in writing. Cover what is reimbursable, the receipt requirement, the submission deadline and who approves. The expense policy template is a starting point.
- Have people submit an expense report. One row per expense, with date, merchant, amount, category, purpose and receipt. See the expense report template.
- Review against the receipts. Check amounts, business purpose and policy limits. Query anything unclear before paying.
- Approve. The approver should be someone other than the person claiming.
- Pay promptly. Pay by the date your policy promises, with the next payroll or a separate payment, as your accountant advises.
- Code and record. Each line should reach your books under the right category, with its receipt attached.
What the IRS says about accountable plans
IRS Publication 463 describes an accountable plan, from the employee’s point of view, as one that meets three rules:
- Business connection. The expenses are deductible business expenses incurred while working for the employer.
- Adequate accounting. The employee documents the expenses to the employer within a reasonable time.
- Return of excess. The employee returns any reimbursement that exceeds the documented expenses within a reasonable time.
The IRS gives safe-harbor periods that count as reasonable: 30 days to receive an advance, 60 days to account for expenses and 120 days to return any excess. A plan that meets all three rules doesn’t add reimbursements to the employee’s Form W-2 wages. A reimbursement that fails them is generally treated as paid under a nonaccountable plan and is included in wages.
Those are the general rules, and your situation may differ, so treat this as background and ask your accountant. The full text is in Publication 463.
Practical points
- Don’t reimburse without support. A receipt (or a signed substitute record) and a business purpose should exist for every line. Missing support is also what makes a plan hard to defend.
- Handle advances carefully. If you give money in advance, track it and settle it against the expense report, with any leftover returned.
- Watch for duplicates. The same expense can show up on a company card and in a reimbursement claim.
- Keep the process fast. Slow reimbursement makes people hold their receipts back, which makes everything else worse.
- Prefer cards where you can. Paying with a company card removes the reimbursement step and keeps the transaction and receipt in the same place for matching.
Reducing the manual work
Reimbursement is mostly reading reports and checking receipts. Barespend collects receipts by email, text or upload, matches them to card and bank transactions, flags what it can’t match, and codes each expense to your chart of accounts, so the review is of exceptions instead of every line. It syncs with QuickBooks Online, Xero and Sage Intacct, and you can try it free for 7 days with no credit card.
For what to do before close, see the month-end checklist.
To work out amounts, use the mileage reimbursement calculator and the per diem calculator.