What Is an Expense Claim? Definition & How to Manage
You might have employees who frequently travel for work or you often have employees submitting expense claims. If you do, chances are you have an employee expense policy already in place. But what expenses can an employee claim and how do you manage all of them?
A good expense policy will outline all the expenses that an employee can submit an expense for. It should include an itemized list of deductibles and any relevant details. This way, when an employee needs to submit an expense claim they will have the information they need.
Yet what exactly is an expense claim? And if you have employees who frequently submit claims expenses what’s the best way for you to manage them?
Here’s What We’ll Cover:
What Is an Expense Claim?
If your employees incur any expenses while doing their work, they might get reimbursed for the actual costs. Before getting too far into the definition of an expense claim, it’s important to recognize which expenses can get deducted. Because not every purchase is eligible for reimbursement.
For example, any personal purchases aren’t eligible for expense reimbursement claims. To help make this transparent to your employees, an expense must meet certain criteria.
First, they need to be work-related. Basically, purchases need to be related to something that’s required for you to complete your job. So, things like fuel costs or hotel accommodations while traveling for work.
Second, employees need to keep any relevant receipts or documentation as proof of purchase. The information should include things like the total amount, time and date of purchase. As well as a description of what was purchased.
Third, any expenses need to get submitted or reported within a reasonable amount of time. And if there are any excess or surplus amounts, it must also get returned within that same amount of time.
If an expense meets those three criteria, an employee can submit an expense claim if it’s outlined in the policy.
Examples of Expense Claims
Here are a few examples of some common employee expense claims.
Meals and Entertainment
If you’re traveling for work you have to eat, right? Some policies are set up differently, for example one employer might provide an up-front per diem meal rate to their employees. Another might reimburse the employees at the actual rate at a later date.
But any meals or entertainment expenses that you incur for work-related purposes can get deducted as an expense. Things like dinner while on the road or taking a client out for the evening. Just make sure it's in the best interest of your business.
Travel expense claims are usually some of the most common expenses an employee claims. This is because there can be several deductibles under the travel expense category. When you travel for business there are often out-of-pocket expenses.
Most transportation expenses are covered when traveling for work-related needs. So if you had to rent a car, take a flight or ride a train to get where you need to go, it would get covered. Or if you had to use your personal vehicle, things like fuel costs and mileage would be reimbursable expenses.
There is a lot that could get considered as a travel expense claim. Check your employee expense policy to see what you can submit an expense claim for. If you are just developing an expense policy, take into account the unique travel needs your employees might have.
Employees need certain things to be able to do their job. Certain tasks or responsibilities might require different tools or additional expenses. So if you or your employees need something to complete their work, an expense claim could get submitted.
Things like laptops, keyboards or other general office supplies. And, if you have employees who work in sales for example, a cell phone plan might be able to get deducted.
How to Manage Your Expense Claims
You might take a different approach depending on if you’re an employee wanting to track your expenses or an employer. As an employee, you want to make sure you keep the proper receipts and relevant documentation as proof of purchase. You should be sure to have important details like date and time, total cost and a description of what was purchased.
As an employer, there might be a little more that goes into managing employee expense claims. Since you need to worry about a number of different expense claims, there can also be a few issues. Some claims could get submitted incomplete or with several errors. And they can get submitted at any time throughout the year.
This can pose challenges to reimburse employees efficiently if claims aren’t managed properly. Plus, processing the claims can sometimes require data to get entered manually. The best thing you can do is have an expense policy in place.
From there, you can manage everything by using an expense management tool. This will help organize all the allowable expenses in order to streamline the entire process. There won’t be a need to have to manually input all of the data each time.
Most expense management tools also offer the ability for your employees to simply take a photo of a receipt to submit an expense claim. So not only can the entire expense process become simpler and easier for you, but it will be for your employees too.
The first thing that you should do if you haven’t already establish an employee expense policy. Clearly outline the list of expense claims an employee can submit a claim for. You should also include details on how employees can submit their claims.
Having an outline in place will help ensure that everyone knows which expenses are reimbursable and which ones aren’t. This will lead to less confusion and errors, which can help improve employee productivity and efficiency.
And using an expense management tool can help with organizing all your expenses. It will streamline the entire expense process and make it easier for both you and your employees to submit an expense claim.
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