A guide on expense reimbursement

These expenses make up a huge part of employee reimbursements. Air tickets, cabs to and from the airport, car rentals, public transport, and hotel stays everything comes under reimbursed travel expenses. Visa charges and other travel-related costs are also included in this category. 

You might be interested to read: A guide on travel and expense management

Next, under reimbursement for employees are meals and entertainment. While on a business trip or conference, or meeting, all the meals for the employees have to be compensated.

Plus, any out-of-pocket expenses incurred to entertain the clients or potential customers are also reimbursed. 

If you offer training programs, courses, and workshops or ask them to enroll in one for their professional development, the employees should not be charged for these.

The company is responsible for this professional skill enhancement and hence is supposed to reimburse employees for the same. 

Any purchase made for office supplies and equipment by your employees using their personal funds is also counted under reimbursement to employees.

For example, stationary, attachments for software processes or third-party storage devices, laptops, tablets, etc.

Some businesses also cover internet connectivity charges and cellular bills when employees are outside the domestic area. 

With the trend of working from home and globalization, you might have employees working from different parts of the world. Any software or system used to establish communication between them and the company is categorized under employee reimbursement.

So if your employees have to use the paid version of Zoom for holding meetings and conferences, it has to be reimbursed. 

Other categories under reimbursement to employees are subscriptions and memberships. Subscriptions for SaaS software, any membership for a business industry club, or a working forum are all supposed to be compensated.

For example, Hubspot, membership to content libraries, Adobe, etc. 

Related read: Types, examples, tax deductibility and management of business expenses

Any other work-related expenses that are valid under the reimbursable expenses category must be compensated.

For example, healthcare or health insurance. Companies encourage their employees to apply for health insurance, for which they can later raise claims.

Some companies also cover the fuel charges for the employees traveling to the office in their own vehicles. 

Employees must be clear about what the purpose of an expense is. If the expense doesn’t have a goal that the employee can state and explain, the validity of said expense can come into question. For example, a purchase of coffee could serve the purpose of treating a potential client.

Even if an expense’s purpose is clear, that does not immediately justify it as a reimbursable expense. The finance team must first determine whether or not the expense and its purpose are necessary. Employee reimbursement claims for transport to the office when employees don’t need to be physically present may be deemed unnecessary.

Without the relevant documents and receipts, employees may have difficulties getting their business expenses reimbursed. While whether or not these documents are necessary ultimately depends on the company policies, more often than not employees will have to be able to provide proof of the transaction. The best way to do this is to attach receipts.

It’s not just what the purchase is that matters. The finance team will also be looking at how much the purchase costs and whether or not those costs can be justified. If an employee purchased plane tickets, for example, purchasing one that costs twice the price of another may not be justifiable.

An expense is only reimbursable if it was made out of the employee’s pockets. If the company issues cash advances and an employee were to make an expense using that money, that expense cannot be reimbursed. The employee making an expense reimbursement claim must be able to prove they made the purchase with their own money.

Generally, businesses will have a timeframe in which employees must report expenses they make to get them reimbursed. This is to ensure the process goes smoothly. If an expense is not reported in a timely manner, there is a risk that the expense reimbursement claim may not be processed or accepted.

Before a decision is made on the expense reimbursement, the finance team will ask the employee who submitted the claim for further clarification if an expense cannot be verified. This should be part of the company policy and a standard procedure. It’s a good idea to make sure that all employees are aware of this, too.

If there are no suitable further clarifications and the finance team still cannot verify the payment, the reimbursement claim can be denied. Typically, this would be a case where the expense is a personal expense or does not benefit the company. The team will have to communicate with the employee why the claim is denied.

Depending on the results of the clarification provided, the finance team may choose to make a partial employee reimbursement. If there is an upper reimbursement limit, for example, the organization may be willing to reimburse the claim up until that limit.

Employees will still have to clarify that the purchase is made in compliance with company policies.

If it is found that an employee is violating company policies on purpose, there must be consequences. These consequences should be part of the existing policies so that they can be referred back to in case they need to be enforced. They can also help set clear boundaries that employees must adhere to.

Knowing what is expense reimbursement is often key to ensuring that all reimbursement claims being submitted comply with company policies and can be verified. Employees should know what the expense policies within the organization are. When necessary, host re-training sessions to help get employees familiarized with the policies.

The main reason why it’s so important for businesses to understand what is expense reimbursement policies is because they are necessary when it comes to ensuring compliance. Without the right set of guidelines, employees won’t know what they have to comply with.

Expense reimbursement policies serve as a guidebook for employees. Similar to how local regulations must be adhered to, so do company policies. Better compliance will also lead to fewer finance-related issues. 

One of the best ways to improve compliance in an organization is to ensure that all the policies in place are clear to everyone. It’s hard to comply with the rules if employees don’t understand them.

With a clear expense reimbursement policy, the management team will be able to promote better clarity and understanding. Employees will know what to expect and what is expected of them when it comes to reimbursements.

Employees will think twice about making expenses that may not fall into the reimbursable expenses in the reimbursement policy. Rather than having to deny half of the reimbursement claims that come in and explain why every single time, employees will already be aware.

Clear and concise reimbursement policies help promote better financial accountability. Employees are given the independence to make expenses but know that they can be held accountable.

The unfortunate reality is that sometimes reimbursements can be misused, both internally and externally, to attempt fraud. For example, an unverifiable reimbursement claim could be made in an attempt to extort money from the company.

Reduce these risks by having clear policies on reimbursements. Employees will know that they have to provide verified details. The finance team will also understand that they are not to process claims that cannot be verified.

Getting everyone on the same page makes it easier to process reimbursements, as the finance teams will run into fewer issues. 

It’s not just the finance team that can benefit from an efficient expense reimbursement process. Employees who are looking to get their reimbursement claims settled will also benefit from it.

Overall, a clear policy about what is expense reimbursement and what is expected from it will streamline the process for everyone involved.

A good employee reimbursement policy often leads to better records. When everyone is on the same page, it’s easy to track the reimbursement process and see where funds are at all times. 

When audit season rolls around, the business will be better prepared and ready for those audits. Fewer flagged expenses and unapproved reimbursement claims also mean an easier audit trail to put together and review. There will likely be fewer findings during the audit.

Employees will want to know that expenses they make on behalf of the business will be reimbursed. When they have confirmation that the company will reimburse them, they will be more willing to make those expenses for the good of the company. 

Having clear processes will also promote a better work environment as it minimizes confusion. A reimbursement policy that is easy to understand is sure to improve overall employee satisfaction. 

Most, if not all, businesses will already have a budget for how much money the company can spend on any particular category. However, when expenses are made out of employees’ pockets, controlling these budgets may be harder.

This is why it’s necessary to have expense reimbursement policies that clearly outline what employees can or cannot be reimbursed for. It significantly lowers the risks of overspending and can help the finance team stay on top of their budgets.

Not all expenses are reimbursable, but the decision of which are and which are not is entirely dependent on the company. Make sure that this question gets asked and discussed when creating a policy, as what one company considers reimbursable may differ from another.

List out which positions within the organization are eligible for reimbursement. While this could apply to all employees in a lot of organizations, some may also choose to limit who is eligible. Regardless, it’s important to decide and make note of this.

To reduce the chances of overspending, some organizations may choose to enforce an upper limit on any particular expense reimbursement claims. For example, the policy could state that the maximum the company will reimburse a transaction is INR 50,000.

Most businesses will need employees to attach a receipt or invoice as proof of purchase when submitting an employee reimbursement claim. Decide what documents are needed for a valid claim. Purchases of a higher sum may also require additional supporting documents.

It’s important that employees are aware of what the reimbursement claim submission procedure looks like. Outline all the steps in detail to avoid confusion. If employees must submit claims within a given time after the corresponding purchase, for example, this must be noted clearly.

Knowing what is expense reimbursement is crucial for the finance team and upper management, as this will help them decide what the reimbursement approval process would look like. Outline this accordingly when creating a reimbursement policy to get everyone on the same page.

Employees will want to know how long it takes to get a reimbursement settled. Having a timeframe is also handy as it helps guide the finance teams and other employees involved in the process to know how much time they need to spend on reimbursements.

There may be instances where an expense is made in a foreign currency, such as when an employee is on an international business trip. It’s good to know what the procedure will look like before these instances happen.

Some organizations may reimburse employees in cash, while others may transfer the money directly to their bank accounts. Avoid confusion by discussing how reimbursements will be settled. Having a standardized payment method helps streamline the expense reimbursement process.

Policy violations need to be taken seriously, especially if companies don’t want them happening on repeat. To show that the company looks down upon policy violations, outline what the consequences of them will be. Employees will expect what will happen if they violate policies.

It’s rare in an organization that every department shares the same budget. When designing budgets at the start of the financial year, it’s crucial to look closely at each department and consider what its budget will look like.

Making department managers aware of what the budgets are will also help them educate team members regarding their spending habits. As a result, all employees will spend according to their given budgets.

Certain roles in the organization may require higher clearances to make expenses in certain categories, while the rest of the staff may not typically spend in these categories. In this case, design role-specific expense categories.

Customer-facing teams, such as the sales or customer support departments, or upper management will want to entertain clients from time to time. For that reason, entertainment expenses such be a justifiable category for employee reimbursement in those roles.

Not all company expenses are weighed the same in terms of the company’s priorities. Some purchases are also naturally more expensive than others. This is why it’s necessary for businesses to design approval workflows based on spending categories.

Dinners with clients are typically not that costly, which means that they may only need two levels of approval. However, travel expenses such as flights or hotels will require a different approval workflow.

Employees in different roles may have different spending requirements. Those who frequently go on business trips, for example, are likely spending more than employees who don’t. 

If a role has expenses that are often made directly with company funds rather than out of pocket, that role also won’t need a high spending limit. These include expenses like digital marketing ads and subscriptions.

Business dinners and coffee meetings, on the other hand, usually happen out of the office.

To support streamlining the expense reimbursement process, consider getting expense reporting tools that support customization. With the right customization features, businesses can tailor their expense reports according to their needs. 

This makes it easier to create different expense report templates based on different departments or roles. Some tools can also automatically route expense reports and reimbursement claims to the appropriate approval workflows based on the expense category or the department it is made on behalf of.

The finance team will have to know who the employee who submitted a particular expense report is, as they are also the maker of the expense. Some crucial details include the employee’s full name, their work ID, as well as the department they work in. 

It’s important for employees to include all the required expense details when filing reports. Common fields to fill out include the expense date, the expense type or category, and a short description of what the expense is. This paints a holistic picture of the transaction.

When submitting an expense report, employees will be asked to attach documentation that serves as proof of the expense. If there are any other expenses made in conjunction with the one being reported, these can also be noted (eg. different accommodation transactions during a business trip).

The total spent on the purchase must be written clearly in the expense report. This would include not just the product or service cost but also taxes and additional fees, such as delivery or handling fees. The total must also match the receipt.

Expense reports that are created with the goal of reimbursement on top of keeping financial records should be accompanied by the corresponding employee’s bank details. Other than the account holder and number, information such as the bank name, branch, and IFSC code is required.

The approval details should not be filled by the employee who submitted the expense reimbursement claim, but rather by the supervisor who reviews it. The supervisor must identify themselves and write the claim’s approval date. This practice promotes better accountability.

There may be additional details required, especially if the finance team needs further clarification. This is why it’s important for employees to understand what is expense reimbursement. Educating employees prepares them to keep additional details or documents on hand in case they are needed.

With fraud attempts running rampant when it comes to business finances, employees may be asked to submit a formal employee declaration. This states that the expense was made and reported by that particular employee and can serve as legal proof.

Employees need to validate and verify their expense reports before the employee reimbursement claims can be settled. When filling out an employee declaration or finishing up an expense report, it’s good practice for the employee to sign the document to legitimize it.

As stated above, start by building a clear and all-encompassing expense policy. Your employee reimbursement strategy must include what expenses will be reimbursed and which won’t be reimbursed. How should the reimbursement claims be submitted — the format, deadline, proofs required, and any other attachments?

Moreover, mention any other necessary detail like signatures needed, department-specific information, etc. 

You might also be interested to read: Key components of a corporate travel policy

Now this whole policy document that you have created is not just meant to lie around. Get all your employees together and educate them about this policy.

Explain to them all the rules and important steps of the process. The employees should be aware of all details to be compliant with it. 

Make a list of the documents that are necessary for getting the reimbursement claim through the system.

So, the employees must know that important documents are receipts, purchase bills, invoices from vendors, subscription purchase proofs, etc. These documents help in checking whether the claim is legit or not.

Also, these are supporting records for maintaining a database of all expenses.



Your expense reimbursement policy should determine how the documentation proofs have to be collected or in what format. Some companies still use the analog method and ask their employees to store every expense receipt or bill and submit the hard copy as proof.

However, some companies have adopted automation systems that allow employees to click a picture of the receipt, upload it on the software, and be done. The further process is taken over by the system and automatically processed. 

Suggested read: Paperless expense reporting to streamline expense management



Again this step comes down to the type of processing you use. If you are still acquainted with a manual process, you will have to set up a team and divide responsibilities and tasks. Along with this, you need to make a clear division of expense categories.

However, with an automation system, you don’t have to worry about organizing and categorizing. The system tracks all the expenses and automatically creates a clearly bifurcated and organized list of all expenses. 

Once the employees know the format and the process, they are supposed to submit their expense reports within the given submission time.

The finance team will then begin processing all the expense claims. Any expense report out of order or in the wrong format would be sent back for amends. 

The process some towards the end, where the financial team reviews all reimbursement expenses, looks over the claims submitted, and checks everything against each other to maintain accuracy and validity.

As the reimbursements are processed, they are forwarded along to the department managers or head of accounting for approval. 

Lastly, after the legitimacy and validity of reimbursements are checked, the claims are finally up for being reimbursed. This means that with the salary of the employees or as an extra payment, the out-of-pocket expenses that were incurred by them are transferred into their accounts. 

The first and most difficult problem to deal with is policy compliance. However, may everyone knows the rules, but there are possibilities of mistakes and intentional non-compliance.

For example, some employees might forget the department managers' signatures, or someone might knowingly slip in extra expense receipts.

However, these problems can be effectively tackled with automation software. 

Continuing on the point above, manual processes are prone to human errors. Plus, it is both time and cost-consuming. Going over a hundred expense reimbursements, checking their validity, and ensuring all information is accurate is tedious.

When done manually, the probability of mistakes in the final outcome is 1 (probability ranges between 0 and 1). Moreover, extra time and money will be spent on correcting those errors and reprocessing the claims.

Another expense reimbursement challenge is miscommunication and the absence of clear instructions. You cannot just recite the rules and policies to your employees because this will definitely create complications and misunderstandings.

Employees get confused with documentation requirements, processing steps, a chain of approvals, etc. This not only creates a dilemma but also delays the whole process.

Another problem in the expense reimbursement process is receipt management. If you have a manual processing system, this is a nightmare. Storing all physical receipts, keeping them in the right files, organizing according to the steps of the process, and easy accessibility.

Receipt management doesn’t just end here; figuring out if the receipts are fake, if there are missing receipts, and any such anomaly is a whole lot of work on top. 

This can be seen as a drawback of the manual system. Approvals are hectic if you do not have an automation system.

The employees will have to run to and fro from office to office to get approval signatures and green lights. Any missing detail or attachment will have to be procured and sent for approval again.

On the manager or approver side, numerous expense reimbursement claims flow in daily and require close reading so that no fraud expense is reimbursed. 

Reiterating that the financial team members have to sit for hours and hours every day to ensure that every reimbursement claim is in compliance with the company policy. If not, getting hold of the employee, asking them to make amends, or bringing the necessary documents is another hell of a task.

Another nightmare in the same category is an audit. Just in case, even if everything reaches the final stage and when it comes the time for audits, there are mistakes in the database or process that will highly damage the company's image and the employees' work efficiency.

On average, for a mid-sized company, the expense fraud amount is almost $30,000 every year. This means that the concept of fake receipts, over-estimated reimbursement figures, fake expense claims, and many more fraud types are not new to any business.

However, combating these issues is a pain. An automation system can still prove to be effective in solving these problems; however, manual processing makes the job harder. 

Related read: How to identify and prevent fake reimbursement claims

Looking from an employee's point of view, if the company runs behind on the reimbursement processing, the employees will have a limitation on their personal funds.

Plus, many companies use cheques to reimburse employees, which takes another few days actually to transfer the money to their bank accounts. This limits the employee's personal funds and creates mistrust and a lack of belief in the system and the company. 

A colossal problem people sometimes fail to recognize is the lack of process transparency and spending visibility. A manual expense reimbursement process does not update everything in real-time. It takes days to complete the claims processing, enter data into the database, sort it according to need, and finally be available to be used by all.

Any overspending or incompliant expenses will not be caught in that very instance, plus the heads do not have the facility to see when are where the company funds are being utilized. 

Streamlining employee expense reimbursement starts with establishing clear expense policies and guidelines.

As mentioned above, the expense policy document must have all necessary information like process, submission format, date and deadlines, and any other particulars. 

Your employees need to understand the set guidelines clearly. Train them to follow the procedure steps and help them with any queries or confusion. Crystal communication will help build a strong workflow without any interruptions.

The greatest solution of all is automation. Setting up an automated expenses management-centric system, setting spending limitations, and increasing the overall efficiency of the expense reimbursement workflow. 



Whichever expense management system you decide to install for your company, make sure that it has a mobile app version. This app can be installed on all your employees’ phones and can be used to upload receipts on the go, check the payment status, check the status of approval, etc. 

It is always a good option to have digital or virtual copies of the physical receipts. This is because physical receipts are highly prone to be lost or misplaced and hard to store over the years.

However, with digital copies, none of the above problems apply, and these can be stored for years and years. 

Set clear approval workflows. Create a workflow where 3-4 people at different levels are supposed to approve the reimbursement claims. This helps to make the process rigid. Plus, also define steps 1 to the last step.

Employees should know whom to submit the reimbursement claims to, whose signatures are needed in chronological order, and when the reimbursement actually be fulfilled. 



A good practice in the employee reimbursement process is to regularly review and audit all expense reports. A regular check and tab on all details will help you sort out any issues before it is too late. Plus, catching any fraud will be easier. 

Along with an expense management system, corporate cards are another effective tool to help streamline employee reimbursements. Cards allow making spending easier, and you will always know which employee is accountable for what expenses. 

Starting with the basics, using corporate cards, you will be able to track all expenses and transactions in real-time. This means you just have to give these cards to your employees, and all activity is traced to the minute.

So you don’t have to worry about receipts and physical records to know how much and where your employees are spending. 

Corporate cards enable companies to maintain expense policy compliance. You can set spend control limits and assign cards for specific expense categories as well.

Any transaction under the given card limit will be automatically approved. But any expense over the limit will require the employees to raise funds request and approval of the superiors. 

Another benefit of corporate cards is budget allocation. Corporate cards can be assigned to employees, departments, and projects. Hence, the card spending limit feature can allocate a budget for departments and projects.

Plus, the feature of setting a card for one-time payments and recurring payments is another feature that helps control spending. 

As corporate cards track all transaction activity, there is already an automatically created database with all the details of the expenses.

Hence, the need to store receipts gets eliminated. Plus, the expense management software can upload receipt snapshots for digital records. 

The automatically created database helps to maintain a streamlined accounts reconciliation process. Corporate cards can be integrated with an accounting system.

So all the expense details are filled into the accounting books without having to put in any extra manual efforts for data entry.

One of the most amazing outcomes of using corporate cards is enhanced data analytics. As every expense detail is captured in real-time, an expense record is also created in the system.

With this, data analytics is also improved, as the system creates reports, analytics graphs, and diagrams to help you identify spending patterns and employee expense behavior. 

As everything is in real-time, there is no scope to make amendments or slip in false expenses in the report. Expense reports are made in a system, and employees cannot alter any information as the real-time recording does not allow it.

Plus, the system catches any anomaly or unusual behavior and stops it immediately. 

Also read, How to apply for a corporate credit card in India