What is the expense reimbursement process?

The expense reimbursement process allows employers to reimburse employees for business-related expenses they incur with their own funds. These expenses must directly support business purposes and align with company policy. When employees purchase office supplies, cover travel expenses or pay for professional development, they can submit reimbursement requests for repayment.

Reimbursement matches the exact amount the employee spent. This rule helps prevent employees from losing money while completing work tasks. To support compliance, each expense must include a clear business purpose and proper documentation. Many of these expenses require itemized receipts to support audit readiness, accurate financial reporting and compliance with tax rules.

Common reimbursable expenses include:

• office supplies
• travel and accommodation for a business trip
• travel-related expenses
• phone charges for client communication
• costs for entertaining a client

Employees often incur out-of-pocket expenses during routine work tasks, such as picking up supplies for an event or meeting. When these costs arise from work duties, the employer may reimburse the employee through the company’s expense reimbursement process.

General practices for expense reimbursement

Employers can strengthen employee trust and compliance by following consistent guidelines. Consider the following practices when you reimburse employees for business expenses:

• Never process reimbursement without a receipt.
• Issue payments through payroll or as a separate payment.
• Pay by direct deposit, cheque, cash or any approved method.
• Record all reimbursements as business-related amounts.
• Maintain accurate financial records for tax compliance.

These principles provide a reliable framework for employee expense reimbursement and can enable employers to better manage business spending.

Alternate types of expense reimbursement

Some companies allow employees to use personal credit cards and then submit reimbursement requests for approved business-related expenses. Others offer flexible reimbursement options that support different spending needs, such as:

Advance

The employer gives funds to the employee before a business-related purchase. Employees then provide receipts after the purchase to reconcile the advance.

Per diem

Employees receive a set daily allowance for meals, lodging and travel expenses. Diem rates vary by location and policy. This method simplifies expense reporting and reduces the need for detailed receipts.

Corporate credit card

Employees use a company-issued credit card for approved spending. This method reduces personal spending and simplifies expense tracking.

Purchasing card

A single employee uses a designated purchasing card for frequent business expenses, such as client entertainment or travel costs.

Best practices for the expense reimbursement process

Strong expense management prevents delays, improves financial accuracy and supports employee satisfaction. These best practices can help employers build reliable systems for managing expense reimbursements:

Create a transparent expense reimbursement policy

A well-defined expense reimbursement policy sets expectations for approved expenses, spending limits and submission requirements. Consider including:

• list of approved expenses
• pre-approval requirements
• spending limits
• required documentation
• timelines for submission and payment

Define which expenses qualify for reimbursement

Clarify which expenses employees can submit. A clear list reduces confusion and prevents disputes over denied reimbursement requests. Examples of common reimbursable expenses include:

• travel expenses
• business meals
• office supplies
• professional development
• mileage reimbursement

Create a system for collecting reimbursement claims

A structured submission workflow prevents lost receipts, inaccurate reports and late reimbursements. Your system can include:

• expense claim form for each request
• detailed expense reports with dates, amounts and business purposes
• itemized receipts
• automated expense reporting software

Set deadlines for expense submissions

Set deadlines so employees know exactly when to submit reimbursement requests. Deadlines prevent last-minute claims and support timely reporting. Some employers want all expenses submitted at least a week before payroll. This approach simplifies processing and helps HR and accounting teams manage business expenses efficiently.

Pay reimbursements within a set timeframe

Timely reimbursement supports employee satisfaction, especially when employees pay out of pocket for business-related expenses. Communicate payment timelines in your expense reimbursement policy to set reasonable expectations.

How to choose the right expense management tools

Expense management software can transform the reimbursement process by reducing manual data entry, improving accuracy and centralizing employee business expenses. Employers can choose from a range of expense management tools depending on the company’s size, spending habits and workload.

When reviewing tools, consider whether you need:

• automated expense reporting features
• mileage reimbursement tracking
• built-in approval workflows
• direct deposit options for reimbursements
• mobile receipt capture
• integration with payroll or accounting software
• custom rules for spending limits and approved expenses

Using automated expense management tools allows employers to submit, approve and track reimbursement requests in one place. These systems also reduce the risk of human error and support accurate financial reporting across the business.

How to train employees on your expense reimbursement policy

Even the best expense reimbursement policy only works when employees understand it. Training employees ensures they know how to submit expense reports, what documentation you require and how long reimbursement requests take to process.

Consider offering training that covers:

• how to complete expense claim forms
• which reimbursable expenses the policy covers
• how to capture itemized receipts
• how to use expense reporting software
• deadlines for submitting requests
• who approves expenses and how spending limits work
• how to reconcile advances or per diem payments
• what happens if an expense does not meet the policy

How to audit and monitor employee spending

Auditing employee spending can help employers control business expenses and strengthen expense management. Consider setting clear spending limits for categories such as travel expenses, business meals, office supplies and mileage reimbursement. Regularly reviewing spending trends may also make it easier to spot unusual activity, frequent high-cost purchases or expenses that fall outside policy.

Employers can also spot-check expense reports to confirm itemized receipts, business purposes and compliance with the expense reimbursement policy. Periodic internal audits support financial planning, help identify cost-saving opportunities and ensure the reimbursement process consistently meets company standards.

A comprehensive expense reimbursement process helps ensure employees receive prompt repayment for business-related expenses while giving employers control over business spending. When your organization uses accurate systems, detailed policies and efficient workflows, you can improve employee satisfaction, support accurate financial reporting and maintain full compliance with tax requirements.