Managing business finances or expenses has become easy and quick in this digital era. Every business owner can use a digital business app to manage all the business expenses separately. But there is one most essential thing that you must consider while managing business expenses, which is managing reimbursable expenses.
Reimbursement is one of the significant expenses you should include in your business expenses. So, if you do not know what the reimbursement expenses are, you should first know the reimbursement meaning.
So, what is reimbursement meaning in simple and comprehensible words? Reimbursement is the monetary compensation received to cover the previous transactions. It refers to the money an entity pays to the employees, customers or third parties to repay business expenses. Simply put, it is the repayment of the money you have already spent.
What are reimbursable expenses?
Reimbursable expenses refer to the costs related to business or operational activities for which employees have made the payment on behalf of the company.
When employees incur expenses on behalf of the company, they spend their money at the moment. But later, the company reimburses the employee for the last payments. So, for example, employees who travel for work will get reimbursement for work-related expenses, such as booking travel tickets or paying hotel bills.
What are the different expenses that the company can reimburse? Unfortunately, employees cannot get reimbursed for every payment they have made. The companies formulate some sets of rules and policies for reimbursable expenses. Following are some of the significant costs that could consider reimbursed by the company;
Travel expenses –
When we visit different places or regions for business purposes, we must make many payments during our business trip. And the company will cover all these travelling expenses and payments related to the business activities.
Meals and entertainment costs –
Sometimes we meet our clients or contractors and offer them dinner, lunch, or any other occasion. So, all the money spent by the employees on arranging the meals or entertainment as a part of business meetings will be considered reimbursable expenses.
Office expenses –
There can be additional office expenses payments, such as spending money on the services of machines or tools. However, we can consider them as reimbursable expenses.
So, some significant business expenses come under the category of reimbursement payments.
On what basis can a company consider the expenses as reimbursable? A company can consider the costs as reimbursed if employees follow the following rules or guidelines;
- The expense must be related to the business activities. It can be any cost incurred for providing services by the employees.
- A company should ask for the receipt or invoice or any other proof for the business expenses paid by the employees.
- The employees must report payments of reimbursable expenses to the responsible department within a specific time duration.
A company should consider the above-listed things to decide whether a cost is reimbursable. So this is all; every business owner and employee should know about the reimbursement costs.