Managing employee Expenses>Business Expenses is a challenge for many small business owners. You want to be fair and reimburse employees for costs they incur in the course of doing their job, but you may also find yourself wondering whether all the expenses are legitimate Expenses>Business Expenses.
The best way to ensure that everyone is treated fairly is to establish a clear employee expense reimbursement policy. The key components of doing this will include establishing clear rules that cover all employees, creating an expense report template for all employees to use, setting deadlines for filing reports and paying reimbursements and clearly communicating the policy to all concerned employees.
Establish a Clear Policy
Handling every situation as it arises requires you to spend considerably more time reviewing expense reports and discussing the costs with the employee, not to mention the effort and time wasted in trying to remember if you’ve paid these types of expenses in the past. So, the first and the most important aspect of your expense reimbursement policy should be clearly stated rules that cover all employees. A lack of a clear policy can also lead to disgruntled employees, especially if you make a habit of paying certain expenses for some employees but not others.
In establishing a reimbursement policy;
- You should develop a comprehensive list of expenses you will cover, as well as those expenses that will not be covered.
- The policy should include spending limits and mileage allowances, but you should also include a statement that exceptions can be made for extraordinary circumstances.
- While you should not offer tax advice, you can make employees aware that any legitimate Expenses>Business Expenses that are not reimbursed could be deductible on their personal tax returns.
Create Set Procedures
In addition to establishing rules, you also need to set up standard procedures that will make it easier to manage the process of making employee reimbursements.
- Creating one expense report for all employees to use will make it easier for you to review and approve reimbursement requests.
- Set deadlines for submitting expense reports, which will ensure that costs are accounted for in the appropriate accounting period.
- You should also set deadlines for your accounting department to pay reimbursements, thus giving employees a clear sense of when they will be paid.
Use Quickbooks to Track Expenses
Quickbooks makes it easy to track employee expenses and to pay expense reimbursements. To do this,
- You should create a payroll item for each expense you will pay.
- Make sure you attach the proper expense account to each item to ensure proper accounting.
- You also should make sure that you indicate that there is no tax tracking for the expense item. This will let Quickbooks know that the item is not subject to withholding and other payroll taxes.
Once you have created the payroll item,
- You must add it to the employees’ records who will receive reimbursement.
- After this is done, you can enter each employee’s expense report as you run your regular payroll.
- Quickbooks will then add the expense reimbursement to the employee’s paycheck, with the check stub listing each expense as a separate line item.
This way , you not only save money by processing fewer checks, but you also ensure that expenses are accounted for properly and in a timely manner.
Communication is Key
Above all, you need to clearly communicate with your employees. Explain the reimbursement policy and the reasons behind it. Establish a comprehensive list of expenses you will reimburse, as well as those you will not. Follow standard procedures, and take advantage of the procedures in Quickbooks that make it easy to reimburse your employees. An established employee expense reimbursement policy will make it much easier for you to manage business and your employees.