4 Ways Expense Reimbursements Hurt Your Business

November 18, 2020By Allya Syahrudi← Back to Blog

What Are Expense Reimbursements?

Expense reimbursements are refunds given to your team when they’ve used their personal money on business-related expenses. Common types of expense reimbursements include:

  • Travel and Mileage
  • Meals and Entertainment
  • Office Expenses
  • Education Expenses

4 Ways Expense Reimbursements are Hurting Your Business

1. Decreased Employee Satisfaction

When your team are forced to use personal funds for company expenses this can impact their own personal cash flow. In fact, 2 in 5 employees experienced cash flow issues due to slow expense reimbursements. Additionally, 38% of employees have felt stressed by inefficient reimbursement processes.

2. Manual Data Entry

Accountants and bookkeepers spend hours manually entering data and chasing invoices to complete expense reimbursements. This prevents the accounts team from progressing on higher-value tasks and can also create unwelcome delays in closing off your books.

3. Lack of Visibility over Employee Spending

Your business’ expense reimbursements can only be recorded once the reimbursement claim has processed. This can leave you with a lack of visibility over employee spending, as highlighted by a recent study showing that 35% of SMEs had little to no clear view of their employee expenses. As a result, businesses are more likely to mismanage budgets and overspend.

4. Increased Risk of Fraud

Expense reimbursement fraud makes up 21% of fraud cases for small businesses. This puts your company funds at risk and creates the need for additional control processes.


An Alternative to Expense Reimbursements

Instead of reimbursing staff members for out of pocket expenses we recommend the following:

1. Issue cards to your staff

Issuing cards to your staff member allows them to pay for what they need without using their personal money. It will also allow you to track spending as it happens and eliminate the need for a reimbursement process all together. It’s important that your card provider offers the ability to dynamically set card limits to prevent overspending.

2. Create an expense policy

Provide each employee with a clear guideline on what they can and can’t spend on and keep spending in check with a regular review. An expense policy will help prevent employees from making unnecessary purchases.

3. Use an expense management tool to report on company spending

A good expense management tool like DiviPay will help your staff quickly upload a receipt and record the details that surround an expense like the GST, a description and expense category. This will allow you and your accounts team to understand why an expense was made, maximise your tax claim and correctly account for expenses on your Balance Sheet and Profit and Loss reports