Don’t Underestimate the Importance of an Employee Expense Report

If your employees have ever covered the cost of a business-related expense, you’ve likely asked them to submit an expense report (or at least, you should have). While an employee expense report is a central component of any company’s reimbursement expense management processes, they are not always so well-understood. 

What exactly is an employee expense report, what purpose does it serve, and how can you create one that best serves your needs? We answer your burning questions. 

What is an Expense Report? 

In its simplest form, expense reports are forms that track business-related spending such as gas, meals or office supplies. This is done by having employees use these forms to itemize expenditures for which they are requesting reimbursement from their employer. If the expenditures exceed a specified minimum amount, proof of the expense must be attached to the form, as well, such as receipts, invoices or credit card statements. 

After an employee submits their expense report, it must be reviewed for validity and accuracy before approval and reimbursement can be given. Employers can then record the reimbursement as a business expense thereby making it tax-deductible. 

What Information Needs to Be on an Expense Report?

There is no one correct way to create an employee expense report. You could make expense reports in an accounting software like Quickbooks, you could use a template in Word or Excel, or you could create and print out PDFs and have employees fill them out by hand. The way you create an expense report is not nearly as important as the information you ask employees for on it. 

Much like the format, there is no law or regulation dictating the information that must be included. However, there are several items you must ask for at minimum in order for you to be able to prove an expense was business-related later. They are:

• The name of the employee who made the purchase. You need to know who to ultimately pay the reimbursement to. If other employees were also present – for instance, at a team dinner – this is also important to know. 
• The date and time of the expense. This will help prove that a reimbursement request was made in a timely manner.
• The vendor or location of the expense. If an employee took clients out for lunch, you must know where they went. If they purchased more printer ink, you need to know where the purchase was made. 
• The reason for the expense. If an employee had to pay for parking to attend a conference, they should explain why they were in that location in the first place. That way you can confirm that the expense was indeed business-related. 
• The amount of the expense. If multiple items are included in the total, they should be clearly listed along with their individual cost. This will help you ensure that no out-of-policy expenses, such as alcohol, are escaping your notice. 
• Any additional notes. Not every employee expense will be clear-cut or by-the-books. Make sure to give them the opportunity to explain a unique citation or provide clarifications. 

 In addition to these form fields, you may want to ask for information that will be more specific to your organization, such as which program, project or department for which the expense was made. This will help Accounting understand which budget will be affected. 

To increase validity and accuracy, it may be wise to include a summary of your T&E policy on your employee expense report. This policy should define which expenses are reimbursable and which aren’t. By making this information easily accessible while they’re filling out the form, employees will be able to reference it and have their questions answered in the moment. Rather than including the entirety of your policy, focus on highlighting the most essential items in clear, unambiguous language. Also, this summary should ideally be placed at the top of the page so employees can’t miss it. 

How Are Expense Reports Useful For Your Business? 

If you ever ask employees to contribute personal resources to your business, it’s imperative that you ask them to submit expense reports. In addition to the obvious expenses such as purchasing a plane ticket for a business trip, asking them to drive their own vehicle to client appointments or use their personal Wi-Fi network to telecommute should also be considered business-related, reimbursed expenses. Expense reports help you collect the information about all of these expenses. With this information, you have the ability to do several things. 

First, many business expenses are tax deductible. If you can prove that an employee made a business-related purchase that you then reimbursed them for, that reimbursement will be tax deductible, too. However, if you reimburse employees for an expense and can’t prove its business relevance, the IRS will consider that reimbursement as taxable wages. Expense reports help you prove the business expense should you be audited, and when it comes time to file your taxes, you’ll be happy expense reports already did the hard work of adding everything up. 

Outside of taxes, having the ability to collect data on employee spending and reimbursement is incredibly helpful for businesses that want to review total costs throughout the year, analyze trends and identify areas where perhaps spending can be reduced. With a detailed employee expense report, you have unprecedented insight into what kinds of expenses are costing you the most, who is spending the most and much more. 

Reimagine Your Employee Expense Report

Traditionally, expense reporting is a very tedious process that steals hours out of employees’ work week, not to mention the onus it puts on their supervisors to manage and approve reports. In addition to time and resources lost, inefficiencies in this process cost companies thousands of dollars every year due to unclear and inaccurate reporting methods. If you want to be able to grow your business and scale up operations, understanding the important role the employee expense report plays in controlling costs is a good place to start. 

CompanyMileage helps our customers address one of the biggest expenditures a company has: employee mileage reimbursement. If your employees regularly travel throughout their workday, the process of mileage expense reporting is nothing new to you — nor, we suspect, are the countless issues with tprocess. Our simple point-to-point trip calculations eliminate the need to record odometer readings, and because they only calculate mileage of the most direct route, you don’t have to worry about personal mileage mixing in with their work mileage. 

Our software integrates with all major payroll providers, further streamlining the process. After mileage expense reports are submitted and automatically sent to supervisors for approval, you’re able to export this data to your payroll system. Expense reporting becomes a simple process, taking as little as two minutes a day for workers.

Not only does CompanyMileage allow you to reimagine your employee expense report for the 21st century, our software significantly lessens the burden expense reporting puts on employees on top of doing their jobs. The best part? You’ll notice immediate savings. CompanyMileage customers regularly save 20-30% on their employee expense management costs. If you’re looking for a better way to report expenses across your organization, request a demo with one of our dedicated customer representatives today!