Shawnee Love   •  
August 22, 2013

I often get calls from clients who want to know whether it is better to reimburse employees for business expenses or offer an allowance.  This blog will wax poetic on expense reimbursement and in our next blog you will see the case for allowances.

Expense reimbursement is a big deal for employees and as such one of those places where companies can either shine or completely drown.  Companies that shine have a clear policy on what expenses are reimbursable and to what maximums if applicable.  They also have a simple procedure that outlines what the employee needs to submit (a completed form with valid, legible receipts attached) and how to get paid (submit to manager who authorizes and passes on to accounting to get paid in short order) which the company follows religiously.  Companies that successfully operate expense reimbursement programs need to have well trained managers who know how to monitor budgets, jump on expense forms as soon as they come in, and are clear on their authority and responsibilities when it comes to approving and submitting expenses.  Those companies also need good bench strength in their accounting team to handle the expense forms in a timely manner.

When an employee spends his or her own money on behalf of the company, they are basically extending credit to their company.  Thus, it is really important that the company show its appreciation for the kindness by sending out those reimbursement cheques (or authorizing the direct deposits) ASAP- Like a week to 10 days of the expense form being submitted.

Many companies that do expense reimbursement wrong end up creating hoops and red tape that results in bad feelings and ultimately turnover.  Examples of hoops and red tape I have seen:

• Long waiting periods between submitting the expense form and being reimbursed.
• Tying reimbursement to payroll schedules.
• Refusing to honor specific requests for more urgent reimbursement than scheduled when the amount owed to the employee gets too large.
• Requiring the expense to be submitted in multiple versions to multiple people in specific order or the expense won’t be reimbursed.
• Expecting each expense receipt to be taped to its own piece of white paper.
• Refusing to pay if there are staples or paperclips or the incorrect date order.

And one more thing:  If your employees are doing you the kindness of bankrolling your company, don’t get angry if they get an associated perk.  I have seen the bean counters get up in arms that employees are getting points for these expenses and subsequently requiring employees use the company’s airmiles card even whilst using their own cash.  Or even more ridiculous is when the company requires that their employees pay the full price (and thus the cost of the item ends up being much more) rather than use a loyalty card which offers a discounted price and accrues points to the individual. Talk about biting off your nose to spite your face.