Guide to employee expense claims

It’s a common scenario for someone on your team to make a business purchase with their own money. Whether for business travel, client meals, or office supplies, you need a way to reimburse employees for those costs.

Expense claims enable employees to request reimbursement for out-of-pocket business expenses. Understanding how they work helps simplify your business operations, ensures compliance, and is the key to quicker reimbursements.

What is an expense claim?

Expense claims are requests from employees to be reimbursed for business expenses they paid for out of pocket, such as travel, meals, or office supplies. They help businesses track expenses, keep accurate financial documents, and ensure you’re staying within budget.

Employees should use expense claims to document and request reimbursement for business expenses they initially paid for using their own money. Expense claims provide the specific details about each expense, including:

• Date the expense was incurred
• Description of purchased items
• Total paid
• Supporting documentation and receipts

These claims are typically filed by:

• Employees, for things like meals while traveling
• Contractors, for project-related costs
• Managers, for higher-level or client-related expenses

Expense claim vs. expense report

An expense claim is typically a single reimbursement request made by an employee for out-of-pocket business expenditures or charges on their personal credit card. Employees often submit them on a rolling basis as they incur business-related costs.

Expense reports are consolidated documents that include multiple claims, providing a broader overview of expenses for business or accounting purposes. Employees usually file expense reports monthly or at the end of a trip or project.

For example, let’s say you attend a conference in another state. At the end of the trip, you file an expense report that includes expense claims for your airfare, hotel, meals, and any other business-related expenses.

What expenses qualify for reimbursement

When employees pay for business expenses with their own money, these are known as out-of-pocket expenses. An example is using your credit card to pay for airfare for a business trip or buying office supplies with cash.

Travel, business meals and entertainment, and office supplies are common reimbursable expense categories. However, not all expenses qualify for reimbursement. You need a clear, comprehensive expense policy to establish expectations and limits for your team.

Common categories of reimbursable expenses

Examples of common expense claims include:

• Meals and entertainment while traveling for business or entertaining clients
• Business travel costs like airfare, hotels, car rentals, and taxis
• Office supplies and other items that employees need to complete their work
• Mileage and vehicle expenses from business use of a personal vehicle
• Training and professional development, such as licensing fees, training courses, or subscriptions

Non-reimbursable expenses

Typically, these types of expenses aren’t reimbursable:

• Personal expenses and anything unrelated to work activity
• Alcohol, although this varies depending on company policy
• Fines and penalties, like parking tickets
• Expenses without proper documentation

How does the expense claim process work?

The expense claim process starts when an employee incurs an expense on behalf of the company and ends once the expense is reimbursed. Here's the typical workflow step by step:

Step 1: Making a business purchase

The entire process begins when someone from your team makes a legitimate business purchase with their own funds. This could be with cash or a personal credit card. There are a few things to consider before making a purchase:

• Is the expense work-related?
• Does the company expense policy cover the expense?
• Does the purchase require pre-approval?

Step 2: Collecting receipts and documentation

Every expense claim needs proper documentation. Employees must save physical or digital receipts, invoices, or other supporting documents for accurate expense tracking and reporting. Receipts should include:

• Vendor information
• Date
• Itemized purchases
• Total amount

Keeping track of paper receipts can be challenging. One solution for staying organized is using a receipt scanning app to digitize and securely store receipts as soon as your team makes a purchase.

Step 3: Submitting the expense claim

You can structure expense claims to best meet your business needs. Whether you choose paper or digital templates, they should always include essential details:

• Employee information: Name, department, and employee ID number
• Purchase information: The date, type, and total amount of the expense
• Business purpose: Brief descriptions of the business intent of each expense claimed
• Documentation: Attached receipts
• Grand total: Total amount of all expenses claimed on the report
• Employee signature: Either physical or digital

Specialized expense reimbursement software can help you maintain accurate records, ensure compliance, and simplify management.

Step 4: Review and approval

Depending on your workflow, employees submit expense claims to their manager, the finance team, or HR for approval. They’ll review the expenses to ensure they comply with company policies and include accurate documentation.

Common reasons for rejection or delays in the process include:

• Missing documentation
• Expenses outside of company policy
• No clear business purpose
• Late submission

Step 5: Reimbursement

Once expenses are approved, the employee receives reimbursement, whether by check, direct deposit, or another method specified by your company's reimbursement policy. It varies by company, but employees usually receive reimbursement within 2 weeks.

Common challenges in the expense claim process

While the expense claim process generally follows a set of prescribed steps, the process has challenges.

These are four pain points and tips for overcoming them:

Manual and inefficient processes

Entering expense claims and receipts into spreadsheets and manual forms can be time-consuming. Not only is it tedious, but it's also inefficient and error-prone. Your finance team doesn’t have time to chase people down for missing receipts. Automating expense reporting with modern software like Ramp can streamline the process.

Missing or lost receipts

When you rely on paper receipts, they can easily go missing, especially when your team is on the road. It’s harder to verify expenses and confidently claim business tax deductions without proper documentation.

Encourage your team to use receipt scanning apps, so the receipts are digitized and submitted immediately. You should also have a policy for missing receipts, such as allowing written explanations under a certain threshold.

Policy confusion

If your expense policy isn’t watertight, you’ll find out in the expense claim process. Your team might attempt to submit questionable expenses, or there may be inconsistencies across the board. This can lead to frustration for everyone.

Treat your expense policy like a living document and make regular updates based on your business and team needs, within reason. Regular training also goes a long way to ensure there are no questions. Do this during employee onboarding, and hold annual refreshers for tenured team members.

Delayed reimbursements

An extended or slow approval process can delay employee reimbursements. This can affect morale, especially if the payment cycle doesn’t align with credit card bill cycles and when handling large expenses.

To speed up the process, establish clear timelines for expense claim submission and the approval cycle. Use automated reminders to ensure both submitters and approvers complete their tasks promptly and that you’re monitoring any potential bottlenecks.

How to streamline expense claims

While there are some challenges, you can streamline the process by using software to automate expense reporting.

Expense management software helps businesses track, control, and optimize expenditures. Many software tools are available to electronically track and organize receipts, seamlessly integrating with accounting software.

The benefits are clear for your employees and the finance team:

• Less administrative burden: Automating the process eliminates many of the most time-consuming manual tasks, such as data entry, categorization, and report generation. Ramp's research reveals that expense management automation software can reduce time spent on expense reports by 85%.
• Quicker reimbursements: An automated approval workflow makes it faster and easier to submit, review, and approve expense claims, which means faster reimbursements
• Improved compliance: Building your expense policy into the software prevents people from submitting unapproved or out-of-policy expenses, and the system usually flags any errors immediately
• Data and reporting: All expense data is right at your fingertips with automated reporting to provide budget insights, highlight trends, and, ultimately, improve cash flow

Popular automated expense management tools that help simplify the process include Ramp, Expensify, SAP Concur, and QuickBooks. To decide which is best for you, consider the scope of your business needs and costs. But look for features like:

• Custom approval workflows
• Policy enforcement
• Digital receipt scanning
• Mobile app for submissions and approval
• Integrations with your existing accounting software
• Analytics and reporting

Real-time visibility into your spending provides transparency for your team, prevents overspending, ensures compliance, and protects you against fraud and potential audits.

How Ramp eliminates manual expense claims

Managing employee expense claims can feel like death by a thousand cuts. You're buried in paper receipts, chasing down missing documentation, and manually entering data you should have captured automatically. Meanwhile, your employees are frustrated waiting weeks for reimbursements, and your finance team is stuck playing detective instead of focusing on strategic work.

Ramp's finance automation platform transforms this painful process through intelligent automation that works from the moment someone incurs an expense.

Automated transaction matching and receipt capture

When employees make purchases with Ramp's corporate cards, transactions automatically flow into our integrated expense management software, where merchant details, expense categories, and amounts populate. No more manual entry or guessing what that cryptic credit card statement line item represents.

The platform automatically matches receipts to transactions using OCR technology, eliminating the back-and-forth of receipt collection. If an employee forgets to submit a receipt, Ramp sends automated reminders to ensure compliance without requiring you to chase anyone down.

Expense approval routing

The real game-changer is how Ramp handles expense policies and approvals. You can set custom spending rules and approval workflows that automatically enforce your policies. Need marketing expenses over $500 to route to a department head? Done. Want to block certain merchant categories entirely? Ramp handles it in real-time.

By automating these traditionally manual processes, Ramp helps finance teams significantly reduce expense processing time. Your employees enjoy faster reimbursements, your finance team spends less time on administrative tasks, and you gain real-time visibility into company spending.

Automate your expense reporting and reimbursement process

Managing reimbursement claims can be taxing, and automation is the key to solving your expense management challenges. Ramp's modern finance operations platform offers a comprehensive solution to streamline corporate spending, saving you time and money.

More than 45,000 businesses have saved $10 billion and 27.5 million hours with Ramp. Try an interactive demo and see why.