Reimbursement receipts: Requirements and best practices

If your employees frequently make purchases on your company’s behalf using their own money, it's important to have a reimbursement policy in place to pay them back.

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A critical component of that policy is ensuring you collect a receipt that verifies and documents every reimbursement request. These receipts are, fittingly enough, known as reimbursement receipts. 

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Below, we take a closer look at what reimbursement receipts are, when they are and aren't required, and what information they should contain. We also walk through some common challenges businesses face when dealing with reimbursement receipts and share strategies to help streamline your processes.

What is a reimbursement receipt?

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Reimbursement receipts can take several different forms, from paper receipts issued at the point of sale to electronic receipts (e-receipts) that are texted or emailed to the purchaser. Other supporting documents that can sometimes act as proof of a business purchase include a credit card statement, paid invoice, and canceled checks, though business receipts are by far the preferred form of evidence.

What information should reimbursement receipts contain?

A reimbursement receipt acts as proof that your employee has made a purchase related to business activities. With that in mind, all receipts should ideally contain the following information:

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• Retailer: The name of the retailer, vendor, or supplier where the purchase was made
• Payment date: The date and time that the employee made the purchase
• Description: An itemized description of what was purchased
• Total payment: How much was spent on the purchase
• Payment method: How the purchase was completed, whether via cash, debit card, credit card, or some other method

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Reimbursement receipts are typically submitted alongside an itemized expense report that provides context for each purchase, including why the expense was necessary from a business perspective. When reimbursement is necessary, the expense report and receipts are then routed for review and expense approval.

Expenses that require receipts for reimbursement

Any purchase employees make on your business’s behalf must be supported by a receipt or other documentation. This is true regardless of whether reimbursement is required.

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If your employee made a purchase using their own money, a receipt is necessary to trigger reimbursement; if the purchase was made with company funds—for example, using a corporate credit card—you still need a receipt for your business records.

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Some common business expense categories that require receipts for reimbursement:

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• Travel expenses: Lodging, airfare, car rentals, train tickets, tolls, etc.
• Business meals: When traveling or in other business situations
• Networking expenses: Registration fees for professional conferences, conventions, and trade shows
• Office supplies: Paper, pens, cleaning supplies, markers and whiteboards, etc.
• Equipment and electronics: Laptops, monitors, mice, keyboards, etc.

Expenses that don’t require receipts

While it’s a good business practice to always collect reimbursement receipts, there are instances where they aren’t necessary. 

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For example, if you provide your employees with a stipend or per diem, you don’t need to collect a receipt since you don’t actually need to reimburse the purchases. Whether or not you require receipts in these instances is ultimately a matter of corporate policy.

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Likewise, if your employees use personal vehicles for business travel and you use the standard mileage rate for mileage reimbursement, you don’t need to collect any receipts. You should, however, require other supporting documentation in the form of a mileage log or trip log.

Why are reimbursement receipts so important?

Collecting and retaining receipts for employee reimbursements isn’t something businesses should view as optional. In many cases, it’s a required part of running a legitimate business. Even when it’s not strictly required, it’s best practice to document all business purchases.

Reimbursement receipts reduce errors and fraud

Without adequate documentation of each business purchase, it’s impossible for you to thoroughly review employee reimbursement requests. This creates the risk that you might reimburse employees for purchases that fall outside company policy, whether due to error or expense fraud. Simply put, reimbursement receipts protect your business from these mistakes. 

Reimbursement receipts serve as tax proof

As a business owner, you’re entitled to write off any deductible business expense as a business tax deduction when you file your taxes. If you plan on claiming deductions, you must have proof of purchase for every expense you write off. Failure to provide proper documentation of expenses can result in penalties and fines if your business gets audited by the IRS.

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Common challenges with reimbursement receipts

Just because you’ve collected receipts as proof of payment for all employee reimbursements doesn’t mean you’re out of the woods yet. In fact, a number of receipt-related challenges often trip up large and small businesses alike. Here’s what you should keep in mind as you think about your company’s receipt policy:

Lost receipts

Lost receipts are one of the most common challenges related to employee expense reimbursements simply because there are so many opportunities for receipts to be misplaced.

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On the one hand, the employee who incurred the expense may misplace the receipt before submitting their expense report, or forget to ask for a receipt with their purchase. On the other, physical receipts can very easily be lost, misplaced, or accidentally thrown away after you’ve processed the reimbursement request.

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While this may not affect your ability to process a reimbursement, it can affect your ability to write off the expense.

Damaged receipts

Just as physical receipts can be lost, they can also become damaged, faded, or generally illegible.

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Many receipts, particularly those printed by cash registers at many retailers, are printed on a special type of thermal paper that is sensitive to heat. This makes fading especially common for receipts that are kept in warm places such as an employee's wallet or vehicle during travel.

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On top of that, all physical receipts, regardless of material, are susceptible to pest damage and water damage whether stored correctly or incorrectly. 

Unassociated receipts

If you collect and store physical receipts without a plan for how you will organize them, it can raise a number of challenges.

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In the event of an IRS audit, it's not enough to simply turn over your receipts. You must also be able to associate each receipt to the corresponding purchase, the business purpose of that expense, and tax write-off that you claimed.

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Storing all of your business receipts in a shoebox or filing cabinet without a system in place to meet these requirements can lead to a major headache if you're ever audited.

Reimbursement receipt best practices

With the above challenges in mind, below are some best practices you may want to incorporate into your reimbursement policy:

Require digital scans

One way to avoid damaged, degraded, or lost physical receipts is to require employees to upload a digital scan of their receipts along with their expense reports. Having a digital copy eliminates the risk of degradation, and can also make it easier to associate each receipt with the corresponding purchase in your accounting software or records. That being said, it’s always a good idea to hold onto physical receipts in case you’re ever asked to produce the originals for inspection.

Enable real-time receipt upload

While it’s possible for employees to lose receipts anywhere, this is especially common when employees are on the road or traveling for business. In these situations, employees will typically stockpile all the receipts related to their trip and upload them all at once when the business trip is done.

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Of course, this increases the chance that a receipt might be misplaced or damaged. Facilitating the real-time upload of receipts—for example, by choosing expense reimbursement software that includes a mobile app with receipt scanning capabilities—reduces this risk.

Hold onto them

As proof of purchase for business-related expenses, receipts serve an important role in documenting your business’s activities. This is especially true if you deduct business expenses from your tax return come tax time.

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Unfortunately, if the IRS decides to audit your business, it can go back several years—up to seven, depending on the circumstances. With this in mind, it’s a good idea to retain all reimbursement receipts for at least seven years, though some businesses choose to keep records for longer. 

Streamline receipt capture and expense reimbursement with Ramp

Collecting and organizing your business’s reimbursement receipts doesn’t need to be a headache. With Ramp’s expense management platform, you can solve many of the receipt-related challenges mentioned above, empowering your employees to:

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• Capture digital scans of physical receipts
• Submit electronic receipts via email or text
• Report expenses on the go via Ramp’s mobile app
• Accurately code, categorize, and map expenses

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On top of that, Ramp’s all-in-one finance platform makes it easy to issue unlimited physical and virtual corporate cards that can help eliminate the need for frequent expense reimbursements. Enforce your expense policies automatically and view all your spending in one place with Ramp.