Reimbursement receipts: Requirements and best practices

If your employees frequently use their own money to make purchases on your company’s behalf, it's important to have a reimbursement policy in place to pay them back. A critical component of that policy is ensuring you collect a receipt that verifies every reimbursement request. These receipts are, fittingly enough, known as reimbursement receipts.

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?

A reimbursement receipt serves as proof that an employee incurred a business expense on your company’s behalf. When the employee requests reimbursement for the expense, they submit the reimbursement receipt as supporting documentation that justifies the purchase and proves they paid for the expense with their own money.

Reimbursement receipts come in various formats, from paper receipts issued at the point of sale to e-receipts that are texted or emailed to the purchaser. Other supporting documents that can sometimes act as proof of a business purchase include credit card statements paid invoices, or canceled checks, though itemized receipts are by far the preferred form of evidence.

What information should reimbursement receipts contain?

A reimbursement receipt confirms that your employee made a legitimate business purchase. With that in mind, all receipts should ideally contain the following information:

• 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: A detailed description of the items or services purchased, including quantities and unit prices
• Total amount: How much was spent on the purchase
• Payment method: How the purchase was completed, whether via cash, debit card, credit card, or some other form of payment

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

Expenses that require receipts for reimbursement

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

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, with a company credit card—you still need a receipt for your business records.

Some common reimbursable expenses that require receipts include:

• Travel expenses: Airfare, rental cars, lodging expenses, train tickets, tolls, etc.
• Business meals: When traveling or in other business situations
• Networking expenses: Registration fees for 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 strictly necessary.

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.

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?

Even when it’s not strictly required, it’s best practice to document all business expenditures by collecting and retaining receipts. When it comes to employee reimbursement receipts, it’s even more important for a couple reasons:

Reduces 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.

Serves 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.

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:

Lost or missing receipts

Lost receipts are one of the most common challenges related to employee expense reimbursements. Consider all the opportunities for receipts to be misplaced. The employee who incurred the expense may lose or accidentally throw away the receipt before submitting their expense report. Maybe they forgot to ask for a receipt with their purchase to begin with.

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 otherwise illegible. Traditional paper receipts are printed on a special type of thermal paper that is sensitive to heat. This makes fading a common issue, especially if the employee kept their receipt in a warm place like their wallet or vehicle during travel.

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

Unmatched receipts

If you collect and store physical receipts without a plan for how to organize them, you could run into several challenges. 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 with the corresponding purchase, the business purpose of that expense, and the tax write-off you claimed.

Storing all 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 get 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 or other damage, and makes 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 the original receipt in case you’re asked to produce it for inspection.

Enable real-time receipt upload

While employees can lose receipts anywhere, it’s 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 en masse when the business trip is done.

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 management software that includes a mobile app with receipt scanning capabilities—reduces this risk.

Retain receipts for at least 7 years

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.

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:

• 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

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.