Travel and Expense
Expense reimbursement: We answer your most frequently asked questions
- What is an expense reimbursement?
- What expenses are reimbursable?
- Do I need receipts to reimburse an employee?
- How do I pay expense reimbursements?
- How long do I have to reimburse employees?
- Do expense reimbursements count as income?
- Are there alternatives to expense reimbursements?
- Are SAP Concur expense reporting and reimbursement services affordable and efficient for small businesses?
What is an expense reimbursement?
An expense reimbursement is the payment made from your business to an employee for business-related expenses they have incurred personally. The reimbursement amount should exactly match the amount of the expense.
What expenses are reimbursable?
Two parties have control over which expenses are reimbursable. The first is the Canada Revenue Agency (CRA). All expenses incurred by your employees fall under the same CRA guidelines as your other business expenses like rent and wages. Simply put, to be valid, expenses must be reasonable and incurred for the purpose of earning income.
Of course, the second party in control of what is and is not reimbursable is the business owner or company finance leader! Can employees book business class flights? Can they expense unlimited alcoholic beverages when entertaining clients? The easiest way to ensure employees are clear on what they can and can’t expense (before the money is spent) is to have a clear expense policy in place.
If you don’t currently have an expense policy, SAP Concur has developed an expense policy template you can customize to your needs for free.
Do I need receipts to reimburse an employee?
Yes! Never reimburse expenses without a receipt. Not only is it important as a business owner to confirm that every expense is valid, receipts are non-negotiable if you are audited by the Canada Revenue Agency (CRA).
To qualify for reimbursement, your employee should create an expense report documenting the details of each business expense incurred. Itemized receipts should be provided for every expense claimed. (For mileage, employees should keep mileage logs or use a distance tracking app.)
Saving receipts is a huge pain point for employees and business owners alike, which is one reason many businesses are turning to paperless expense reporting.
How do I pay expense reimbursements?
You can integrate reimbursements directly into your payroll system or reimburse employees separately for expenses via cheque or direct deposit. While convenient for the employer, keep in mind that expense reimbursements via payroll may mean employees have to wait longer to receive their money back.
How long do I have to reimburse employees?
No matter what the amount, the reimbursement of an employee’s personal funds should occur promptly. A best practice rule is to ensure employees get reimbursed for business expenses before their credit card bills have a chance to arrive.
Do expense reimbursements count as income?
No. For the employee, expense reimbursements are not considered income since the reimbursed funds are simply replacing personal funds expended. Therefore, expense reimbursements do not need to be reported by the employee to the CRA (the original personal income has already been taxed). Even if the funds are reimbursed through payroll, the expense reimbursement amount should appear as a separate item that is not subject to any taxes.
For the business, an expense reimbursement is considered an expenditure and will likely reduce the amount of tax you’ll pay.
Are there alternatives to expense reimbursements?
Yes and no. In most cases, expense reports and reimbursements cannot be entirely avoided. Some of the common alternatives/complements to traditional reimbursements include:
- Per diems
- Corporate cards
- Purchasing cards (P-cards)
Are SAP Concur expense reporting and reimbursement services affordable and efficient for small businesses?
If managing expense reports and reimbursement sounds time-consuming to you, you’re not alone. We work with small businesses from coast to coast every day to eliminate the hassles, risks and costs of paper-based expense processes. Our services are not only affordable for businesses of all sizes, but designed to cost less than manual expense reporting. Watch this 2-minute video to see exactly how Concur Expense works. If you like what you see, jump into our FREE self-guided Concur Expense demo.