No matter what industry your business may belong to, there will be a time when you will need the use of an expense reimbursement invoice. This invoice is made specifically for expense reimbursements and will prove useful to getting your refund on time. In this article, we will explore this type of invoice and discuss its importance to your business operations.
What is an Expense Reimbursement Invoice?
An expense reimbursement invoice provides companies and their employees with a means of recovering business-related expenses paid directly out of the budget. Examples of situations that will require an expense reimbursement invoice include an employee paying for a tool that’s strictly for business use only, a business that requested for its client to cover the cost of an item or service that wasn’t in the discussion during negotiation, and the like.
What is an Expense Reimbursement?
Furthermore, reimbursement expenses are transactions made by an employee or business strictly for the benefit of the client or business itself. A reimbursement invoice breaks down the expenses paid for, along with the total cost of each item, and any receipt numbers and other identifying fields that were used to prove the payment of the expense.
In terms of taxes, employees are not liable to pay for the expense reimbursements. For employee reimbursements to be non-taxable (non-income), the company needs to have an accounting system in place. This plan will outline how refunds will be distributed among employees of the company.
In addition, the IRS 535 states that personal expenses are non-taxable; therefore, any amount spent for personal reasons will not be tax-deductible. However, employees need to acknowledge their responsibility for ensuring taxed reimbursements. They will need to follow the rules outlined in the company’s accounting system. At the same time, they also need to invoice their employers immediately after paying for an expense.
Expense Reimbursement – The Employer’s Perspective
If you put yourself in your employee’s shoes, the first question that comes to mind would be, ‘can employers refuse to reimburse employee expenses?’ Except for California, which has laws requiring expense reimbursement, an employer can refuse to pay an expense paid by an employee for business purposes. However, there are some exceptions to this rule:
- An employee has a base salary close to minimum wage and is required to pay for a business-related expense that will bring their wage below the minimum rate, they are entitled to request and receive reimbursement.
- If the employer guarantees the employee about receiving compensation for any work-related expense, the law requires them to fulfill their promise.
- If the non-reimbursement is an act of discrimination (other employees are receiving expense reimbursement or the employee isn’t receiving a refund because of gender, race, age, religion, or disability).
Providing Reimbursement to Customers
Customer reimbursement may be necessary for many reasons, such as the following:
- A customer has changed their mind after purchasing your product.
- The customer received the wrong product.
- The customer meant to order a different product.
- A customer received more than one product that they ordered.
A reimbursement is necessary when you have purchased something on behalf of someone else or the other way around. When it comes to business, reimbursement is something that you would do for your employees. If they have paid for business-related expenses with their own money, the company is required by law to compensate for the money they spent.
Once they submit their receipts along with an expense reimbursement invoice to the relevant person or department, they can claim the money back from you. To control reimbursements, it’s common for companies to give their employees certain allowances per day to spend on specified expenses (e.g., breakfast, lunch, and dinner).
Expense Reimbursement Invoice Template
An expense reimbursement invoice is an accounting document used when employees use their own money to pay or company-related expenses. A business trip is a great scenario when this type of invoice will be necessary. During a business trip, the company will ask the employee to keep the receipts of all the payments they made (e.g., transportation, accommodation, food). The employee can then charge the company afterward. By creating an expense reimbursement invoice, employees can add up all of the expenses returned to them on the next payroll.
How to Create an Expense Reimbursement Invoice?
There are a ton of options for creating an expense reimbursement invoice. The first is by downloading a template on online invoicing websites like Invoicely or QuickBooks. Employees can then fill out the blank fields with information such as the following:
- The employee’s name, address, and contact information.
- Their company’s name, address, and contact information.
- An invoice number (if necessary).
- A detailed list of the expenses that they paid with their own money on behalf of the company.
- The total amount.
After filling out the expense reimbursement invoice template with the details above, they can save their work, print it out, or email it to the relevant person or department responsible for the reimbursement.
Creating an Expense Reimbursement Invoice on ReliaBills
ReliaBills is different from other invoicing systems. For one, you don’t get to download a template and edit it on MS word or PDF. Instead, you can create your invoice on the platform itself. All you are to follow the instructions below:
- Create a FREE ReliaBills account.
- Head towards the invoice editor.
- Create your invoice (you can copy the format and details provided on-site or on other sources online).
- Fill out your expense reimbursement invoice with the necessary details and information.
- Save your work.
After creating your invoice, you can send it via email to the relevant person or department. ReliaBills will then notify you once your email is received and payment has been made. It’s that easy and convenient.
Expense reimbursement is necessary for any business. There will always be times when your employees will need to pay for a certain expense on the company’s behalf. What’s important is to educate them on how to create a proper invoice. This type of invoice will help towards improving your company in terms of finances and documentation. At the same time, it will also give your employees the confidence to know that they will be compensated for whatever company-related expense they will pay.