Smart Strategies for Handling Reimbursable Expenses

Reimbursable expenses (expenses for which you expect to be paid back by someone else) are a double-edged sword.

In theory, expenses that are reimbursable should cost you nothing–a check deposited into the bank equal to whatever burden you took on in the first place. In practice, these expenses can get tricky, cumbersome and downright frustrating to deal with.

There are a handful of potential problems with reimbursable expenses:

1. You are responsible for the time (and expense) of putting together paperwork, following up, and ultimately depositing your reimbursement check.
2. When seeking reimbursements from friends or family, constantly bugging them about payment can strain your relationship.
3. You need a system to stop reimbursable expenses from falling through the cracks. Most people have a short memory and will magically forget they owe you money.
4. You have to front the money from your own spending account or line of credit until you’re paid back.
5. Getting paid can sometimes take weeks, months, or even longer. You don’t have access to the money you spent until you’re paid back.
6. It’s possible that disputes about whether your expenses are valid will come up. The burden of proof will often fall to you. No receipt or justification for an expense often means you’re left picking up the tab.
7. Similarly, disputes about the reimbursement amount could come up. For example, you thought your company allowed $60 per day for meals, but their policy is only to reimburse $30.

I’ve dealt with most of the above issues to some degree with my work, my friends, and as a coach. It helps to have a strategy and system in place for dealing with reimbursements so that  you’re not stuck paying for things you shouldn’t be.

What are some things you can do?

#1: Track Expenses

Unless they are exceptionally honest, most people won’t chase you down to give you back your money. The responsibility for tracking, properly documenting, and following up on money owed to you is yours alone.

It shouldn’t matter much if you use a program like Quicken, or if you do it in a simple spreadsheet or on paper. If you already use a system to track your finances, it helps to build reimbursable tracking into that same system, so you don’t have two things to worry about. In all cases, you’re looking for the same information:

• When you spent the money
• Where you spent the money
• Why you spent the money
• How much you spent
• Who is supposed to pay you back
• Some way of proving the expense (a receipt, in most cases)
• A way to track payments

If you use software to track your expenses, the when/where/how much is evident. The reason for spending could be placed in the “Notes” or “Memo” field, and most software also has a tagging feature (useful for tracking who owes what).

Tracking can seem tricky at first glance, but there are a handful of ways to go about it, including tags, flags, clearing paid expenses, etc. One of my favorite strategies is to simply have two spending sub-categories: Unpaid Reimbursable Expenses, and Paid Reimbursable Expenses. One report can give me a rundown of each category, and marking things paid is as easy as moving things from one category to the other.

If you use spreadsheets or paper, tracking is as easy as setting up a column for each variable. As new expenses and reimbursements come in, it should be easy to add and match transactions and keep a running tab on outstanding payments.

#2: Track Receipts

As important as it is to track every reimbursable expense, getting paid back is usually pointless unless you have the means of proving you spent the money. In most cases, it’s enough to provide a receipt that documents the transaction and can be tracked back to your own checking account or credit card.

Programs like Quicken will allow you to attach a receipt directly to a transaction for easy safekeeping. Call me old-fashioned, but I still keep these in a separate folder on my computer as PDFs.

Regardless of the volume of transactions and receipts, it’s useful to keep a certain place for pending receipts somewhere on your desk or computer. Once they’re put into your system and scanned into PDF, you can file them in a permanent location on your hard drive. If you’re old school or your regulations require paper copies of records, you’ll need a place in your file cabinet as well.

Reimbursing mileage is trickier, and usually requires a start and stop mileage record which most people forget to write down. If you have a smart phone, taking a quick photo of your dashboard at the start and end of your trip provides a useful record. Be sure to ask for reimbursement of “official” driving only–if you do any personal driving at your destination, make a note of start/stop miles for the business-related portions only.

#3: Handle Family Effectively

Getting paid when dealing with a friend or family member can be a hassle, to say the least. There are a handful of strategies I use personally or would suggest if you buy something for another person that you should clearly get reimbursed for:

• Scan the receipt and send it to them in an email and/or text message ASAP. You can use language like “Here’s the receipt for the blank you had me buy for you–for your records.” This sends a subtle message that you expect to get paid back and also provides a record of the purchase.
• Follow up in a few weeks if you don’t get paid back. You can suggest that you want to “get this purchase off your books,” which is true since too many of these expenses will clog up your system.
• If too many follow-ups are fruitless, you could request the other person’s tax ID number so that you can report the transaction as a “gift” on your tax return. This is sure to get people freaked out and think twice about repaying you. Whether or not you could actually do that on your return is another matter.

#4: Fronting the Money

At times, the hardest part of reimbursables is not getting paid, but the lag between the expense and getting the money back. For many families who already live paycheck-to-paycheck, coming up with more funds that benefit their charity, team, or business can be very tough.

Whenever possible, I recommend using a credit card for all (or at least the big) reimbursable expenses. This allows you to “float” the expense for a month or longer without any interest expense, and that’s typically plenty of time to get your money back.

If getting paid on time or consistently is a problem and even a credit card doesn’t seem to help, you’ll need to get creative. Approach your superiors and ask for allowances to be paid up front before travel takes place. You can also use your boss’ credit card to make big purchases directly rather than acting as the middle man.

If nothing works, set clear expectations up front and refuse to spend the money if the terms of repayment are not clear. If your employer or organization is unwilling to share those terms, take a good, hard look at what you’re involved with.

Your Thoughts

Do you have experience with reimbursable expenses? What are some of your best tips for dealing with these sometimes-challenging parts of the business world?

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