Expense Claims: Definition, Examples & How to Manage It?

Expense claims

Businesses use expense claims to handle travel expenses and other costs incurred by the employees on behalf of the company. Want to know more about expense claims and how they work? Are you looking for ways to handle expense claims effectively? Read the blog to know the answers. 

What is an expense claim?

To claim back the costs incurred by them for your company, employees file expense claims. These expenses could be travel-related or other expenses the employee incurred on behalf of your firm. 

This typically happens in organisations where employees do not have access to corporate credit cards. Instead, they spend from their pockets and file for reimbursement later. 

In most organisations, employees file an expense report – made of multiple expense claims – for reimbursements. In the traditional method, employees do not submit expense claims as and when it happens, making the entire process cumbersome and time-consuming. 

Also, Read: An Extensive Guide to Expense Reimbursement Claims

What are the different examples of expense claims?

Here are some examples of expense claims that employees submit: 

1. Travel expense 

This is one of the most common expense claims filed by the employee. When employees go out for business trips, in most cases, they end up spending from their own pockets during the trip.

Some of these expenses are transportation charges (to and from), cab charges, toll charges, hotels, etc. Since the employee spends money on these for your business, you must reimburse all expenses within the policy. 

2. Food and entertainment expenses 

The company must bear food-related expenses that employees incur while on a business trip. Moreover, entertainment expenses like taking a client out for food or entertainment, client gifts and others must also be reimbursed (only policy-compliant) since it is done for the best interest of your company. 

When it comes to food expenses, the policies set by the companies can vary. Some companies reimburse the actual amount spent on meals. On the other hand, some firms give an up-front per diem meal allowance. 

3. Office expenses

Any expense for tools and services that allows the employees to work effectively comes under this. This could include software subscriptions, office supplies, stationeries, laptops, electronic devices, and cellular plans. 

Suggested Read: Expense Accounting and Types of Expenses

How do traditional expense reports work? 

Here’s a step-by-step guide on how traditional expense reports work: 

Step 1 

This is the first step in the expense reporting and reimbursement cycle, where employees spend personal money for business expenses. It could be for travel, food, or other business-related expenses.

Step 2

The employee collects receipts, tickets, and bills during the trip as proof of expense. These proofs could be flight tickets, food bills, hotel receipts, etc. 

Step 3

After returning from the business trip, the employees file an expense report containing dates, time, the reason for spending, categories, total amount and other important details. Bills, receipts and tickets collected by the employee are submitted to their department heads or managers along with the expense reports for approval. 

Step 4

After verifying the report, the manager approves or rejects it. After which, this report is then forwarded to the finance team. 

Step 5

The finance team then meticulously reviews the entire expense report and the submitted expenses. The team will go through every single expense and check for compliance. 

The employees receive reimbursement if the reports comply with the firm’s expense policy. Whereas, if the reports do not comply with the policies, they are rejected, and the employees receive no reimbursement. 

Also, Read: What are Expense Categories?

Problems in the traditional expense claim process

The traditional expense claim process is often error-ridden. Here are some of the most common problems you can find in the manual expense claim process: 

1. Time-consuming

To manually go through every single expense claim and report filed by employees is an arduous task. If you are an enterprise with employees travelling regularly for business purposes, your finance team needs to spend their precious time reviewing all the reports. 

2. Prone to error 

Since your finance team must go through a humongous amount of paperwork, there are high chances of error creeping in. If the errors are huge, they can ultimately affect your company’s financial health.

3. Poor policy compliance 

Your organisation’s policy compliance rate will be affected if the finance team manually checks each report for compliance. There will be instances where non-policy-compliant expense reports will be reimbursed since the entire process is manual. 

4. Expense fraud 

Employees can use the loophole in the manual expense claims method to commit expense fraud. Some employees could submit duplicate bills and fraudulent reports and indulge in other unlawful activities to obtain money. 

5. No real-time spend visibility

From filing expense reports to reimbursement, the entire process is done manually. This means you do not have any real-time spend visibility. Without real-time spend visibility, you cannot check on your current budget, and you will not be able to forecast your future budget. 

If you are looking to eliminate all these issues with a single solution, we have one for you: Happay! Happay is India’s favourite travel and expense management system that helps hundreds of companies streamline their expenses. 

Also, Read: What Are Business Travel Expenses?

What are the benefits of automating expense management? 

Most enterprises have started automating their expense management using expense management systems to solve the problems mentioned above. Here are some of the significant features of the expense management system:

1. File paperless claims 

Employees can now submit digital expense reports with electronic bills and receipts as proof. Travellers no longer need to file a ton of paperwork for reimbursement. 

2. Instantly capture expenses

Expense management software like Happay comes with optical character recognition (OCR) technology that allows corporate travellers to take pictures of the bills using a mobile camera and capture expenses on the go. 

3. Higher policy compliance 

Most expense management systems will allow you to integrate your company’s travel and expense policy into the system. This will allow you to reimburse claims that are within your organisation’s policy. 

4. Greater spend visibility 

Using the high-level data from expense management, you can now easily find the categories where you are overspending and create strategies to control. What’s more, this data can also help you forecast future budgets accurately. 

Happay is your best bet if you are looking for the best expense management software to effectively manage your firm’s expense claims. Using Happay, you can now effectively manage all your expenses on one single platform. Want to know more about Happay? Schedule a demo with us today. 

Expense claims – FAQs