Expense claims – How do they work?

Need to brush up on your expense claims?

If your staff are looking to be reimbursed, make sure you have a procedure in place to ensure your staff get paid, and you get all the information you need to record the claim in your accounts and claim back any VAT on expenses. It will keep your staff happy and your records nice and tidy!

Plus, check out our FREE expense claim form. It’s simple and easy to use, and can work with any accounting system. It can even calculate mileage!

In this article we take you through the essentials of expense claims. We explain why you need them and give you a how to guide for using them.

If ever in doubt, you can call us any time.

What is an expense claim?

Essentially, an expense claim is a bill. It’s handed to an employer by an employee and shows all the expenses they incurred on behalf of the business. It’s usually done once a month and is often reimbursed through an employee’s payslip. The expense claim summarises all the expenditure which occurred and categorises it by the type of cost. Often an employee would pay for travel and accommodation costs on behalf of the business. These would be shown on the expense claim and categorised as travel expenses. If the business is VAT registered, the amount of VAT paid by the employee is also shown, so that the company can claim it back from HMRC.

When do you need one?

If you have staff which need to be reimbursed for business expenses, then an expense claim is the perfect solution. However, if you’re a director, remember you have a director’s loan account which can be used instead. You can put your bills directly onto your accounting system and mark them as paid from your director’s loan account. This is much easier that using an expense claim, and it’s easier on the company’s cash reserves. The director’s loan account still keeps track of the balance owing to you, ready for when you need to draw down on it.

How to pay it?

Payment can be made from the company bank account directly to the employee, usually at the end of every month. Typically, the manager or director would review the claim first and sign it to mark it once approved. It’s also a good idea to ensure the staff members have attached copies of all their receipts to back up the claim. The receipts will be needed as evidence if there is any VAT to be reclaimed from HMRC.

If your business has payroll set up, expense claim payments can be included with the net wages paid to the employees. You need to make sure you inform your payroll administrator what figure each employee needs reimbursing, and they will include it on the employee’s payslip.

Free expense claim template

Xoba has a free, easy to use expense claim template available for download. You can print this out so your employees can handwrite them, or give them access to the template in excel and they can fill in in on the computer and email it to you.

Click to download your FREE expense claim template!

How to use the claim form

  • Update the form with the name of your company and address.
  • The employee will enter their name, ID and period start and end date for the claim.
  • List all expenses for the period and attach receipts. If completing electronically, the receipts could be saved in the same folder as the claim. Give the receipts a reference number and include the reference on the breakdown of the expenses.
  • Each expense is assigned to a category which you can select from a list. If you need to edit this list, you can do so on the “Expenses categories” tab.
  • If the employee is claiming mileage, fill in the supplementary “Mileage expense calculator” form. You will need to include the details of the employee’s vehicle and calculate an advisory fuel rate if the business is claiming back VAT on the mileage.
  • The employee then signs both forms and hands it to their supervisor to approve by also signing.
  • Once complete, the claim is reimbursed, often through the employee’s payslip. Make sure the payroll administrator gets a copy!

How to record an expense claim on your accounting system

As mentioned earlier, an expense claim is essentially a bill. You can manually add a bill to your accounting system and attach a copy of the claim along with the receipts as evidence.

We have found this to be by far the easiest and most accurate way to record an expense claim.

However, there are dedicated apps, add-on’s and special features used on different accounting applications that you may wish to use instead.

    For example, Xero has an expense claim feature called “Xero expenses” which will allow staff to scan their receipts and submit their claims using their mobile. It comes through to the employer who can then check the claim and approve it.

    Currently, Xero expenses is an optional feature available upon upgrading the subscription. The price is £2.50 per month for each user, with the first 3 months free.

    If you would like assistance in setting this up for your company, please get in touch and we can help get you up and running in no time, with your staff trained and ready to use the app.

    Other addons:

    If you need help

    Setting up an expense claim procedure for your company can seem like a daunting task, but it really doesn’t need to be.

    If you would like to talk about the options available for your business, give us a call and we can help put a plan in place for you. We can design your claim forms, show your staff how to submit them, and show your accounts department how to process them.

    It’s easy to do and will help keep your employees happy.

    Get in touch to discuss your expense claims pocedure!

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