Reimbursable expenses are expenses that employees incur purchasing goods and services for your company, which get reimbursed to them. In some instances, you can also charge clients for your expenses. In both scenarios, expenses must generally meet specific criteria. This guide compares reimbursable and non-reimbursable expenses.
What are reimbursable expenses?
Reimbursable expenses are costs that employees pay for their business while performing their jobs. They initially cover the expense and can later claim back the cost — this is the most common form of reimbursable expense.
However, the same rule applies if your business incurs expenses for a customer when carrying out work for them. These reimbursable expenses are typically invoiced to the customer once the project is complete, but you should let them know beforehand what expenses you expect to incur, and get their approval.
Reimbursable expense categories
Reimbursable expenses fall into a handful of common categories, including:
Travel costs and mileage
Travel costs and mileage are among the most common types of reimbursable expenses. A classic example is an employee travelling out of town to attend a conference or visit a supplier. In this instance, the business would cover airfares, trips to the airport and back, or mileage and parking depending on the employee's mode of transport.
Travel costs also generally include accommodation, meals and other miscellaneous costs like laundry expenses or mobile roaming fees for the days the employee is away, primarily for business purposes.
Meal and entertainment costs
Meal and entertainment costs cover food and drinks paid for by an employee while conducting business with a client. Examples include a sales meeting over coffee, hosting a networking event or Christmas function, or running a strategic planning day with a client for an upcoming project.
Office supplies and tools
Office supplies and tools include items an employee needs to perform daily tasks in the office or while working from home. While most organisations will likely purchase these supplies in bulk — like computer hardware, mobile phones, software subscriptions, desks, printer cartridges and other stationery items — there may be instances when an employee needs to cover the upfront cost and get reimbursed.
Training and education
Training and education expenses cover any costs associated with upskilling or retraining your workforce. These include attending workshops or conferences or completing a professional development course.
Differences between a reimbursable and non-reimbursable expense
The main difference between reimbursable and non-reimbursable expenses is that reimbursable expenses refer to any purchase of services or goods that are business-related and paid for with an employee's money, for which they can submit an expense claim later.
Non-reimbursable expenses are generally costs paid for with company money — for example, using a business credit card or expenses that aren't directly related or necessary to perform a business task.
Here's an example of a reimbursable expense:
An employee uses a company car to travel to a conference in another city. The car gets a flat tyre, which needs replacing. The employee pays for a new tyre using their own money and applies for reimbursement.
Here's an example of a non-reimbursable expense:
An employee travels overseas to speak at an industry seminar. The company has arranged a rental car, and the employee asks for a car upgrade on arrival. The upgrade is a non-reimbursable expense if it’s not necessary for them to do their job.
Your company's expense policy should clearly outline what expenses are reimbursable and non-reimbursable, and what proof of purchase is required to submit a claim. You may require employees to submit expense claims within a specified time period or limit the amount of money an employee can spend on behalf of your company within a certain time frame.
Examples of reimbursable expenses
These are all examples of reimbursable expenses:
Business travel airfares
Business travel airfares include flights, associated booking fees and other airline costs.
Meals during client meetings
Meals during client meetings are reimbursable, such as coffee with an existing client or taking a potential new client out for lunch. Alcohol isn't always reimbursable – most organisations only allow alcohol consumption with meals and often with limits, for example, two drinks with a meal.
Meals when travelling for work
When travelling for work, meals include breakfast, lunch, dinner and special meals for specific health conditions (dietary preferences may or may not be reimbursable). This example also covers the cost of meals when hosting clients or prospects on a business trip.
Company car maintenance costs
Company car maintenance costs are usually covered by the company on a fleet-maintenance schedule. However, if an employee has sole use of a company car, there may be instances when they need to pay out of pocket to repair or maintain the car, which are considered reimbursable expenses.
Public transport
Public transport is usually only reimbursable when travel is required outside of an employee's regular working hours or location. This might be a temporary change in the workplace, travelling to an off-site meeting, or carrying work-related tools and equipment, for example, transporting photography equipment to a studio for a photoshoot.
Examples of non-reimbursable expenses
These are all examples of non-reimbursable expenses:
Fines for parking or speeding
Fines for parking or speeding are non-reimbursable, even if incurred during a business activity because they're negligence-related expenses.
Rental car and accommodation upgrades
Rental car and accommodation upgrades are generally considered non-reimbursable because they're considered an unnecessary additional expense. However, if there's a last-minute change to business travel plans, and the employee requires extra seats or boot space in a rental vehicle, for example, then an upgrade may become reimbursable.
Personal entertainment and dining
Personal entertainment and dining unrelated to business operations is non-reimbursable.
Valet services
Most organisations class valet services as non-reimbursable because the cost is unrelated (and unnecessary) to a business project or task. However, this is one of those expenses that your business may choose to make a reimbursable expense as part of a specific employee's contract. For example, you run a taxi service, and your drivers use their private vehicles for work.
How to record and track reimbursable expenses
As a business, you can record and track your expenses by keeping receipts — or taking photos of them — and using Excel to track which ones may be reimbursable and which ones may be claimed for tax. However, you may find that it becomes harder to maintain accurate records as you get busier.
This is where accounting software comes in. With MYOB, you can use the Capture App to take photos of your receipts. The software then automatically files the information from the receipt in your software, so no data entry is required.
With expense management software, every bill and expense is matched to a bank transaction. Further, you can assign your reimbursable expenses to a specific job or customer and on-charge the cost at the click of a button.
Reimbursable expense FAQs
What is the difference between reimbursement and disbursement?
The difference between reimbursement and disbursement is that reimbursement is the refund of an employee or another party’s out-of-pocket expenses after they've purchased on behalf of your business. A disbursement refers to allocating payments from a fund or account for specific business purposes, such as paying salaries, rent and utilities.
How is a billable expense different from a reimbursable expense?
A billable expense is different from a reimbursable expense because of who reimburses whom for the cost. Billable expenses are incurred while providing goods or services to a client or customer and are added to the final invoice for payment. Employees can't be reimbursed for billable expenses, but they can receive payment from their employer for reimbursable expenses.
Keep track of and manage reimbursable expenses
Even with an airtight expense policy, reimbursable expenses can quickly become an administrative burden and cause frustration for employees if reimbursement takes too long. MYOB's expense management software makes it easy for your business and employees to track, manage and pay reimbursements — without getting overwhelmed by paper receipts. Get started today.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.