What Is an Expense Claim? A Complete Guide

Navigating expense claims can be a headache for both employees and finance teams. This guide dives into everything you need to know: what qualifies, how to manage claims efficiently, and how to overcome common challenges. Get ready to streamline your expense process and free up valuable time! 

What Is An Expense Claim?‍

An expense claim is a formal request submitted by an employee to be reimbursed for business-related costs they incurred using their own money. These costs could be for travel, meals, office supplies, or other work-related expenses. 

This system is especially helpful in workplaces where employees don't directly use company funds.  Instead, they pay for work-related expenses themselves (with a personal credit card or cash) and then submit a request to be reimbursed for those valid costs. 

What Is Expense Claim Management?

Expense claim management is the process of submitting, reviewing, and approving expense reports. It ensures proper documentation, adherence to company policies, and timely reimbursement for business expenses. 

When Does An Expense Qualify To Be Claimed?

An expense qualifies for reimbursement if it meets the following criteria:

• Ordinary: It’s common and customary for your industry or role. 
• Necessary: It’s essential for performing your job duties.
• Reasonable: The cost is considered fair and reasonable to similar expenses. 

For more information, go through our guide on Business Expenses: Your Complete Guide to Tax Deductions, Tips, and More

Can Personal Purchases Be Claimed As Business Expenses? 

Generally, no. Company policies typically have clear guidelines on what constitutes a valid business expense. Mixing personal expenses with business claims can lead to delays or rejections.  

Do I Need To Keep Receipts For Requesting Expense Claims?

Yes, receipts are crucial proof of purchase. Most companies require them for all expense claims, especially for larger amounts. Electronic receipts are often accepted as well. 

Generally, you should hold onto your receipts for at least three years. 

What Can I Claim As a Business Expense?

• Travel: Flights, hotels, meals during business trips, car rentals, taxis, and public transportation used for work. 
• Meals: Business lunches or dinners with clients or colleagues. 
• Office supplies: Printer cartridges, notebooks, pens, or other items essential for your job.
• Professional development: Registration fees and travel costs for conferences or workshops relevant to your work. 

For a detailed list of business expenses you can claim tax deductions on, go through our Business Expense Categories Cheat Sheet: Top 35 Tax-Deductible Categories.

Examples Of Expenses That You Cannot Claim

• Personal meals: Your daily lunch or groceries.
• Entertainment: Movie tickets, sporting event tickets, or unrelated social outings. 
• Gift certificates: Unless for a specific business purpose with prior approval. 
• Fines or penalties: Personal fines incurred due to violations. 

What Does The Expense Claim Process Look Like?

The expense claim process comes into play when employees incur business expenses without using company funds upfront. This could be because they don’t have a company credit card, haven’t been issued a per diem for travel meals, or haven’t received an expense advance for an upcoming trip. 

Here’s a breakdown of the typical steps in an expense claim process:

1. Employee fronts the cost: The employee makes a legitimate business purchase using their own money (cash or personal credit card)
2. Saving receipts and documentation: It’s crucial for the employee to save the receipt and note the reason for spending. This step helps with accurate reporting later. 
3. Completing the expense claim form: Typically, at the end of the month (or after the trip), the employee fills out an expense claim form. This form should capture details like the date, time, location, business purpose of the expense, and the corresponding receipt of the invoice. 
4. Manager review and approval: The employee submits the completed claim form to their manager for review and approval. The manager verifies the information and ensures the expense aligns with company policy before approving it. 
5. Finance team’s review and reimbursement: Once the manager approves, the claim gets forwarded to the finance team. They review the claim for completeness, ensuring all necessary information and approvals are in place. If everything is in order, they initiate the reimbursement process.
6. Reimbursement received: According to company policy, the employee is typically reimbursed during the next payroll cycle or within a designated timeframe. 

Challenges In The Expense Claim Process

The expense claim process is riddled with inefficiencies that frustrate both employees and the finance team. Here’s a closer look at some of the most common challenges faced:

Manual Data Entry

Traditionally, expense reports involve manually entering information from receipts into a form or spreadsheet. This can be a tedious and time-consuming process for employees, especially those with frequent expenses. Inevitably, errors can creep in during data entry, leading to delays or rejections while corrections are made. 

Missing or Lost Receipts

Physical receipts are easily misplaced or damaged, which can significantly delay or even prevent reimbursement. Without proper documentation, the finance team cannot verify the legitimacy of the expense claim. This creates frustration for the employee who has to track down the receipt or potentially eat the cost. 

Policy Confusion

Unclear or complex expense policies leave employees unsure about what qualifies as a reimbursable expense. Ambiguous guidelines can lead to employees submitting claims that are ultimately denied, causing wasted time and disappointment. Additionally, it can create inconsistencies in how expenses are treated across different departments. 

Time-Consuming

The entire expense claim process, from collecting receipts to submitting reports and waiting for approval, can be very time-consuming for employees and the finance team. Employees have to dedicate valuable work time for filling out forms and tracking down receipts. Finance teams are bogged down with manually reviewing and processing claims, taking their focus away from more strategic tasks. 

See how Fyle’s Conversational AI makes receipt collection 10x faster.

No Visibility Into Company Spend

Traditional expense claim methods lack real-time visibility into company spending. Finance teams often have to wait until reports are submitted and processed to understand spending patterns. This lack of immediate insight makes it difficult to identify areas for cost savings or make informed budgeting decisions. 

How Can An Expense Reimbursement Software Help?

New expense reimbursement tools have emerged in response to the above-mentioned issues. They can automate the entire process from receipt collection to reimbursements so you can spend time doing what matters most–growing your business. 

Here’s everything an expense reimbursement software like Fyle can do:

• Submit expense claims digitally: Say goodbye to paper-based processes and manual data entry. 
• Automate receipt capture: With Fyle’s conversational AI, employees can submit receipts via text messages and other daily apps like Slack, Teams, Gmail, Outlook, etc. 
• Create and enforce complex policies: Fyle's powerful policy engine lets you tailor expense rules to your needs. Set up custom approvals, receipt requirements, spending limits, and more–all configurable by project, department, employee, category, or even merchant. Approvers can then give the green light from anywhere using the mobile app, email, Slack, or Teams.
• Reimburse via ACH: Fyle lets you reimburse employees quickly via ACH (US only), sending funds straight to their accounts. Simplify reimbursements by paying multiple employees at once with just a click.