Reimbursable expense

A cost is reimbursable when someone paid it and another party has agreed to repay it. In a business, the term has two everyday meanings: an employee's out-of-pocket business expense that the employer pays back, and a cost a business incurs for a client that the contract lets it bill back to that client.

Employee reimbursable expenses

An employee who pays for a client lunch, a train ticket or a box of supplies with their own card is owed the money back once the expense is approved. What is reimbursable is set by the company's expense policy: which categories, what limits and what proof is required. Mileage on a personal car is reimbursed at a rate per kilometre or mile rather than at cost.

The tax rules behind them

In the US, reimbursements paid under an accountable plan aren't wages. The plan has to meet three rules: the expense has a business connection, the employee accounts for it within a reasonable period, and any excess is returned. The IRS treats accounting within 60 days and returning excess within 120 days as reasonable. In Canada, the CRA distinguishes a reimbursement, which repays actual expenses the employee supports with records, from an allowance, a set amount paid without receipts. Reimbursing a real business expense against receipts is generally not a taxable benefit; reimbursing a personal expense is.

Client reimbursable expenses

Consultants, contractors and agencies often bill clients for travel, materials or filing fees on top of their fees. The contract decides whether those costs are billed at cost or with a markup, and whether the client wants the receipts attached. Billable is the more common word for this, and reimbursable is used when the cost is passed through at cost.

Non-reimbursable

Personal costs, items outside the policy, purchases with no receipt and anything the contract excludes are non-reimbursable. Common examples are in-flight upgrades, alcohol beyond a set limit, fines and the employee's own commute.

Keeping it simple

Reimbursable expenses go wrong when the receipt and the claim travel separately. Expense reports in Smartbills attach the receipt to each line and show when the reimbursement is planned, and rebilling keeps the supplier's receipt with each cost billed on to a client.