Try as we might to keep purchasing centralized and with vetted vendors, practicality dictates that employees must often make their own purchases outside of dedicated procurement procedures.
And while some managers might have access to company spending cards, its more often the case that employees must submit an expense report for reimbursement.
A key component that must be submitted as part of this process is the expense receipt, a document that serves as proof of purchase.
This article will explore the world of expense receipts so you can better understand how to use them when processing employee expense reimbursement.
We’ll discuss what counts as a valid expense receipt, why they are important for maintaining accurate records, and how modern financial management tools can streamline the process.
What is an expense receipt?
An expense receipt is a formal document that serves as proof of purchase for a business expense.
If an employee has to make a purchase using their money — for example, purchasing coffee for a team meeting — they have to submit an expense receipt for the finance team to reimburse them.
What can you use as a valid expense receipt?
This depends a little bit on your organization’s policies.
Broadly speaking, though, a valid expense receipt can be a sales receipt (physical or digital) or an invoice that clearly displays:
- The sellers name
- The date of the transaction
- The amount paid
- A description of the goods or services provided
Why expense receipts matter
Expense receipts are critical for maintaining financial compliance.
Businesses must report their spending to the relevant tax body, and they must be able to back up the expenses they list in their financial statements with valid receipts.
If its the employee who has made the purchase, then it's up to them to provide that receipt.
When they do that, it allows the business to demonstrate the legitimacy of expenses to regulatory bodies and stakeholders.
The expense receipt also serves to validate that a purchase actually took place — that is, to prevent fraud.
Without an expense receipt, any employee could submit an expense reimbursement request without any proof that the purchase even took place.
When it comes to explaining to employees why expense receipts matter, however, it's a better idea to rely more on the compliance need so as not to make anyone feel surveilled or as if there is a lack of employer-employee trust.
Proofs of payment for different types of expenditure
Considering how broad the definition of a “valid proof of purchase” can be, it’s worth providing more concrete examples with your team so they can understand what an expense receipt looks like in their given context.
Here, we explore different proofs of payments depending on the type of expenditure in question.
Meal expenses
Meal expenses are a classic form of claimable employee expenses.
Thankfully, they’re also super easy to prove payment for, as the restaurant or cafe in question will be able to provide a proper tax receipt.
As long as the receipt has the right information present — like the date, time, and amount of the purchase — it should count as valid proof of purchase.
Transport costs
Similarly, receipts or invoices from taxis, rental car agreements, public transportation, or ride share services all serve as valid proof of purchase.
Apps like Uber and Lyft can also provide digital receipts and you can even set up a business account with these providers for even easier payment processing, perhaps attaching a business credit card to the account to prevent the need for an employee expense claim altogether.
Mileage tracking
When employees use their own vehicles for business purposes, things do get a little trickier.
Mileage logs are a suitable solution for most causes, though you may wish to collect odometer readings or even GPS tracking reports for heavy usage.
Accommodation expenses
When employees have to stay out of town for business purposes, such as to attend a conference or a client meeting in another city, they’ll need to submit an expense claim for their accommodation expenses.
The hotel or Airbnb where they stayed will be able to provide a legitimate invoice or receipt detailing any additional charges (like meals ordered on the room) as well as key data like the name of the hotel, the date of the stay, and the room rate.
Miscellaneous expenses
For any other miscellaneous expenses, such as the purchase of last-minute office supplies, coffee runs, or conference fees, the employee should provide a formal receipt or invoice and ideally be able to match that up against a purchase number in your procurement system.
Why do you need receipts for expense reports?
When submitting or processing expense reports, valid receipts are important for a wide range of reasons, including:
- Serving as proof of purchase. The receipt provides tangible evidence of a transaction (that the employee actually paid the bill).
- Financial compliance. A receipt creates a paper trail of business expenses so that a company can demonstrate if required, that the expenses claimed against its income are legitimate.
- Aiding reimbursement. Receipts are used to justify employee expenses and request reimbursement from the company. The person responsible for processing these requests can easily validate expenses by matching the request against submitted receipts.
- Fraud prevention. Requiring receipts as part of the reimbursement process helps protect against fraudulent claims and ensures employees adhere to relevant company policies regarding what they can and can’t purchase as a business expense.
- Budgeting and financial planning. Receipts help businesses track spending patterns and analyze costs, so they can make more accurate forecasts and more informed budgeting decisions.
Automating proofs of payment
Making sure your employees understand what constitutes a valid proof of payment is a great first step.
Making it easy for them to submit claims and get them approved and integrating this information with the rest of your financial systems is where your focus should be next.
Financial automation solutions like BILL can help you automate many aspects of the expense claim process, a win-win for both the finance team and your employees who are waiting for reimbursement.
Here are a few best practices for capturing, storing, and managing expense receipts that you may wish to consider to help streamline receipt management.
- Automate uploads. Use digital tools to scan physical receipts or directly upload a PDF document from their email. BILL Spend & Expense supports easy, automated receipt loads.
- Centralize storage. Use a centralized cloud-based system, BILL’s document management feature, to ensure easy access to documents as required.
- Implement automated matching. Use financial automation solutions to match receipts with corresponding transactions and purchase orders, something BILL can do automatically.
- Create approval workflows. Use workflow automation to speed up reimbursement workflows, minimizing the amount of time that employees are out of pocket.
- Integrate where possible. Use native integrations or create your own connections between software platforms using an API, ensuring data consistency across all systems.
- Maintain policy compliance. Use automated notifications to flag when reimbursement requests don’t comply with internal policies, such as if a valid proof of purchase is missing.
Want to learn more about how BILL can transform expense receipt management? Sign up for a demo today.
FAQ
How do you keep track of expense receipts?
Businesses implement a few different options for tracking expense receipts.
Whatever route you choose, the first step should always be to digitize any paper receipts by scanning them or simply capturing a clear photo.
From here, some small businesses and startups can get away with a manual storage system like Google Drive and a well-set-up spreadsheet or project management app.
For growing businesses and enterprises, a dedicated expense-tracking app is a smarter move.
These provide a centralized, searchable repository for all of your expense receipts, while also often coming with a wide range of helpful features like automated expense reporting and easier claim submissions.
What qualifies as an itemized receipt?
For a document to qualify as an itemized receipt, it must include the following information:
- A detailed description of the goods or services purchased with separate line items for each good or service
- The quantities of each good or service purchases
- Unit prices for goods or services purchased
- The total price per item
- Any tax applicable
- Any discounts applied
- Vendor information
- How the payment was made
Do you need receipts for reimbursement?
This is really a personal choice made by business leaders, but most businesses require some form of receipt as proof of purchase, and it is generally accepted as a standard and wise practice.
What is a valid proof of purchase?
Depending on your company’s specific policies, there are a number of differnet documents that can be considered a valid proof of purchase.
These are:
- Receipt
- Invoice
- Order confirmation
- Credit card or bank statement
- Warranty or guarantee certificate
- Packing slip or delivery note
- Purchase contract or agreement
For most businesses, however, the first two options — a receipt or an invoice — are the only proofs of purchase that will be accepted.
