Expense reimbursement: how the process runs, step by step

An expense claim moves from a published policy to an employee's claim, then a manager's approval, a finance check, payment and the settling of any advance or personal balance. Each hand-off should have a named owner. Most delays and errors sit where that ownership is vague.

The steps in order

1. Set the policy and the approval limits. The financial controller drafts the policy with input from HR and the tax team. It covers what counts as a business expense, which receipts are required and how travel, meals and entertainment are treated. Approval limits follow the delegation of authority signed off by the finance director or the board. The finance team then publishes the policy in the expense system and HR covers it during onboarding.

1. Request an advance, where one is needed. Some staff need cash before a trip, often for travel to places where cards are not accepted. The employee raises the request and the line manager approves it. Accounts payable releases the funds and opens a balance against that person, which stays open until it is cleared in a later step.

1. Spend and keep the evidence. The employee pays on a personal card, a corporate card or with the advance. Itemised receipts matter here. A card slip alone rarely satisfies the tax authority, so a proper tax invoice should be kept wherever reclaiming sales tax is possible.

1. Submit the claim. In the expense tool, the employee enters each line, chooses a category and adds the cost centre or project code. Receipt images go on every line. Entertainment claims need the business purpose and the names of attendees, because both reviewers and tax rules depend on them.

1. Approve the claim. The line manager checks that the spending was genuinely for business and was reasonable. Claims above that manager's limit route upward automatically. Nobody should approve their own claim or one from a person who approves theirs.

1. Audit against policy. An expense or accounts payable specialist compares receipts to the lines entered, checks categories and looks for duplicates. Some teams review every claim; others sample by risk. Anything that fails goes back to the employee with a reason, and the approval resets.

1. Capture the tax data. The tax accountant, or AP working to rules the tax team sets, splits out recoverable sales tax and records it for the return. Items that are taxable benefits, such as certain meals or personal use of a car, are flagged to payroll so they reach the employee's tax record.

1. Pay the employee. Approved and audited claims join the next payment run prepared by accounts payable. Treasury releases the bank file. In some organisations reimbursement flows through payroll instead, which keeps the tax treatment in one place but ties payment to the payroll calendar.

1. Settle advances and personal accounts. AP nets any open advance against the claims submitted for that trip. If the advance was larger than what was spent, the employee repays the difference. Personal charges made on a corporate card are recovered the same way. Deducting from salary is a last resort and needs the employee's written consent in most places.

1. Post and reconcile. A general ledger accountant posts the expense to the right accounts and accrues for claims submitted but not yet paid at period end. The employee clearing account and the corporate card control account are reconciled, and old balances are chased.

Where practice drifts from the written process

Approval is the usual weak point. Managers approve on a phone without opening receipts, trusting the audit step to catch problems. Auditors, for their part, assume the manager looked.

Advances are the other one. Balances sit open long after a trip because nobody owns the follow-up, and they surface only when someone leaves the organisation.

Tax capture also slips. If the claimant picks the wrong category, the sales tax split and the benefit flag are wrong too, and no one downstream checks.

Questions to ask the people who run it

• When a claim arrives without a receipt, what actually happens to it?
• Do managers open the attachments before approving, or rely on the finance check?
• Which claims get a full audit, and who decided that rule?
• How are claims handled when the usual approver is away?
• Who chases an unsettled advance, and what triggers the chase?
• How do personal charges on corporate cards get identified and recovered?
• Which categories do employees most often choose wrongly, and does anyone correct the tax treatment afterwards?
• Is there any spending paid outside the expense system, through petty cash or supplier invoices, that ought to come through it?
• What do employees complain about most, and what workaround have they invented for it?
• At period end, how is the accrual for unpaid claims worked out, and who signs off the clearing account?
• When the policy changes, how do staff and approvers find out, and is the old version still being applied anywhere?

APQC's Process Classification Framework® (PCF) is an open standard developed by APQC, a nonprofit that promotes benchmarking and best practices worldwide. To download the full PCF or to view definitions and measures, please visit www.apqc.org/pcf.