5 ways to simplify employee reimbursement in startups

In a startup environment, you know that attracting and maintaining top talent is key to your company's success. You want to make it easy for your employees to cover work-related expenses, and reimbursing them on time shows them you value their contributions while allowing them the flexibility to excel.

But, if you find yourself losing track of employee business expenses or falling behind on reimbursing employees, employee morale might begin to falter. Your employees might even start polishing their resumes and exploring other opportunities.

While you're juggling all the everyday tasks that come with being a founder, it's easy to get behind on employee reimbursements. Fortunately, with the right strategies in place, you can reimburse your employees on time without any added hassle. Read on to discover five ways to streamline your company's employee reimbursement process.

What is employee reimbursement and why is it crucial for startups?

Giving your employees the option to use their own cash to pay for business expenses — such as travel expenses and taking clients out for meals — builds trust and boosts efficiency.

Of course, when your employees use their own money to pay for work-related expenses, they expect you'll pay them back within a reasonable period of time. This is especially true for startups, where capital is limited and workers often accept lower pay and health benefits than they would at an established business, sometimes even making minimum wage.

If your workers aren't sure when they'll be reimbursed for work-related expenses, they may hesitate to spend their own money, which could cause them to miss opportunities that would benefit your business. And if they struggle to pay their bills because they aren't reimbursed on time, they may start looking for work elsewhere.

Effective strategies to simplify company reimbursements

You understand how important employee reimbursement is, but how do you keep track of expense reimbursements when you have so much else on your plate? Luckily, some strategies simplify the process so you can improve efficiency and increase morale without taking on more work.

1. Implement digital expense management tools

Digital expense management tools are software programs that streamline the reimbursement process. Generally, expense management follows these basic steps:

1. An employee submits a reimbursement request for an expense with a picture of the associated receipt.
2. The program notifies you of the request, and you choose whether to approve or deny it.
3. Your finance team receives the approved request, ensures it's valid, and reimburses the employee according to your company's reimbursement schedule.

With this software, employees always know which steps to take to get their expenses reimbursed, and you avoid the headache of tracking down receipts and signatures.

Expense management software can also help you prep for tax time. It can automatically generate expense reports and track deductible business expenses to help you maintain accurate financial statements.

These tools assist you in handling reimbursements quickly, which can have additional tax benefits. According to the IRS, you must document and reimburse your expenses in a reasonable time for the IRS to consider them non-taxable income.

2. Establish clear reimbursement policies

A clear reimbursement policy removes the guesswork for you and your employees. Transparency builds trust, which leads to a positive company culture. And a clear reimbursement policy is essential when setting up your expense management tools.

When establishing your company's reimbursement policy, be sure to specify:

• The types of expenses that are considered reimbursable expenses. These should be ordinary expenses necessary to the job, such as auto mileage, professional license costs, and travel reimbursements. The policy should never include personal expenses.
• The reimbursement rate for mileage. You can reimburse actual expenses or use the IRS standard mileage rate. If employees use company vehicles, you might reimburse mileage at a lower rate since you won't need to account for depreciation.
• Reimbursement schedule. Employees need to know when you'll pay them back. Clarify whether you'll reimburse employees immediately, with their paychecks, or monthly.

3. Automate approval workflows

Automating approval workflows takes tedious work off your plate. Automated approval workflow software lets you customize workflows to meet your business's needs.

You can set conditions for automatic approval or denial of some claims to avoid wasting time ensuring that every $10 purchase meets the requirements. You set the requirements, and the software does the busy work. You can choose to manually approve expenditures above a certain amount, within specific categories, or from particular employees.

Automating approval workflows saves time and resources and makes it easy to spot employee expense reimbursement violations.

4. Provide real-time tracking and communication

Including real-time tracking and communication within your expense management and approval workflow systems benefits everyone.

Employees always know the status of their reimbursement requests, so they're not left wondering if the request made it to the right person. And because they know when to expect payment, they won't reach out for updates.

Your finance team can easily reach out to employees with questions about their expenditures instead of wasting time trying to track them down. Communicating in real time lets you resolve issues immediately instead of leaving work hanging. With real-time tracking, you always know which expenses still need to be paid in addition to your accounts payable so you can effectively manage your cash flow.

5. Integrate reimbursement with payroll systems

Most digital expense management tools and automated workflow systems can integrate directly with your business's payroll management system. Payroll integration prevents human errors, and it saves time and hassle. There may be an added fee for the integration, but it'll save you money in actual costs by reducing your team's workload and avoiding costly mistakes.

Make reimbursing your employees hassle-free for your startup

Well-managed cash flow and happy employees are key to a startup's success. If you're manually reimbursing your team for out-of-pocket business expenses, it's time-consuming and costly, and it takes your focus away from growing your company.

Take the hassle out of reimbursing your employees. The right reimbursement management tools can streamline your business's operations, keep your employees satisfied, and free up your time so you can concentrate on the important work of running your company.

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