How to Manage Employee Expense Claims

Why Expense Claim Management Matters

When employees spend their own money on business costs - client lunches, travel, equipment, software - they expect to be reimbursed promptly and fairly. A slow, opaque, or inconsistent expense claim process frustrates your team, erodes trust, and creates compliance risks. On the flip side, a well-designed process makes reimbursement fast and predictable, keeps your expense records accurate, and ensures every claim is legitimate and properly categorised for tax purposes.

The goal is to make the process as frictionless as possible for employees while maintaining the controls your business needs. These two objectives are not in tension - a well-designed system achieves both simultaneously.

Define What Is and Isn't Reimbursable

The most important foundation of any expense claim system is clarity about what expenses the business will reimburse. Without a written policy, employees make assumptions - often different ones - about what's acceptable. This leads to awkward conversations, inconsistent treatment, and occasional fraud. A written expense policy, even a simple one-page document, eliminates most of this ambiguity.

Your policy should specify: which categories of expense are reimbursable (travel, meals, accommodation, office supplies, etc.); any spending limits per category (e.g. meal allowance of £30 per person, maximum hotel rate of £150 per night); what documentation is required (receipt mandatory for all expenses over £10); how quickly claims must be submitted after the expense is incurred; and who has authority to approve claims at different levels.

Related reading: how to set an expense policy for your team.

Choose a Submission Method

The submission method you choose has a significant impact on how efficiently claims are processed and how accurately they're recorded. Common options range from simplest to most sophisticated:

• Paper forms and physical receipts: Slow, easy to lose, and difficult to process for bookkeeping. Only appropriate for very small teams with minimal expenses.
• Email submission: Better than paper, but creates an email management problem and requires manual data entry into your accounts.
• Spreadsheet-based claims: A structured template that employees fill in and submit with attached receipts. More organised, but still requires manual processing.
• Dedicated expense management software: Employees photograph receipts on their phones, categorise expenses, and submit claims digitally. Approvals are handled in the system. Approved expenses sync directly to your accounting records.

Set Approval Thresholds and Workflows

Not every expense claim needs the same level of scrutiny. A £15 taxi receipt should not require the same approval process as a £1,500 flight booking. Define approval thresholds: claims under £100 can be approved by a line manager; claims between £100 and £500 require finance approval; claims over £500 require director sign-off. This tiered approach ensures appropriate oversight without creating a bottleneck for routine reimbursements.

Also define the expected reimbursement timeline. Most employees consider two weeks from claim submission to bank transfer to be reasonable. Anything longer erodes morale, particularly for lower-paid employees who may feel the cash flow impact of waiting. If your current process routinely takes longer than this, identify the bottleneck and fix it.

Keep Tax Compliance in Mind

Some employee expense reimbursements are taxable benefits - meaning you need to report them to HMRC (or your equivalent tax authority) and potentially account for income tax and National Insurance. Generally, reimbursements for genuine business expenses at the actual cost incurred are not taxable. But round-sum allowances, reimbursements above approved HMRC rates, or payments for personal expenses disguised as business costs can trigger a tax liability. When in doubt, check with your accountant before establishing any standing expense allowance.

How Note.now Makes This Easy

Note.now's expense claims feature lets employees submit claims from their phones - photographing receipts, categorising expenses, and submitting for approval in minutes. Approvers receive notifications, can approve or query claims in the app, and approved expenses are automatically recorded in your accounts. Related reading: reimbursable vs. non-reimbursable expenses explained. Explore Note.now's expense management tools, or try it free today.