How to Record Employee Expenses in Xero: Streamlining Expense Reimbursements

Recording and reimbursing employee expenses can be a tedious process. Most organizations would agree that streamlining this is important.

Luckily, Xero offers features to simplify expense management. You can set up the Expenses tool to standardize and automate parts of the process.

This guide will walk through critical aspects like customizing categories, enabling approvals, integrating addons, and more. You'll learn end-to-end techniques to record expenses in Xero for smooth reimbursement.

Introduction to Xero Expense Management

Managing employee expenses can be tedious, but Xero offers features to streamline the process. The Xero Expenses app lets employees submit expense claims, managers can approve them, and accountants can reimburse employees all in one system.

Key benefits of using Xero Expenses include:

• Simplified expense claims: Employees can easily submit expenses by snapping a photo of receipts through the mobile app. No more sorting through paper receipts.

• Streamlined approvals: Managers get notifications to review and approve expense claims on the go.

• Automated reporting: Get real-time insight into expenditure with dashboard reports and analytics.

• Seamless integration: Expenses feed directly into Xero accounting seamlessly.

Understanding Xero Expense Claims

The Xero Expenses mobile app allows employees to submit expense claims on-the-go. All they need to do is take a photo of receipts and provide some details. Expense claims are then routed to managers for review and approval.

Once approved, the expenses can be reimbursed to employees automatically based on payment settings. As expenses move through the workflow, Xero keeps everyone updated with email notifications.

The Importance of Streamlining Expense Reimbursements

Streamlining the expense reimbursement process through Xero Expenses eliminates manual tasks to save time and money.

Benefits include:

• Increased transparency: With all expenses captured digitally, there is clear visibility and tracking.

• Faster processing: Automated workflows mean employees get reimbursed faster.

• Cost savings: Removing manual tasks leads to accounting time and cost savings.

• Improved reporting: Better expense data leads to actionable insights to control costs.

Navigating the Xero Expenses App

The Xero Expenses mobile app provides an intuitive interface for employees and approvers. Employees can easily snap photos of receipts, record key details, submit claims, and track status.

Approvers can quickly review pending expense claims, ask clarifying questions, and approve or deny them on-the-go.

Key features like automated categorization, receipt scanning, and reporting make managing expenses efficient.

Is Xero Expenses Free: Costs and Subscriptions

Xero Expenses is free for up to 10 users on Xero's Early plan. Above 10 users, it costs an additional fee per user/month billed annually.

So for small teams, Xero Expenses comes bundled at no extra charge for seamless end-to-end expense management.

How do I record employee reimbursement in Xero?

Recording employee reimbursements in Xero is a straightforward process that can help streamline expense reporting. Here are the key steps:

1. In the Payroll menu, select Pay employees.

2. Select the draft pay run, then click the employee you're reimbursing.

3. Click Add Reimbursements Line.

4. Select the Reimbursement Type, then add a description. Some common types include:

   • Mileage
   • Travel expenses
   • Office supplies
   • Business meals

5. Click OK.

6. Enter the claim amount.

7. Click Save.

Following this process allows you to easily record and track employee reimbursements. The expenses will show up on the employee's next pay slip as a non-taxable reimbursement.

Key benefits include:

• Streamlined reporting for employees submitting expenses
• Clear categorization of different reimbursement types
• Simple tracking within Xero for accounting purposes

With a few clicks, reimbursements can be smoothly handled through payroll rather than requiring separate payment. This saves time for both finance teams and employees.

How do you record employee reimbursed expenses?

To record employee reimbursed expenses in Xero, follow these steps:

1. Have employees submit expense claims with receipts and details. They can use a spreadsheet or form you provide.

2. Review each expense claim for validity and policy compliance. Approve the expenses you will reimburse.

3. In Xero, go to Accounts > Purchases > Add Bill. Select the employee as the supplier.

4. Enter the expense details from the claim as individual line items on the bill.

5. Allocate the expenses to the appropriate accounts, tracking codes, etc.

6. Save the bill in Xero to record the expenses.

7. When you reimburse the employee, record a bank payment against that bill in Xero.

This links the reimbursements directly to the recorded expenses for reporting. It keeps personal employee expenses separate from company expenses too.

Streamlining this process makes expense claims and reimbursements easier on both sides. Setting clear policies, using Xero Expenses, and having employees submit via an online form can optimize the workflow. But manually entering the details as bills works perfectly well too.

How do you account for reimbursed expenses in Xero?

To account for reimbursed expenses in Xero, follow these steps:

1. Have the employee submit an expense claim with receipts and details. Approve the claim.

2. In Xero, go to Accounts > Bank Accounts and select the account you will reimburse from.

3. Go to Accounts > Expense Claims. Click "Add Expense Claim".

4. Enter the employee's details, amounts, account codes, and receipts. Click Save.

5. The claim will now show under Expense Claims with a status of "Awaiting Payment".

6. When ready to pay, click the claim and select "Approve & Pay".

7. In the popup, enter the date and select the bank account to pay from.

8. The payment is now recorded against the expense claim.

9. Reconcile the bank statement line for the reimbursement payment with the transaction in Xero.

This links the approved expense claim with the actual reimbursement payment, keeping a clear record of the process in Xero.

The key steps are submitting the claim, approving in Xero, processing payment, and reconciling the bank transaction. This helps manage cashflow and ensure expenses are properly accounted for.

How do you account for employee expense reimbursements?

When an employee incurs work-related expenses that are reimbursable by the company, it's important to have a clear process for tracking, approving, and reimbursing those costs. Here are some tips:

Track Expenses Properly

Employees should submit detailed expense reports with receipts to document each reimbursable purchase. Information like date, amount, description, and purpose should be included. Using an automated expense tracking system can help streamline this process.

Review and Approve

Managers should review all expense reports to verify purchases were necessary, appropriate for the business, and made in accordance with company policy. Once approved, reimbursement can be issued.

Reimburse Promptly

Once approved, employee expense reimbursements should be prioritized and paid out quickly - within a few weeks at most. This prevents financial hardship for employees. Direct deposit or payroll reimbursement are efficient options.

Record Reimbursements

From an accounting perspective, the company should record employee reimbursements as expenses to the relevant GL account. This ensures expenses hit the books in the proper reporting period.

Set Clear Guidelines

Having clear formal guidelines around what types of expenses are reimbursable, what documentation is required, spending limits, and the approval workflow will simplify the reimbursement process for both employees and managers.

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Setting Up Xero for Expense Management

Activating Xero Expenses Online

Activating Xero Expenses is simple and can be done directly within your Xero account. Just follow these steps:

1. Log in to your Xero account and click on Settings.
2. Under Organization Settings, click on Expenses.
3. Toggle the Expenses setting to "On".
4. Check the box to confirm you have read and agree to the Expenses Terms and Conditions.
5. Click Save.

Once activated, you can set expense permissions for your organization's staff. Make sure the appropriate employees have access to submit expenses and manage approvals.

Customizing Expense Categories in Xero

Creating customized categories for recording expenses can help with accurate bookkeeping and reporting. Here's how to set up expense categories in Xero:

1. Navigate to Accounts > Chart of Accounts
2. Click "New Account" and select "Expense Account"
3. Give the account a name reflecting the expense type, like "Office Supplies"
4. Select a Tax Rate (if tax deductible)
5. Enable payments from this account if reimbursements will be made
6. Click "Save" when finished

Repeat steps to create categories for all common expense types employees might claim. Well-organized expenses simplify reconciliation and billing.

Integrating Xero Expenses Add-on

Xero offers an Expenses add-on for additional features like automated approvals, advanced reporting, and more. To integrate:

1. In Xero, go to Settings > Add-ons
2. Search "Expenses"
3. Select the Official Xero Expenses add-on
4. Choose plan and click "Install"
5. Follow prompts to connect accounts

The add-on seamlessly syncs with Xero Expenses to enhance default functionality.

Configuring Tax Rates and Payment Accounts

Properly configured tax rates and payment accounts help ensure accurate reimbursements:

• Tax Rates: Set up tax rates for expense accounts reflecting deductibility. Sales tax may apply for non-deductible expenses.

• Payment Account: Link a bank account to pay out employee reimbursements. Payments can be manual or automated with Xero Payroll.

With expenses set up for your workflow, employees can easily submit claims, reducing administrative hassles. Streamlining the process improves transparency and reporting.

How to Use Xero Expenses for Claims Submission

Offering clear guidelines on submitting and approving expense claims in Xero can help companies maximize efficiency and cost savings. This section provides best practices for employees, managers, and accountants.

Submitting Expense Claims via the Xero Mobile App

The Xero mobile app makes it easy for employees to submit expense claims on-the-go:

• Capture receipts by taking a photo directly in the app and attach it to your claim
• Enter key details like date, description, amount, and tax
• Select the appropriate expense account code
• Submit the claim for approval

The app allows employees to submit expenses as they happen, reducing paperwork and speeding up reimbursements.

Streamlining Approvals with Manager Tools

Managers reviewing expenses in Xero have tools to approve or query claims quickly:

• Sort and filter claims by employee, status, date etc.
• View claim details and attached receipts
• Add comments for any queries
• Approve or decline claims with one click

Setting up email alerts also notifies managers when claims await approval. This facilitates rapid turnaround times.

Automating Expense Claim Approvals

Xero allows companies to configure automated rules for approving certain claims without manager review. This could cover:

• Claims under a cost threshold e.g. $50
• Claims matching specified accounts or descriptions
• Claims from particular employees

Automating predictable, low-risk claims can accelerate approvals and reduce administrative effort.

Tracking and Reporting Employee Expenses

Xero produces real-time reports on employee expenses:

• Monitor expense patterns over time
• Analyze costs by account, employee, or department
• Export reports for additional analysis

Tracking expenses assists financial planning and budgeting. Companies can identify areas for additional policy controls to optimize spend.

Integrating Xero Expenses delivers transparency and efficiency gains for managing employee spend. Streamlined submission, smart approval rules, and detailed reporting provide control and insights.

Reimbursing Employee Expenses in Xero

Explain key options in Xero for reimbursing approved employee expenses efficiently.

Executing Bank Transfers for Expense Reimbursements

To reimburse employees for approved expenses in Xero, you can set up and execute bank transfers directly from Xero. Here are the steps:

1. Set up the employee as a contact in Xero if they are not already added. Make sure their bank account details are added to their contact profile.

2. When the employee submits an expense claim with receipts, review and approve the expenses in Xero Expenses.

3. Once approved, go to Accounting > Bank Accounts and select the bank account you want to transfer funds from.

4. Click Record Payment and select the employee contact under Pay To.

5. Enter the total reimbursement amount and click Create Payment.

6. Review the pending payment details and click OK to execute the transfer to the employee's bank account.

This allows you to easily reimburse employees directly from Xero once expense claims are reviewed and approved. The payments are automatically recorded against that employee's contact profile.

How to Create a Bill for Employee Expenses in Xero

To create a bill for reimbursing employee expenses in Xero:

1. Go to Accounts > Expenses and select Add Expense.

2. Select the employee contact who submitted the expense claim.

3. Enter the date, reference number, and line items for each expense being claimed, including tax details.

4. Once all expenses are itemized, click Save Expense.

5. Under Expenses find the newly created expense and click Create Bill.

6. Review the bill details including total amount and click Approve Bill to complete it.

This creates a bill in Xero that can be used to track and manage the reimbursement of specific employee expenses. The approved bill can then be used as the basis for executing the reimbursement payment.

Assigning Expenses to a Customer for Billing

To assign employee expenses to a specific customer in Xero:

1. When creating the expense item, change the Paid By field to the relevant customer instead of the employee.

2. Enter the details as usual, ensuring the Date, Reference and Line Items accurately reflect the customer project.

3. Click Save Expense once complete.

4. Go to Accounts > Sales and open that customer's account.

5. Under Related Transactions you will now see the expense linked to that customer.

6. When you create the next invoice for that customer, the expense amount can be added to the invoice total.

This allows you to directly assign certain employee expenses to customer projects, enabling accurate billing of those expenses to the customer.

Adding Billable Expenses to Customer Invoices

To add billable employee expenses to a customer's invoice in Xero:

1. Open the customer account under Accounts > Sales.

2. Click Add Invoice and complete the usual details.

3. Under Line Items, click Add Item and select Expense.

4. Select the relevant expense from the drop down list.

5. Enter the quantity as 1, and adjust description if necessary.

6. Complete other invoice details and click Approve Invoice to issue to the customer.

Now approved expenses that were already assigned to that customer will be directly added to their next invoice for reimbursement. This provides an integrated billing workflow in Xero to recover billable employee expenses from your customers.

Advanced Expense Management Techniques

Managing employee expenses can be complex, but Xero offers advanced features to streamline the process. Here are some techniques to leverage Xero's capabilities:

Assigning Expenses to Specific Projects or Customers

You can assign employee expenses in Xero to specific customers or projects for more detailed financial tracking.

• When employees submit an expense claim, ensure they select the appropriate customer or project from the dropdown menu.
• Expenses will then show up under that customer's summary or project report for precise accounting.
• This allows you to bill customers for employee expenses incurred on their behalf.

Streamlining Expense Claims with Bulk Actions

Xero enables bulk actions to manage multiple expenses simultaneously:

• Use the checkbox column in Expenses to select multiple items.
• Click "More Actions" to choose options like Approve, Delete, Export, and more.
• Process expenses in batches instead of individually to save significant time.

Leveraging Analytics for Expense Oversight

Gain insights into employee spending patterns using Xero's analytics:

• Navigate to the Expenses dashboard under Accounting.
• View graphs summarizing expense trends over custom periods.
• Filter expenses by employee, category, status, and more.
• Use the data to inform policy changes to control spending.

Integrating Third-Party Tools with Xero Expenses

Extend Xero Expenses by integrating with other apps:

• Apps like Expensify and Receipt Bank capture receipts and feed data to Xero automatically.
• Approval workflows in tools like Bill.com can integrate with Xero for easier oversight.
• Sync card transactions from banks to automatically reconcile expenses.
• Automations streamline expense handling between multiple platforms.

With some planning, Xero can provide robust expense management at scale. The above tips demonstrate advanced techniques to control costs and maximize efficiency.

Conclusion: Maximizing Efficiency with Xero Expenses

Using Xero Expenses can help companies streamline the employee reimbursement process and maximize efficiency. Here are some of the key benefits:

• Automated tracking and reporting: Xero Expenses automatically tracks employee spending and generates reports for reimbursement claims. This eliminates manual paperwork and saves time for finance teams.

• Integration with accounting: Expenses feed directly into Xero accounting in real-time. Transactions are categorized and coded, simplifying reconciliation.

• Simple employee submission: Employees can easily submit expenses online via mobile or web. Receipts and details are attached digitally, removing paperwork.

• Customizable approval workflows: Finance teams can set up rules and approval chains for expenses based on thresholds and categories. This tightens oversight and controls.

• Direct reimbursements: Once approved, reimbursements can be automatically paid out to employees by direct deposit. This speeds up the process.

By leveraging Xero Expenses, companies can reimburse employees faster, reduce administrative costs, and gain better visibility into spending. Key to success is setting up the approval workflows and integration with accounting upfront to maximize efficiency gains long-term.

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