This guide includes a list of action items to improve your company’s employee reimbursement program.  

We see many companies wasting precious time and money on common mistakes that also undermine their IRS compliance. 

Here, we’ll give you detailed ways to get your reimbursement program on track.

Minimize manual work

The most common reimbursement mistake we see is still relying on manual expense reporting. Manual reporting leads to inflation, over-reimbursement, and wasted employee time, especially for mileage. We often see 10–15% mileage inflation with manual tracking/input. It could even open you up to potential compliance issues if the right data isn’t captured.

Furthermore, manual logging burdens your employees with tedious work. After all, you’re not paying people for the task of logging miles, filling out, and approving expense reports. 

Action items:

  • Give your employees the right tools to automate mileage and expense tracking. For example, tools like Everlance offer easy-to-use, automatic GPS mileage logs; they also include automatic expense tracking.
  • If you’re relying on manual logging today, spot check reported mileage to detect if there are any potential inflation issues. 
  • Make sure that admins have the tools they need to review reports quickly. For example, Everlance connects our mobile app with our Team Dashboard, so administrators can easily review, justify, and approve reports.

Set an accountable program

Setting an accountable program includes setting clear expectations. For example, are employees expected to log their mileage in real-time? Does your finance department flag mileage above a certain threshold? 

Action items: 

  • Clarify how and when employees should log their mileage.
  • Set a standard mileage threshold by evaluating how many miles employees typically drive.
  • If you don't have the time to reconcile reports, use a company reimbursement solution that automatically keeps employees accountable via GPS mileage logs and expense documentation.

Clarify what counts as business mileage 

Commuting between the home and the office does not count as business use.  This may come as a surprise to some people, according to IRS Publication 463, commutes are considered personal expenses, not business expenses. Make sure that all your employees know this before they start to track their mileage. 

Action items:

  • Make sure you aren’t reimbursing employees for commuter mileage. For example, it’s best practice not to compensate for the first or last trip of the day.
  • Be sure to spell out your reimbursement policy and educate your employees about what is and is not reimbursable at work.

Set expense documentation requirements

Setting documentation expectations for your team will save time, money, and headache later on. For instance, outline for your team what the appropriate documentation is for an expense to be reimbursable.

Action items:

  • Ask employees to list all the team members present, enabling cross-referencing across expense reports. 
  • Set a clear allowance for backlogging. We typically see 1-2 months as an industry allowance for backlogging expenses.

Select the software that meets your organization's needs 

Because manual mileage and expense tracking has so many issues, some businesses choose to use reimbursement software. It’s easy to get sold on bloated software that doesn’t do what you need it to—but this is a mistake. Instead, your buying criteria should be centered on saving your business money, improving productivity, and boosting compliance. 

Action items:

  • If you’re unhappy with your current software, look for user-friendly apps for tracking mileage. For example, products like Stride, Everlance, and MileIQ, make mileage and expense tracking automatic.
  • Test out different apps and get feedback from your employees! Many apps, like Everlance, offer free versions.

We hope you found this guide helpful and feel empowered to take action to improve your company’s employee reimbursement program. 

Want this checklist in an actionable PDF? 

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If you are looking for a system that takes care of these items for you, then consider Everlance Business. This digital solution takes the tedious work out of reimbursement and helps you stay compliant with the IRS.

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