Record-Keeping Requirements for Expense Report Receipts
Standard business practice mandates that all transactions between vendors and buyers, whether large or small, be supported by the appropriate documentation. Travel receipts serve as more compelling evidence for or against what’s already been classified as a business expense.
Truth be told, businesses face an existential crisis from rising costs and inflation, and managers need to rethink their expense management policies, track, and cut off unnecessary travel spending at its root. One way to do this is by justifying travel expense reports with accurate and detailed travel receipts.
In this post, we’ll explore the essentials of travel receipts as a function of travel expense reporting.
Table of Contents
Why Expense Report Receipts Matter in Travel Expense Management
Naturally, receipt duties transcend into shedding light on business travel expense management where proactive analytics and limited visibility remain persistent issues.
The average business traveler spends $326 daily. The cost is divided between accommodation, meals, airfare, among other travel-related expenses. Tracking individual transactions without sufficient data obscures proper record-keeping, which can have a detrimental effect on personal and organizational accountability.
For small businesses, receiptless transactions mean higher risks of non-compliance and a general lack of accountability. Larger firms with dozens of employees traveling for business-related purposes, on the other hand, would suffer longer error-prone accounting and auditing processes.
Receipts as proof of payment pierce much deeper than invoices with regard to the depth of the information related to a transaction. Receipts also validate the legitimacy of an expense for tax claims and reimbursement. In essence, behind every receipt lies a clear audit trail for accurate financial record-keeping.
Types of Expense Report Receipts
Expense report receipts generally fall into two broad categories;
- The ordinary receipt is a basic receipt that captures the “bare-bones” transaction details, including dates, vendor name, and items purchased. Smaller expenses such as meals can be expressed to satisfaction with an ordinary receipt.
- On the other hand, we have itemized receipts. These receipts provide a more detailed overview of a transaction. Each individual item gets a single line on the receipt. Itemized receipts often carry more details for each transaction, sometimes including the description of the items purchased, quantities, and prices. Itemized receipts are necessary for grouped items and services.
It’s important to note that receipts are preferred to other transaction-related documents, such as invoices or bank/card statements. Although these documents, too, may provide enough information about a transaction, they are not considered sufficient proof of an expense.
Acceptable and Unacceptable Expense Report Receipts
Acceptable and unacceptable expense report receipts are subject to company guidelines. For a travel receipt to meet the criteria, it must satisfy the following:
- Name of the vendor or business
- Date of issue
- Total amount payable per item
A brief description of the goods or services purchased may also be included for added clarity, depending on the nature of the expense.
Receipts with clearly altered or hidden transactions should never make their way into your expense report without scrutiny.
Common Types of Business Travel Expenses
Business travel expenses can be broken down into broader categories, including airfare, lodging and accommodation, meals, and miscellaneous expenses.
Airfare comprises any and all costs associated with flying to and from a business destination. Plane tickets, baggage fees, and seat upgrades plus related taxes all comprise airfare.
Ground transportation costs cover any and all charges borne by the company’s account. Of course, such business expenses must be justifiable. Car rental, for instance, is a ground transportation cost that averages $513 when booked 91 days in advance.
Finally, miscellaneous expenses include any other costs incurred during the business trip that cannot be classified under airfare, ground transportation, meals, or accommodation. Such expenses include admissions fees, conference registration, and entertainment costs.
Every charge, every cost must be accompanied by a justifiable business purpose, come audit day.
What Additional Supporting Documents Should Be Kept?
While itemized receipts provide all the information required, additional documentation may be required for deeper scrutiny.
These documents may include:
- Sales slips
- Bank and card statements
These documents support your proof of payment and help validate the amount and nature of the expense.
It’s important to redact any personal information on sensitive documents like bank and card statements before storing them.
Employee Compliance with Receipt Guidelines
Any recent changes and updates to your receipt guidelines and policies must be communicated in a timely fashion, so stakeholders always understand and comply with these guidelines.
Compliance with receipt guidelines attracts several benefits, first by exposing and eliminating unnecessary spending areas. Errors and potential fraudulent activity can be detected and fixed with receipt documentation.
For employees, early adoption and compliance with receipt guidelines facilitates faster settlement of reimbursement claims as travel managers do not have to lift tons of paperwork. When receipts are properly submitted and meet the requirements, the processing time for expense reimbursements drops significantly.
Dealing with Lost, Missing, and Forgotten Receipts
While it is important to have all receipts for expense reporting, there may be instances where receipts are lost, missing, or forgotten. In such cases, some companies will generate provisions for a receipt replacement form. This form typically requires detailed information about the expense, date, vendor, and purpose.
In special cases where a physical receipt is not available, employees may be asked to provide bank or credit card statements showing the transaction as proof of purchase.
Receipt Management Software for Paperless Expense Management
Storing physical receipts becomes burdensome with the increasing volume of information being generated every month. As companies grow, so too, do the storage needs and book-keeping expenses.
TravelBank’s technology stack eliminates the book-keeping headache. TravelBank’s all-in-one booking and travel management platform connects travelers to managers, providing real-time insights into your travel budget usage – without extra admin assistants, expensive auditors, or cluttered expense reporting processes.
One of the key benefits of TravelBank’s receipt management software is the ability to organize and store receipts digitally, always ready for access and review on the go. So, no more piles of physical receipts, traveling employees can simply scan and upload receipts into the platform, creating a digital record that is easy to access and retrieve.
Frequently Asked Questions
What are the requirements for a receipt?
The requirements for a receipt are subject to review by the organization. They include itemized purchases, amounts, and the transaction dates. The IRS does not mandate physical copies for every transaction. Sufficient documentation for purchases qualifying as business expenses may suffice, whether in digital or physical format.
How do you record receipts in accounting?
Traditionally, businesses would keep physical copies of receipts, such as sales slips, invoices, and deposit slips, and organize them in a filing cabinet. Today, digital storage methods offer vast options where businesses can record and store receipts using specialized software to save on physical space.
What receipts are acceptable for reimbursement?
In the context of travel expense management, the minimum requirements standards should include the following details: name of the traveler, form of payment, items/services purchased, and the amount paid. These details are crucial for accurate reimbursement and to ensure compliance with the travel policy.
Why do you need receipts for expense reports?
Receipts serve as valid proofs of purchase and play a crucial role in the reimbursement process. When employees submit their expense reports, providing receipts is necessary to verify that the expenses were actually incurred and that the amount claimed is accurate.
How do you organize paperwork and receipts?
Having an organized system in place not only saves time and effort but also helps in making informed business decisions. Consider using cloud-based software or an integrated booking, travel, and expense application for storage of digital copies of receipts.
Do reimbursements require receipts?
Reimbursements require receipts to ensure accuracy and accountability. In most cases, receipts are required for all business expenses, regardless of the amount. Reimbursement requests without receipts may be denied or subject to further scrutiny.