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How to account for reimbursements
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How to account for reimbursements
You’re busy, and maybe you have some extra hands helping you out. How do you record reimbursements in Wave if someone else makes a purchase for your business? Follow the process below and you’ll be...
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Is there a way to separate out the reimbursements so it is allocated to each expense category? My accountant says that having the category of "Transfer to Reimbursement- Raj" is not specific enough. The transfer to reimbursement of Raj must also include a category such as "Office supplies" on the transfer so it is allocated prorperly. Is there a way to do this?
I ran a third-party sponsored giveaway contest and paid the upfront costs of shipping the contest winners' prizes.
Shortly after, the third-party reimbursed me for the shipping costs. How do I account for this?
I have one transaction imported from PayPal that shows the money I received as income for the reimbursement. How do I properly categorize this transaction?
What necessary journal entries must I make since I'm receiving the reimbursement instead of paying it? Thanks.
So, just to confirm... when the transaction is downloaded from the bank I will merge the bank's transaction with the #2 transaction above?
Hey @creeker, definitely! You should still be able to select a category when creating the transaction (or by editing it after). So, the overall account would be Reimbursement, but you will also need to select an expense type, such as Office Supplies, Travel, etc. This will show on the initial expense transaction, but not the transfer itself (which is just categorized as Reimbursement) but Wave will still include the initial expense category.
@JSC in this case I think you'd want to create an expense transaction (if there isn't one already) where you essentially fronted the shipping costs. You could then create a Journal Entry which transfers the income over to the expense account to zero it out, but I'd recommend selecting 'Refund for Expense' as the category, with the same overall payment account. This will zero out your books as the system will view the 'refund' as recouping the initial shipping costs you paid out.
@4K_Works If your bank pulls in the transaction, you won't need to merge it, but rather just categorize the bank transaction as Transfer to Bank, Credit Card, or Loan.
Is there a way to link a reimbursement expense to be paid out during next payroll?
@neiltorrefiel All you will need to do in this case is add a bonus for your employee that paid for the expense and label it as 'expense reimbursement' - this will show the amount listed on the employees pay stub, and will be paid for the following payroll (with the expense reimbursement label). Remember, these amounts area always tax deductible as well.
What if there were two separate items that need to be reimbursed. For example: Mar 1 - Raj paid $10 for printer paper and on Mar 15 - Raj paid $10 for printer ink. When I reimburse on Mar 31 - do I have to perform 2 transfer of $10 each or can I transfer $20? What if instead of 2, Raj has 4 expenses he incurred for the company 2 in February, 2 in March. On March 31 I was to clear out the Feb only.
Hey @Keyur - in terms of whether you accounted for 2 transactions of $10 or one of $20 in your first example would depend upon how granular you wanted to be with your accounting. Generally speaking, I'd recommend keeping the accounting as close to actual as possible, so setup the transactions the way reimbursement would have occurred in real life.
In your second example, the same would be true - make sure you separate out the individual expenses so that they correspond to the actual dates. For this reason, you'd probably want a transaction per expense incurred so that they could show their individual dates. But you could do two reimbursement transactions - one for clearing February, one for clearing out March. You could also split transactions too. Say you reimburse two people at one on the same date, but see only the one expense transaction - you can split and categorize each part against the money owed back to them.
Thanks for this guide. I know it has the desired effect, but it feels weird to have to create a credit card account for this. It would be nice if there was some feature to create a reimbursement account.
1) I have created a "reimbursement" account and have been effectively using this to track business expenses that I have personally paid for with the intent that I will reimburse myself at some point.
2) At the same time, I have been drawing "dividends"
3) For my T5 filing at calendar year end, my accountant had reported my total dividend drawings NET of the the amount due for reimbursement.
My question is how to reflect this "netting out" and settle my "For Reibmursement" liability account?
Thanks for any help you guys can give!
Hey @te3re - could you let me know a little more what your ideal workflow would be in this case? You should still be able to run reimbursements without a Payroll in Wave and record the manual payout. You'd record the initial expense however as a liability, meaning that you wouldn't impact your bank balance. Once you record the actual expense (when you make the reimbursement), you'd have it as an expense out of your bank account, but categorized as a transfer to this liability account. In essence you're tracking the money owed to someone as you would money owed to a credit card. I hope this makes sense but let me know!
@Samd It does make sense (as much as it does for a non-accountant). I think we've got it to work like that. Just waiting for the bank records to appear in wave from our first refund. THanks
Hi,
I think my situation may be similar to that of @te3re, but I'm not sure. I'm the treasurer of a non-profit organization (an amateur radio club), and sometimes we have to reimburse board members for expenses. Typically, one of them will make some sort of purchase and give me the receipt. When I get the receipt, I write them a check to reimburse them for the cost of whatever they needed to purchase. I'm not sure how to set this up in WaveApps. Do I set it up the same way as you suggested for @te3re, or is there a better way to do this? Also, in the setup described above, there's no check information. Since I'm writing checks to individuals, I'd like to make sure that information is reflected in my accounting (for example, Check #101 written to John Doe). What's the best way to do this?
@jchadwell For the first part of your question, I would follow the same steps above that @Samd had mentioned. In terms of the second part of your question, there isn't necessarily a way to reflect it in your accounting, unless you are writing it in the description of the transaction (which should suffice) or putting it in the notes section of the transaction.
@JamieD @Samd
I understand why the transaction shows 3 times as described above after I manually transfer funds from checking to credit card (reimbursement account). But what happens when the actual reimbursement check that was written (from the bank account linked to the transactions) posts and syncs with waveapp? wouldnt this now create a FOURTH transaction??
Thank you in advance
@Jake I believe that this is the transaction that you'd want to categorize. Creating a new expense or income would become redundant. Conversely speaking, you could just delete the bank imported transaction, as you would have already created it manually. Some people do create a temporary holding account to show their expenses paid sooner, then credit the temp asset account with a journal transaction, but this might get a bit convoluted.
Will there be a feature for approvals? We follow this method and use emails to approve expenses before paying it out. However, it would be great if we could have an approval function in wave to approve an expense to be reimbursed.
Hi @MoAnwar . No plans to add this feature in the near future. How are you handling this currently without the feature? Let me know.
Outside the system by taking screenshot and emailing to ask for approval. It would be great if you could add this feature in the transaction section or an additional comment column to track additional notes about the transaction.
The approval doesn't even have to be an actual workflow. it could be an indicator/checkbox that tracks who approved it.
Regarding this method, is it necessary to create a credit card liability account for each and every person you reimburse, or can you just create a single generic reimbursement liability account and just keep track of what's (who's) been reimbursed. Obviously there isn't going to be a CC statement for reconciling at the end of the month, but you'd need some form or way to request the reimbursement / receipts anyway. Also, do you make the transfer immediately after you disperse payment (issue a check) or wait until it has been cashed, because the date on the check might be different from date cashed and/or processed.
Hey @CP_PASTOR! Those are great questions. As far as the first one goes, I'm thinking that it really depends on how granular you want that breakdown to be. The single generic reimbursement account should be fine, though if you're trying to track reimbursements from several people in several places, I'm thinking that could get jumbled up fairly quickly. For your second question, I think it would be best to wait until it was cashed, in order to not duplicate efforts if the date is different, as you've thought.
Hello Wave Team. I have a slightly different question regarding how to account for a shareholder (Reimbursement - Raj Liability Account) to reimburse the company for personal travel expenses that were paid under a corporate credit card. The scenario is that Raj booked personal travel ($1000) through the company credit card and now would like to reimburse the company from his account (Reimbursement - Raj Liability Account) as he has $2500 in that account for other expenses that Raj covered through his personal account. We would like to transfer from Raj’s account so that his balance goes from $2500 to $1500, however, if we perform a manual journal entry to debit Reimbursement -Raj, what corporate account should be credited? If we credit the corporate bank checking account that was used to pay the corporate credit card, the bank reconciliation will not match. Should the corporate credit card account be credited instead in the journal entry? Thank you.
Would anyone have any insights in the above scenario with reimbursement for personal travel using corporate credit card? Thanks.
Hello Wave team, any updates on the above would be appreciated? Thank you.
Hi @MartinK! Thanks for reaching out. This does sound a bit more complex. When you say "We would like to transfer from Raj’s account so that his balance goes from $2500 to $1500" is there any money moving between actual bank or credit card accounts to show this?
This doesn't mention uploading the receipt from the Office Supply store and how to make sure the receipt is tied to Raj and not the bank payment paying Raj so it doesn't look like it was paid twice out of the same account. How is that done?
Hey @ChrisHOA, I'm not entirely sure I follow here. Can you explain that inquiry in a little more detail for me, please?
@Sarah_at_Gild Great question here! I'm thinking that creating a liability account would be your best bet as far as recording these transactions and tracking them appropriately!
An employee hands over a receipt for office supplies out of pocket. I scan the receipt over to Wave. Then pay the employee using the aforementioned process. So now I show a bank payment going to the employee, but no way to tie the scanned receipt to the purchase, thus making it appear as if the company purchased the supplies and gave the employee cash for supplies with no receipt for the goods in Wave. I want to make this all one transaction tied together.
I hope that clarifies.