Specifically, under California Labor Code Section 2802, an employee is entitled to reimbursement “for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer.” What exactly does this mean for you and your unreimbursed business expenses? In this article, we will dive into everything you need to know about how to keep a record of business expenses, such as using software to keep track of business expenses.
Expense Management Best Practices
Keeping sufficient documentation is key to managing any business expenses. So long as you are organizing your expenses, California law will protect your rights. Unfortunately, without proper documentation, you may not be reimbursed regardless of the reason for the expense. The law differs across states regarding the definition of adequate records. In California, when documenting what your unreimbursed business expenses are, your records must include:1. The Date of the Expense
It is crucial to have documentation that includes the date of the expense, or else the employer may deny your claim.2. The Amount of the Expense
This is straightforward. To document an amount owed, you need to document the amount spent. Any claims without valid documentation may not be reimbursed.3. The Place the Expense Was Incurred
Simply stating the date and amount of the expense is not enough– for expense management best practices, documenting unreimbursed business expenses must include the recipient of the expense, whether that is another business or an individual.4. The Essential Character of the Expense
The essential character of an expense must be documented to determine whether the expense was directly related to your job duties and not personal in nature.Documents to Support Business Expenses
How do you keep a record of business expenses in line with expense management best practices? We recommend using software to keep track of what your unreimbursed business expenses are, which we will discuss in more detail later in this blog. There are a variety of documents that can be used to substantiate business expenses. These include but are not limited to, canceled checks, cash register tape receipts, account statements, credit card receipts and statements, and invoices.When it comes time to request reimbursement from your employer, it is best to make this request in writing. While you can do this orally, in the case your employer denies or ignores your request, it will be easier for you to protect your rights. If your employer requests further information or documentation, be sure to respond with the requested information promptly. Documenting unreimbursed business expenses properly will ensure a smoother process. How you keep a record of your business expenses and your reimbursement requests may impact your ability to receive reimbursement.
Common Types of Necessary Business Expenses
Now that you know the expense management best practices, we can discuss what expenses actually qualify for reimbursement. Expenses that are reasonable and necessary to perform your job duties are eligible for reimbursement. It can be helpful to review your employer’s policies and expectations to determine whether they would consider a purchase to have been required to perform your job duties. Additionally, be aware of any required software to keep track of business expenses. So, what are qualifying unreimbursed business expenses?
1. Travel
If your job requires you to travel strictly for business purposes, then you should be reimbursed for any expenses incurred while performing your job duties. Business expenses related to travel include meals, lodging, taxi or cab fees, and other incidental expenses. It is important to note that your daily commute to and from work does not qualify as a business expense.2. Meals and Entertainment
While you cannot be reimbursed for your meal or entertainment during a lunch break, any meals directly resulting from performing your job duties are eligible for documenting as unreimbursed business expenses. For example, you should document expenses incurred from taking a client to lunch for a necessary meeting now that you know how to keep a record of business expenses.3. Office Supplies and Equipment
All necessary tools and equipment required for the job are eligible for reimbursement. Additionally, for those working from home, a good portion of essential home office supplies are eligible for reimbursement.4. Communication and Technology
Expenses stemming from using a personal device for business-related purposes may be reimbursed, but be sure to follow expense management best practices. Software, technology, internet access, online subscriptions, and cell phone bills needed for your job are what can be considered unreimbursed business expenses.Tools and Software to Keep Track of Business Expenses
Now that we know what expenses should be reimbursed and the best practices, it’s helpful to know the tools available to make tracking those expenses simple. There are a number of popular applications that facilitate expense report creation, submission, approval, reimbursement, and accounting for businesses. If your company uses specific software for expense tracking, make sure to take time to learn how to use it for documenting unreimbursed business expenses so that any mistakes are not on your end.