Ideally, you and your business partners, clients, employers and fellow employees have agreements already in place for reimbursements. Requests for repayment of incidental expenditures should never come as a surprise.
When you spend your own money on behalf of a client, an employer, your fellow employees or a business partner, you can and should expect to get it back. Sales agents, teachers, lawyers and financial advisers can incur reimbursable business expenses on a daily basis. These expenses chip away at your profit margin if you do not contain them.
Send a Reimbursement Letter Before You Spend
Unless waiting for advance approval would result in a lost opportunity, request reimbursement before you spend any money. Making your request in writing allows you to create a budget for the event or project and provide advance justification for how and why spending money now will save money later.
Dear Allen Jeffries:
While filing your incorporation papers, I learned that the Arizona Corporation Commission charges a $35 fee for expedited processing to reserve your desired company name. As we discussed in our meeting last Tuesday, your desired company name "Wild Turkey Surprise" requires a $10 processing fee to reserve it for the next 120 days. Adding the expedited fee will secure the name reservation by Friday, May 11 instead of Thursday, May 17. Paying the expedited processing fee ensures that you own the name before Alphabet Sign Company makes the neon sign you ordered for the west side of your restaurant. It also gives us time to get a reply from Warner Brothers to ensure that they would not consider the name to be a violation of their trademarks or copyright.
Since timing matters, I will pay the expedited processing cost if I do not hear from you by noon tomorrow and I will submit my reimbursement request along with my usual weekly expense report.
Alexis Chapman, CPA, Chapman Business Services
Per Diem Etiquette
The Internal Revenue Service states that a per diem covers lodging, meals and incidental expenses when the employee travels for business. Employees must file an expense report within 60 days, or the per diem becomes taxable wages. The report must include the date the trip took place, the business purpose and the location of the trip. The employee must also attach receipts for lodging. The entire per diem payment becomes taxable if your worker does not submit an expense report.
Attn: Robert Morgan, Accounting Department Manager
Dear Robert Morgan:
Enclosed is my expense report for March 2018. I have attached my receipts for the planned three-night stay at Sandals on Sanibel Island between March 5 and 7 for our annual sales training seminar. I added the charges for the additional three nights of lodging in Denver, Colorado between March 7 and 12, while dealing with the wildcat strike at our downtown location. I also added the receipts for dry cleaning my suit after a striker threw a water balloon filled with red paint at me, as well as an estimate of the cost of a new outfit. The dry cleaner was not able to remove all of the stains. I have included a quote from Men's Wearhouse, Ted's Clothiers and The Suit Depot for a new jacket, pants, dress shirt, tie, and shoes since all of them had significant damage.
James S. Corwin, Sales Manager, Store #3126, Phoenix, Arizona
Many schools do not reimburse teachers for any classroom items they may purchase. School districts might cover at least a portion of continuing education costs, however, including paying for travel, lodging, books, test fees and study materials. You can deduct up to $250 per year on your income tax return if your district does not reimburse you. Consult with your principal and school superintendent before spending any money.
Dear Mr. Polk:
This year's class is 10-percent larger than last year, but I only received 15 textbooks in usable condition for my 33 students. Although you are correct that students can share a book in class, they will not be able to study together at home. Printing all those extra workbook pages will cause me to run through the entire year's copy paper allowance before September 30, leaving me no choice but to buy new textbooks or buy more copy paper.
I calculated that even if all pages print error-free, I will need 32 additional reams of copy paper between October 1, 2018, and May 31, 2019. At bulk rates, I was quoted $4 per ream, for a total of $128. Since most of the parents already pay $65 per year in school fees, I feel it would be a burden to ask them to pay for copies when their children should already have textbooks. I am willing to purchase the paper myself as long as the school district will repay me at some point. For comparison, I have included prices from Staples, Office Depot and Walmart.
Angel Harris, Grade 5 Science, Rolling Hills Middle School
If you lend money, tools or supplies to a coworker, you should agree in advance whether this is a gift or a loan. Most coworkers will make an effort to balance the books, but some may forget about your generosity unless you request repayment. If you made a written agreement of some sort, you would have backing for a small claims case if needed. If your arrangement were verbal and private, with no one else present, you would have scant luck getting your money or property returned.
Sample letter for reimbursement of expenses with a prior written agreement:
When I bought your transit pass for March, it was with the understanding that you would either repay me or buy me a pass for April. I attached a copy of the reimbursement agreement you signed before I purchased your pass. Please pay me the $62 this Friday or I will have to add a $5 late fee. Thanks for taking care of this ASAP.
Reimbursement letter format without a prior written agreement:
The three lunches I bought you last week totaled $39.20. Please pay at least half of that by this Friday and the remainder by April 24th. I understand you are struggling, but I used part of this week's gas money to buy those meals for you. Thank you for taking care of the problem right away.
Your Team Member,