Use expense claims

Expense claims record expenses incurred by people on behalf of the business. These can be of two types:

  1. Actual expenses paid with personal funds that, in other circumstances, could have been paid directly with company funds and posted to appropriate accounts. Examples include: travel expenses for company business charged to an individual’s credit card, cash purchases of office supplies, or materials bought locally out of pocket on an emergency basis to finish work at a customer’s site.

  2. Allowances based on rates rather than actual expenditures but deductible from income under local law. Often, allowance rates are officially established. They represent real costs to the business, even though explicit monetary transactions do not occur. Examples include: motor vehicle usage based on distance or daily meal or lodging stipends earned regardless of actual costs.

Setting up the Expense Claims tab

Enable the Expense Claims tab by clicking Customize below the left navigation pane, ticking the box for Expense Claims, and clicking Update at the bottom of the list:

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Creating expense claim payers

Expense claims may be entered only for the following three types of Payers:

  1. Members created in the Capital Accounts tab, including partners and sole traders/proprietors using capital accounts.
  2. Employees created in the Employees tab.
  3. Expense Claim Payers defined under Settings, including directors, proprietors not using capital accounts, and all other persons.

Individuals may be of more than one type. For example, partners might define themselves as Expense Claim Payers to avoid complicating their capital accounts with expense claims. Or a business might authorize only certain employees to file expense claims, defining those employees as Expense Claim Payers and prohibiting expense claims from other employees.

Creating an expense claim

Once the person claiming the expense has been defined under one of those three types, you can create an expense claim. Select the Expense Claims tab and click the New Expense Claim button:

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Complete the form:

  • Date will be pre-filled with today’s date.
  • Reference is optional and may be used for internal or external sequences. If the box within the field is checked, Manager will number the transaction automatically. The program will search for the highest number among all existing expense claims and add 1.
  • Select the Payer from the dropdown list:

    If expense claim payers are included in more than one category, their names will appear more than once on the list. Codes or other identifying information in their names must be used to distinguish them.

  • Payee is the entity to which money was paid by the Payer. For allowance claims, you may either leave the Payee field blank or enter Allowance.
  • Complete line items with details of expenses, allocating them to appropriate accounts. (Tax and Division fields appear only if applicable codes or divisions have been defined in the Settings tab and appropriate accounts have been selected.)
  • Inventory location can be selected if inventory locations have been set up and an inventory item is selected.
  • A checkbox allows indication that Amounts are tax inclusive. This checkbox applies to the entire form.
  • The Line description checkbox adds description fields to the entry form. Contents of such forms will be displayed on the completed transaction, whether or not the box is checked so they show on the entry form.
  • A Custom theme can be chosen if any theme besides the built-in Plain theme is active.

When finished, click Create.

What happens after the expense claim is created?

After an expense claim is created, it will be credited to one of three liability or equity accounts, depending on the payer’s type:

Line items from the expense claim will be debited to allocated expense accounts. Or, if the Billable Expenses tab is enabled and the expense is allocated there, it will add to the balance of the Billable expenses asset account for the selected customer.

Settle expense claims according to the payer type:

  • Member’s capital accounts require no adjustment, as an expense claim is equivalent to a contribution of capital.
  • Expense claims showing in the Employee clearing account are reimbursed to the employee via a payment from any bank or cash account. This process is exactly like paying the employee for amounts due from payslips.
  • The Expense claims account can be cleared by direct reimbursement of the Payer. Enter the payment under the Payments tab, allocating the payment to Expense claims and the correct Payer.
  • In the case of a sole trader/proprietor or director who is also an Expense Claim Payer, claims can be cleared by journal entry, debiting Expense claims and crediting Owner’s equity or Directors’ loans.

Expense claims reporting

Status of expense claims is monitored in different ways for different payer types. Claim, reimbursement, and clearing transfer totals of Expense Claims Payers are shown on the Expense Claims Summary in the Reports tab:

Claims of Members (capital account owners) show on the Capital Accounts Summary, also under Reports:

Claims of Employees add to the Employees’ subaccounts of the Employee clearing account:

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Note that employee balances are blue, meaning you can drill down by clicking on them to see included transactions:

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Final thoughts

Remember that creating an expense claim never includes paying, receiving, or transferring money in the Receipts, Payments, or Inter Account Transfers tabs. The exchange of money took place between Payer and Payee and did not involve the business. Or, an allowance may have been earned without the exchange of money.

Paying or clearing an expense claim is a separate, second transaction. When directly reimbursing someone, payment from a bank or cash account is required.

Lastly, if you need a report showing how much the business owes and has paid to everyone who has filed an expense claim, you must define everyone in the Expense Claim Payers category in the Settings tab, even though they may already be defined as Members or Employees. Otherwise, status information will be scattered in different reports.