How to manage cash receipts for employee reimbursement
![How to manage cash receipts for employee reimbursement](https://images.squarespace-cdn.com/content/v1/577c006b725e25e0affed0c1/1716812504442-LEQ86IA12GZ6INZYGK81/blogheader_cashreceipts.png)
Have you ever experienced the chaos of an employee’s reimbursement being delayed due to misplaced cash receipts? It may look like a tiny piece of paper, but it’s vital for validating and tracking expenditures for business transparency and accountability. In this guide, we’ll explore how you can manage cash receipts for employee reimbursement, including the basics of their importance and the crucial ways to keep your financial ducks in a row. Let’s dive in.
What are cash receipts, and why are they important?
Cash receipts play a vital role in managing financial transactions regarding employee reimbursement. They’re the concrete evidence needed to prove that an employee has incurred an expense on behalf of the company – whether by using their personal money or the company’s petty cash. Without cash receipts, a business lacks the essential records to verify that the expenses claimed by employees are legitimate and meet the criteria for reimbursement.
Here are a few cash receipt examples: When an employee attends a business conference, they’re out of their routine and more likely to encounter merchants who don’t accept credit cards. Expenses like taxis or food trucks paid in cash are common examples. Also, if an employee purchases office supplies using personal money, these types of transactions can be verified with a receipt. Cash receipts encompass a wide range of documentation – maybe more than you think – including printed sales slips, handwritten receipts from small vendors, or digital receipts issued electronically.
Methods for recording cash receipts
One of the traditional and most widely-used methods for recording cash receipts is entering them into a cash receipts journal – a special ledger designed to track all cash (including checks and money orders) coming into the business. The journal usually has columns for the date, source, amount of receipts, and other information, such as the account to be credited. How you tailor this tool to your needs is up to you, but the most important thing is to capture every employee's reimbursement.
Entries in the cash receipts journal are periodically summarized and posted to the general ledger, ensuring a business’s financial statements are updated and reflect the latest information. It also helps to track the cash flow and assists in reconciling the cash account during the accounting cycle.
Software and tools that help record cash receipts
While manual recording methods have merit, there’s a shift towards leveraging technology for efficiency and accuracy. Some people still prefer using spreadsheets, while others are using apps that scan receipts or even bookkeeping software like Quickbooks.
Expensify has helped millions of businesses keep track of their expenses and receipts. Learn how.
By streamlining the process of capture, storage, and categorization of receipts, Expensify automates a significant part of the expense management process. It simplifies recording, generates reports, and prepares you for tax season. Today, more and more businesses are using tools like Expensify to save time and create a more robust financial management system.
Importance of tracking cash receipts
Effective tracking and management of cash receipts provides some of the following benefits:
Reduce fraudulent expense claims: cash transactions are some of the highest risk for fraud, so it's important to get a receipt and establish an audit trail.
Enforce record keeping for better expense management: comprehensive records lead to a well-organized system that simplifies reporting and tax preparation.
Speed up reimbursement: with clear and complete receipts, the verification process is accelerated, leading to quicker employee reimbursements.
Correct expense categorization: proper recording promotes the accurate classification of expenses, which is fundamental for budgeting and financial analysis.
Challenges of managing cash receipts
It’s clear just how important cash receipts are in playing a role in managing employee reimbursements because they provide a record of transactions related to petty cash funds, travel expenses, and other reimbursable costs. But that doesn’t mean it’s always smooth sailing when it comes to the actual process of managing them. Here are some of the challenges that arise when managing cash receipts:
Error-prone recording process: this can result in discrepancies that become difficult to reconcile.
Accidental and inaccurate employee reimbursement: employees might unknowingly log inaccurate amounts, leading to miscalculating reimbursements.
Slow reconciliation: when inaccurate amounts are inputted, this can snowball into a larger issue of slow reconciliation as finance teams work through errors and enforce checks for accuracy, delaying the overall expense settlement process.
Fraud: without stringent controls, dishonest claims or falsified receipts can go unnoticed, causing financial losses over time.
Lost receipts: amplifying the above challenges is lost receipts, as missing documentation makes it harder to validate and record transactions regularly. Purchases made on credit cards can at least be backed up with a credit card statement. A lost cash receipt has no record.
Incomplete or unrecorded transactions: major setbacks, such as issues with financial audits, can happen when transactions are incomplete or unrecorded.
Inaccurate tax write-offs: due to faulty records, businesses may claim too much or too little for tax deductions.
Tips for improved cash receipt management
We know that managing cash receipts can be challenging when it comes to staying organized while tracking and analyzing transactions. But hear this: using a tool like Expensify simplifies receipt capture, storage, and categorization.
Here are some other useful tips for improving your cash receipt management:
Ditch the manual record-keeping and instead implement a digital receipt system. This reduces the risk of lost receipts and makes tracking and reconciling expenses easier. Plus, it’s easy for employees to use their smartphones to upload receipts directly into the system you have in place.
Enforce a strict receipt submission policy with clear guidelines for employees. This can include setting deadlines for receipt submission and communicating the consequences of late or missing receipts.
Implement an approval workflow to review and approve all submitted receipts before processing reimbursements. This can involve multiple levels of approval, depending on the organization’s hierarchy or expense threshold. Then, you can verify the legitimacy of expenses and identify any discrepancies or fraudulent activities. For example, ensure the person receiving the cash isn’t the same one recording it, reducing the risk of embezzlement.
Another best practice is to use pre-numbered cash receipt forms, which help prevent theft and make it easier to track transactions. Even better? With Expensify, receipts are automatically timestamped and logged, which mirrors the benefits of using pre-numbered forms. Plus, Expensify creates a uniform system for cash receipt management by helping you include essential details like the date, amount, payer’s name, and purpose of the payment.
Accurate categorization is important and that’s where Expensify comes into play with auto categorization of expenses. Forget the hassle of figuring what goes where and let Expensify categorize expenses for you.
Using cash receipts for employee reimbursement
Expense management software, like Expensify, aids in streamlining expense recording by allowing employees to upload digital copies of receipts, reducing paperwork and expediting approval times.
However, employees need to know which expenses are reimbursable – and which aren’t. Non-reimbursable expenses generally include personal items, fines, or expenses that don’t comply with the company’s expense policy. This is where Expensify can help by preventing non-reimbursable cash expenses from being reported by providing realtime policy compliance alerts.
Automating cash receipt management with Expensify
A petty cash fund often covers small, routine expenses, but larger or more specific reimbursable expenses, like travel costs, require careful documentation. Receipts for cash payments serve as the bedrock of this process.
Employers typically use a cash receipts journal or various forms to capture the details of each transaction. But for businesses looking to streamline this task, expense management software like Expensify simplifies the process. By allowing employees or contractors to upload receipts directly into a company’s accounting system, Expensify helps to give a realtime record of expenditures. It only takes a few steps to upload receipts:
Sign in to or register with the Expensify app and click on “SmartScan.”
Take a photo of your receipt or select an existing picture.
Expensify captures the details for you.
Review and categorize the expenses – or let Expensify categorize it for you!
Submit the report for reimbursement.
Our user-friendly platform allows employees to easily upload receipts for cash payments using their mobile device, ensuring that all expenditures are accounted for promptly and accurately.
By automating the receipts and expense management process with Expensify, businesses can make sure to have correct and efficient employee expense reimbursements. This, in turn, reduces mistakes, saves time, and enables a more fluid workflow.
Cash receipts FAQs
-
Yes, a cash receipt can be handwritten as long as it includes details like the date, amount, purpose of payment, payer’s name, and the person's signature. But to ensure accuracy and help in tracking, computer-generated, pre-numbered cash receipts forms are often preferred.
-
Establishing a systematic method for storing and organizing your cash receipts is essential to ensure their security. Use things like locked filing cabinets or safes technically work, but a better solution is creating digital backups with secure encryption for additional protection. Also, limiting access to these receipts to only authorized personnel can reduce the risk of mishandling or theft. Taking advantage of software that tracks receipts and matches them with corresponding financial records can further bolster security by allowing for quick detection of any discrepancies.
-
If a cash receipt is lost, reconstruct the transaction details quickly. This may involve referencing purchase orders, bank statements, electronic payment records, or contacting the party involved in the transaction for verification. It’s best to have a predefined process for reporting and documenting lost receipts, which often includes completing a lost receipt affidavit or form to acknowledge the missing document and provide an explanation.
-
Expenses management software and financial tools like Expensify help you to automatically import receipt data, categorize expenses, and match them with financial entries, thanks to direct integration with popular accounting platforms. The process typically involves configuring the software settings to sync with the accounting system, allowing realtime updates and simplifying reconciliation and auditing efforts.
Ready to make managing your cash receipts less tricky? Give Expensify a try today by filling out the form below and we’ll take it from there.