A method of tracking reimbursements

I've been using YNAB for years and one thing that has always been a pain is tracking reimbursements from friends, roommates, work, etc. As long as everything happens in the same month simply assigning the expense and the repayment to the same category works fine, but for payments over longer time periods it becomes difficult to see what is really going on in the budget or in reports. It is also difficult to verify that everything has been appropriately paid back, especially for groups of people or multiple transactions. I am familiar with YNAB's two recommended reimbursement methods, and both have these drawbacks.

I recently had a large expense split over multiple payments, dozens of people, and several months, so to deal with it I'm trying to find something that works better. In accrual accounting there is a useful concept called an Account Payable, which is recorded as an asset and represents future cash income. YNAB is cash-based rather than accrual, but I can approximate the same idea with an off-budget (Tracked) account called "Reimbursements" (or whatever).

In practice: when I pay for a large group expense, I split the expense. My portion goes into the appropriate budget category, as usual. For the rest, I use a Reimbursable category AND I change the payee to "Transfer to: Reimbursements." When someone pays me back, it's a "Transfer from: Reimbursements." Because it's going to an off-budget account, the initial cash outflow still has to come from somewhere, as it should. But now, not only does it not mess up my monthly reports when the timing is off, but I also have a convenient record of reimbursable expenses and repayments in that Reimbursement account. If there's a positive balance, I know someone still owes me.

Sharing this idea to get the community's thoughts - has anyone tried this or another method they like for tracking reimbursements? Are there any fatal flaws to my own method that I haven't thought of?

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  • The most recommended approach (the offset or pre-funded category) doesn't have this drawback, since a balance less than the offset indicates you are owed money, even across the month boundary. The other advantage of this approach is the CC Payment category takes care of itself.

    With the second recommended approach (Temporary Debt), it's not uncommon to add the Tracking account as you've done, but not strictly necessary. A search for the Reimbursement category in All Accounts will show the pending balance as well. The drawback to the account add-on is the Payee field is occupied, so you have to put the relevant person's name in the memo line (not the end of the world).

    However, if you like the account add-on, one tip is useful when multiple reimbursements are pending: when someone has paid-up, clear the transactions related to them (both inflow and outflow) and Reconcile the account to $0. This allows you to hide that person's transactions, leaving only the pending reimbursements visible. The original expense should be split with separate transfer/splits for each person to allow the per-person clearing later on.

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  • If you haven't offset/funded the Reimbursement category, you'll still need to shift funds in the budget if you've paid with a credit card. The Tracking account doesn't eliminate that requirement.

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  • JD said:
    not only does it not mess up my monthly reports when the timing is off

    FWIW, monthly reports were never off, even without the tracking account, since those are based on the transactions in your budget account(s). Those haven't changed.

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  • JD said:
    In accrual accounting there is a useful concept called an Account Payable

    Also FWIW, you're actually ginning up an Account Receivable capability. 😉 Cheers!

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  • dakinemaui,  thanks for the replies!

    you're actually ginning up an Account Receivable capability.

    You are absolutely correct! Thanks, I misspoke - too long since my last accounting class.

     

    FWIW, monthly reports were never off, even without the tracking account, since those are based on the transactions in your budget account(s).

    Agreed, splitting the expense and using the Reimbursable category gets this benefit even without the extra account. My wording wasn't clear here.

     

    The most recommended approach (the offset or pre-funded category) doesn't have this drawback, since a balance less than the offset indicates you are owed money, even across the month boundary. The other advantage of this approach is the CC Payment category takes care of itself.

    Here I'm a little confused. Part of my issue with using the Reimbursement category without the extra account is that there is no memory from prior months. If cash is allocated, it just goes back to zeron, and if it isn't allocated then it goes negative and that throws everything off. Are you suggesting pre-funding that account with everything I might possibly need at any given time? I can see that working for minor expenses, but it's hard to both cover any future scenario and not tie up an unreasonable amount of cash. If I let it go to CC Payment then wouldn't I lose the tracking aspect?

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      • dakinemaui
      • dakinemaui
      • 11 days ago
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      • Reported - view

      JD The two reimbursement approaches can be viewed as one and the same -- the temporary simply has an offset of $0.

      If the category is sufficiently offset, it stays positive and therefore not zeroed out. The difference between the category Available and the offset IS the pending amount owed. Say you offset by $250, and then buy something for someone for $50. The category Available would be $200. That's less than the offset ($250) and you're owed the difference. You can set a Goal for the offset amount and YNAB will tell you directly you're $50 short (owed to you). Tip: put the offset in the category name for reference.

      Yes, large expenses don't work well with this approach in everyone's budget. Typically, people just carve off a bit of their emergency fund to live in the Reimbursement category, simplifying things. (It's obviously still available if no reimbursement is pending, and it's usually a simple matter to revert to the temporary debt approach if one is pending and the EF was needed.) Hopefully your emergency fund or income-replacement category is also an "unreasonable amount" of cash just sitting. 😉 Might as well be useful until it's actually needed.

      With an offset of $0 (Temporary Debt approach), the "memory" isn't on the budget screen (unless you owe them, of course.) Again, just search for the Reimbursement category in All Accounts register. The total of those transactions IS the net amount owed. (It's the exact same number you get if you also add on a tracking account.)

      Getting the pending amount this way works for ALL the approaches. Offset (though it's quicker to look at the goal), Temporary Debt, or Temporary Debt+Tracking Account (though it's quicker to look at the account balance for that; the tradeoff is the transaction entry is a little more complicated.)

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      • JD
      • probablyjd
      • 11 days ago
      • 1
      • Reported - view

      dakinemaui Thanks, that makes a lot of sense. Clearly there are more ways of doing this than I had considered, each with trade-offs. Filtering by category in the All Accounts register is probably the simplest trick that I missed, and would have saved me some headaches over the years.

      I like seeing a little running total of what people owe me on the left, though, and I already have the extra account set up, so I'll probably stick with this approach for a bit and see if the extra transaction steps become annoying. At least it seems like it's a valid way of accomplishing the same goal.

      Thanks again for your insights!

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      • dakinemaui
      • dakinemaui
      • 11 days ago
      • Reported - view

      JD Be sure to add the trick of hiding the relevant transactions in that account when you're square with someone. The account add-on starts to shine brighter when things are pending from multiple people at once.

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