Reimbursed business expenses
I use a personal credit card for business expenses and then I get a monthly reimbursement check. That card is also my primary credit card and I have no intent to open a separate credit card to solve this.
My question is this: what is the best way to track these expenses and then the offsetting reimbursements so that it doesn't disrupt my budget?
One idea is to just let them accrue and show me as overbudgeted until I deposit my reimbursement check to offset those expenses. I'm not a huge fan of this and would prefer to have a separate account and budget for this category; however, the amount that I spend each month varies so I'm not sure how to set a budget amount. Is there an easy way to accomplish this?
Hey Orchid Lobster !
Sorry for the delay here! I moved this over to our Q&A section to make sure you get an answer!
How to handle reimbursements is an important topic, so a section of our Help Docs is dedicated to it.
There are two ways you can handle reimbursements in YNAB:
1. Budget for the initial expense, then treat the reimbursement as income.
2. Temporarily overspend, then use the reimbursement to cover it.
Since you're using a credit card, you can create a Business Expenses category and go with either of these methods. If you choose not to budget for those expenses upfront, then your budget will appear overspent, but you can then budget your full reimbursement check towards that category each month to make sure you're paying off those purchases.
You could also use your funds to budget for the expenses, but wait until you receive the reimbursement check to pay for it (so you'd technically still be paying with the reimbursement check, but wouldn't be overspent).
Hopefully, a few others will chime in here, but take a look at the Help Doc and let us know if you still have questions! :)Reply
Do you have funds you can leave in your expense category to act as a cushion?
That's my preferred method for dealing with claimable expenses. There are really only two options, either pay for it in advance with your own money, then use the reimbursement to replenish your category, or overspend a category with no funds in it and wait for the reimbursement to be deposited in order to repay the cc.
I abhor overspends in my budget. It makes me feel like I can't pay the cc bill, and there's a little emotional baggage that comes with that. I also don't like having my accounts held hostage by someone else, waiting on my accounting department to pay me on time. I leave a cushion of my own emergency money in the administrative category that I use for reimbursable expenses. I pay my credit card in full on my own time table and when it's due. Admittedly, the amount I spend on claimable expenses is not very much, probably small potatoes to someone who regularly travels for their employer, but presumably you also receive a larger income too.Reply
As for tracking, whether you use your own funds or let the category go overspent, I recommend a tracking account.
Every expense is entered as a transfer from (in this case) your credit card account to a tracking account you create for this purpose. I named mine Next Expense Claim. When you receive a payment, enter a transfer from the tracking account to your chequing account.
Tip: you can't assign a category in a tracking account, so I always enter these transfer in the on-budget account, and I can enter a category for the incoming dollars. I choose to categorize the repayment directly back as an inflow to the category I use for expenses rather than as income to budgeted. This keeps all the expenses and repayments in the same category, doesn't mess with my income numbers in my reports, and I can exclude that one category from my reports.Reply
Personally I've opted to fund a "Reimbursables" category which I'm building up to $250 (currently at $119, but it's slowly getting there) . If I spend my money, it comes out of that category and when I get the reimbursement deposit, which comes from a different entity than my normal paycheck, it gets budgeted directly back into the Reimbursables category. So far I haven't had any trouble getting reimbursed, so I haven't worried about tracking stuff, but I suppose if that ever does happen I'll have to start. $250 is at the higher end of what I'd ever be out, so I think it'll do, but I suppose I could be wrong about that and I may need to increase that amount at some time in the future.Reply
Seems like this thread might be dead but thought I'd throw my 2 cents in as I use a bit of a hybrid of the two options. I travel a lot for work (and no that doesn't mean my salary is higher...unfortunately) and my monthly spend varies from $250 - $5,000+.
Ideally I'd like to have $5k of my "emergency savings" parked in a reimbursable expenses category that I spend against and replenish monthly. Then when the job ends and I move on that money is still there. Right now I don't have that much available so I keep $1000 parked in my reimbursable category. Some months my expenses are less, everything stays positive and I pay it back before the end of the month...all is well. Other months I spend $2k or more and show a negative in this category.
I've been diligent in getting my expenses submitted by the 20th each month so I'm paid before month's end and still "put them back" in the reimbursable category before month's end so no harm done, nothing shows as negative at the end of the month. A little more juggling than I'd like and would like to get the balance up so I don't have to think about it so much but does keep me from submitting my reports late.
Hope this helps someone searching around on here as I am!Reply
I'm back to this question again. The problem I have is that the Business category I created for business expenses goes negative during the month but I don't reimbursed for those expenses until the following month and that negative balance doesn't carry forward. In effect, I feel like I am showing as overspent in Month A with an artificially inflated amount to budget in Month B when that reimbursement check gets deposited because I cannot (as far as I know) go back retroactively to clear Month A's expenses with Month B's income. Does that make sense?Reply
My vacations are roughly the same order of magnitude as a typical business trip. When I incur business travel, I take it out of my own personal vacation category (temporarily). Once the reimbursement check comes in (typically within a month), I move it briefly to To Be Budgeted and then top off my vacation category again. I don't move it directly into vacation as my priorities might have changed. (Clearly any other category with a large balance could equally be used here).
How do folks feel about a dedicated buffer for these kinds of expenses? On the one hand, I would be in a pickle if I had a business trip and had to pay for some of a vacation. On the other hand, tying up a vacation's worth of money continually seems like a large forgone opportunity cost in terms of interest.
Has anyone used a tracking account to keep all the budget amounts the same and "float" the cost of the business trip without affecting other categories? That seems like it would keep priorities the same, but there is a slight risk you spend money you do not really have.Reply
I am a fan of creating a tracking account + a dedicated expense category for each type of reimbursable expense. I have a small business, and sometimes I pay a business expense from personal funds, so the business owes me money that it eventually pays back. I also have an adult son who lives at home, and I frequently purchase his groceries when I go grocery shopping. His mobile phone and car insurance are on our family plans, which which he reimburses me for. I really needed a bulletproof way to track all of that! HappyDance had a great explanation of how this setup works. Here is how I use it:
--create a category group called Reimbursable Expenses
--create a category for each type of reimbursable expense, and fund it with the maximum amount that I expect to have outstanding. In my case I have $500 budgeted to my Business Expenses category and $300 budgeted to my [Son's Name] Expenses category. If there were ever a month when expenses exceeded those amounts, I could temporarily move some money from another category to increase the budgeted amount. I would not allow the categories to be overspent.
Note that because these expenses get reimbursed regularly, I only had to budget the $500 and $300 one time. After that, the categories become self-sustaining, because when the reimbursement comes, it gets budgeted directly back to that category. So the average monthly spend in the reimbursable categories is zero.
--I like to be able to see at a glance exactly how much is owed to me for reimbursable expenses, so I create a tracking account that corresponds to each reimbursable expense category. The type of tracking account is "Other Asset" (because money owed to me is an asset).
--Each time there is an expenditure in a reimbursable category, I record it as a transfer to the tracking account. For example, if I buy some groceries for my son, under payee I put "Transfer to [Son's Name] Owes" (that is the name of the tracking account) and under category I put "[Son's Name] Expenses." Throughout the month I can see how much he owes me by simply looking at the tracking account balance.
--Each time I get reimbursed, I reverse the operation described above. In the payee field, I enter a transfer back to the tracking account, and in the category field I enter the same category that I used for the original outflow.
Also, just to keep things easier to track, whenever I get reimbursed I "clear" the transactions that the reimbursement applies to. and reconcile the tracking account That way when I view the tracking account with reconciled transactions filtered out, I am always looking at just the outstanding reimbursable expenses that are currently owed to me.
I can exclude the whole Reimbursable Expenses category group from my reports. Over time the amount spent in these categories should average out to be zero anyway.
Just sharing what works for me, and hoping that everyone finds a workflow that makes sense for them.Reply