Reimbursing employees and how to track these expenses

Thank you for the detailed information, @maddyt.

You're on the right track on creating an expense transaction to reimburse your employee's business-related expenses. However, you'll have to select a liability account to record it properly in your QuickBooks Online (QBO) account.

Also, to answer your question if it varies for employees vs. contractors, yes. To reimburse a contractor, you can create a bill and pay it. While for employees, you can create a check or an expense transaction.

You have two options to reimburse your employees. If you want to pay them on the day of the transaction, you can create an expense transaction and select a liability account.

But if you want to record the expense first and pay them later, you can create a journal entry for it. For more guidance, feel free to check out this article for the detailed steps and information: Reimburse an employee.

As always, feel free to visit our QuickBooks Community help website if you need tips and related articles in the future.

Please touch base with me here for all of your QuickBooks needs, I'm always happy to help. Have a good one.

Thanks, Mark! All clear on the contracted employees being paid via bills... that's easy enough and makes good sense.

The reimbursement of employees, I think I've got, but maybe you could clarify. (To this point in time, employees were paid back and then the expense was recorded later so it doesn't really fit either example. Whoops!)

(1) Add New > Journal Entry

(2) List all purchases linked to correct expense account (or asset / COGS / etc.)

(3) Save / Close

***Do journal entries debits / credits automatically link to the Accounts Payable account? Or, where do these pile up?

(4) Add New > Expense

(5) Pay reimbursement to Employee in lump sum Category: Accounts Payable (or whatever account contains journal entries)

(6) Cheer and begin to assess next problem

Thanks for getting back to us, maddyt,

I'm glad to clear things out for you. Debits and credits of your journal entries are linked to your liability accounts, not to the Accounts Payable one.

You'll want to visit again this link: Reimburse an employee for instructions and detailed steps.

If you're unsure about this, I highly recommend consulting your account. He/She might have specific instructions on what accounts to debit or credit. This is to ensure you have accurate employee reimbursement records in your books.

Let me know if you need additional information. I'm always right here in the QuickBooks Community to help.

Thank you and stay safe!

This is all great information! I am going to try it. Can I ask a question that complicates it even more?

When we upload our Bank Statement, it shows multiple payments to one of our employees who does purchasing. These payments are to reimburse her for the purchasing. So, when I have the bank statement data in front of me and I am editing each line item to make sure it reflects the right Category, every line related to her account number takes on the last Category I put in! 

How can I reflect that each line item that is a payment into her bank account is a payment to reimburse this employee AND still categorize the expense accurately?

Welcome to the Community, @stalker. And I appreciate the detailed information you've shared.

I've got your back on categorising purchases made by your employee and reimbursing the payment.

When your employee purchases something for your business, you should create an expense and categorise it with a liability account. This way, you'll record the reimbursement correctly in QuickBooks.

Here's how:

1. Click the + New button, then select Expense.
2. Select the bank account to use to reimburse the payment made by the employee.
3. In the Category column, select a liability account.
4. Enter the amount of the reimbursement.
5. Click Save and close.

I'm adding this article for more details: Record the reimbursement as an expense.

Most importantly, I still encourage seeking help from your accountant. They may add suggestions based on what's more suitable for your business and to your books.

Please let me know if you need clarification about this, or there's anything else I can do for you. I'll be standing by for your response. Have a great day.

As a startup, the business owners charged their credit card and now those expenses need to be reimbursed.  I understand creating expenses and issue a check.  However, I do not understand why I need to create a Journal Entry with a credit and debit transaction?  Thank you

Hello, @KateS1. I'm here to provide some information that'll help you.

You can pay your employees' business-related expenses in QuickBooks Online. Let me show you how.

Here's how:
 

1. Select + New and select Cheque or Expense.
2. On the Payee drop-down and locate the name of your employee.
3. Select the Category drop-down, then select a liability account. 
4. Enter the other information.
5. Then select Save or Save and close.
    

Meanwhile, to answer your question about journal entry, it is used to record the expense for future payment.

For more information you refer to this article: Reimburse an employee in QuickBooks Online.

I've also added this article, for future reference: Import your chart of accounts to QuickBooks Online.

If you have any other questions or clarifications with your bank registers, please post a reply in the comment section. I'll get back to you as soon as possible.

I have a similar situation:

Employees get reimburse for a remote desk set up or other expenses where they use their own funds.  We pay them using  (justworks) which intergrates with quickbooks online.  The account I have when I pay out outside of QB is "reimbursable expenses"

When the transaction downloads to quickbooks I move it to the item category it should go like "supplemental pay, employee benefits, travel, etc.  

Is there any other step I should be taking here?

Thanks for joining the thread, @test32.

Let me help you record your employee's reimbursement in QuickBooks Online. 

If they used their personal funds to pay a business expense, you can pay them now or record the expense first and pay them later. Simply create a cheque or expense transaction to reimburse them. 

I'll show you how:

1. Click + New and select Cheque or Expense.
2. Choose employee from the Payee ▼ drop-down list. 
3. Select a liability account from the Category drop-down menu. If you don't have one yet, you can add a new account.
4. Enter the other information.
5. Click Save or Save and close.

If you're not sure about these process, reach out to your accountant for further guidance. They can add suggestions about the best ways in recording your transactions. That way, we can ensure that your books is accurate. 
 

For additional reference, please check out this article: Record the reimbursement as an expense.

Let me know if you have further questions or concerns. I'm always right here to help you out. 

I already have the process of paying them outside of QB handled.  I would like to know what to do after that?

Hi there, test32.

May I know if you're trying to pay your employees? Can you explain the specific process that you've done so far? This way, we'll be able to know how to properly address you. If you have any other concerns about reimbursement, let us know so we can get back to you as soon as possible.

Currently the employees uses their personal funds to pay for a remote set up, they then submit expenses for reimbursement.  I have no issue paying the employees, i guess the main questions is how should it show on my P&L should i have it go to an account called "employee perks"

Hi Maria,

I have a similar situation but the difference is the employee had paid some company expenses. 

But instead of reimbursing him, the company - a new start up company - put him as the recipient for a business grant because there was no business bank account at the time. 

So after receiving the grant, he paid that grant into the company bank account (opened recently) but instead of wasting a transaction, he just deducted his expense and transferred the rest into the company bank account. 

An example would be the employee paid $200 of expenses, the business grant he received on behalf of the company was $500. 

So he directly deposited $300 into the company bank account. 

How would I go about recording the $500 business grant and the $200 expense in the same transaction to show the result of $300 deposit in the bank account?

Thank you.

Thanks for checking in with us, Jackson15.

When it comes to this recording these kinds of transactions, it would be best to reach out to your accountant for further guidance. They'll provide you details on how to record the $500 business grant and the $200 expense to show the $300 deposit in the bank account. If your accountant advised you to record them as a journal entry which is the last resort for entering transactions to balance in specific ways, just follow the steps and details in this article: Create a journal entry in QuickBooks Online.

Another way to record the transaction if the employee used their personal funds to pay a business expense is to record the expense first and pay them later. Just create a cheque or expense transaction to reimburse them. Here's how: 

1. Click + New Plus icon.
2. Select Cheque or Expense.
3. Choose an employee from the Payee drop-down list.
4. Select a liability account from the Category drop-down menu. If you don't have one yet, you can add a new account.
5. Enter the other information.
6. Press Save and close.
7.  

For additional reference, please check out this article: Record the reimbursement as an expense. For more tips and other resources, you may visit our page in managing your business in QuickBooks: QuickBooks Online Self-help articles.

If you have any additional QuickBooks-related concerns, feel free to click the REPLY button below. I'm more than willing to assist you again to improve your experience here in QuickBooks. Have a great weekend. 

Question...

If I have an owner who needs to be reimbursed, should the reimbursement check be entered under him as an employee or do I add him as a vendor? 

Let me guide you on how to reimburse an owner who paid for purchases on behalf of the business, JBlecka.

We can perform some steps to record the payback to the company’s owner who did some payment on behalf of the company. We'll have to create first a Current Liability account to track the amount owing to the business owner for incurring expenses on its behalf. Here's how:

1. Go to the Gear icon on the top menu.
2. Choose Chart of accounts and New.
3. Select Current liabilities from the Account Type dropdown, 
4. From the Detail Type dropdown, choose Other current liabilities.
5. In the Name field, type a relevant name such as 'Payable to the owner'.
6. Press Save and close.

Then, make an expense transaction and select the account Payable to the owner. Let me show you how: 

1. Click the + New Plus icon. 
2. Select Expense.
3. Choose the Payee.
4. From the Category dropdown, select the account Payable to the owner.
5. In the Amount field, enter the total purchase amount as a negative figure. When done correctly, the amount at the top right should read $0, as no cash has left the business at this point.
6. Press Save and close.

Once done, we'll need to create a Transfer when you have paid back the amount. Here's how:

1. Click the + New Plus icon.
2. Select Transfer.
3. From the Transfer Funds From dropdown, choose the name of the bank account used to pay the owner.
4. From the Transfer Funds To dropdown, select the account Payable to owner.
5. From the Currency dropdown, if required, change the currency in which it was paid.
6. In the Transfer Amount field, enter the amount reimbursed.
7. Press Save and close.

Feel free to visit our page for managing your business in QuickBooks Online: QuickBooks Online Self-help articles.

I'm just one click away if you have any additional QuickBooks-related concerns. I'm more than willing to assist you again to improve your experience here in QuickBooks. You have a good one. 

Thank you!

Glad to know we're able to provide the solution that you're looking for, JBlecka.

If you need additional help in managing and running reports, please let us know. We're always here to help you out.

I've also added our View All Help article for future reference. There, you can search topics that'll help you in completing your other QuickBooks tasks.

Have a great day ahead!

If I'm paying them today (the day the expense was incurred), why am I using a liability account? You suggested creating an Expense transaction. If a liability account is used, when does the expense get recorded. An Expense transaction would normally hit the bank account and an expense account. Paying them later is when you would use a liability account. To do that, I have read in the QB forum that you use a JE to debit the expense, credit a liability account (ex. Reimbursable Expenses), and select the Employee in the name field. When you issue the check and record it in QB, select the employee in the Paid To field and select the Reimbursable Expenses for your Category. If you need to see who has still not been paid, a report can be run for Reimbursable Expenses for a certain time period and sorted by Name to line up the credits with the debits.

I just recently migrated to QBO from a different accounting system. I've been vastly confused trying to read the various suggestions for how to handle this situation. The Journal Entry method that seems to be most-suggested seems like it would lose all of the normal benefits of expense tracking, so I'm not sure I get why that's being suggested.

Here's the way this got handled on our old system prior to moving to QBO:

1. Each person who made expenses on behalf of the company that would later be reimbursed would get a liability account set up in the chart of accounts.
2. When they submitted a receipt, the expense would get logged on the date of the receipt (the date the purchase was actually made), with the company that was actually paid listed as the payee, and the expense would be properly categorized.  The Payment account (source of funds) was then set to that person's reimbursement liability account, which would debit off the balance of that account.
3. When we wrote the check to reimburse them, it would get logged as a transfer from the bank account to their liability account, which would then zero out their liability account.

Where I'm running into problems trying to implement this in QBO is that liability accounts do not show up as an available source of funds in the Payment account field when logging an expense.

I've managed to work around this by making them be asset accounts instead ("Other Current Assets" and "Prepaid Expenses" as the detail type), and this seems to work great.  It just bugs the hell out of me because it shows up in the wrong place on the balance sheet.