In a small business, expenses usually start informally. Someone buys train tickets or a client lunch, sends a photo of the receipt to whoever handles the money and gets paid back when that person has a spare moment. With three people it works. With ten it starts to creak: receipts go missing, claims sit unanswered in an inbox, nobody is sure what has already been repaid and the accountant asks the same questions every quarter.
A good expense claims process does not need to be complicated. It needs a clear policy, one place to submit claims, a named person to approve them and a record that holds up at year end. This guide walks through each step.
The short version: write a one-page expense policy, ask for every claim in one place with the receipt attached, give each claim a clear status from submitted to reimbursed, pay out on a fixed schedule and keep the records for at least six years.
Why small teams need an expense process
Out of pocket spending is money your team has lent the business. Getting it back quickly and predictably matters, especially for junior staff who may be waiting on a few hundred pounds before payday. A loose process also costs the business. Claims without receipts are hard to justify to HMRC, VAT goes unreclaimed and the same lunch can be claimed twice without anyone noticing.
The goal is a process that is quick for the person claiming, quick for the person approving and complete for whoever does the books.
Step 1. Write a short expense policy
Your policy does not need to run to pages. One side of A4 is enough for most small teams, as long as it answers the questions people actually ask:
- What can be claimed. Travel, accommodation, meals with clients, training, equipment and software are the usual categories. Say plainly what cannot be claimed, such as commuting to your normal place of work.
- Limits. A sensible nightly hotel rate, a daily meal allowance when travelling and a value above which spending needs approval in advance.
- Receipts. Every claim needs a receipt. For VAT registered businesses, ask for a VAT receipt so the VAT can be reclaimed.
- Deadlines. Claims submitted within a set time, for example by the end of the following month, so costs land in the right accounting period.
- Who approves. Name the person or role. In most small teams that is a director, an operations lead or a line manager.
- When people are paid. A fixed schedule, such as every Friday or with the next payroll run, removes the awkward chasing.
Share the policy during onboarding and keep it somewhere everyone can find it. Our employee onboarding checklist covers where it fits in a new starter's first week.
Step 2. Decide what a complete claim looks like
Most back and forth on expenses comes from claims that are missing something. Agree the details every claim must include:
- A short description of what was bought and why
- The date of the purchase
- The supplier
- The amount, with any VAT shown separately
- The currency, if the spend was abroad
- A category
- How it was paid for, such as personal card, cash or a company card
- The project or client, if the cost will be recharged
- The receipt
Recording how something was paid matters more than it looks. Spending on a personal card or in cash needs repaying. Spending on a company card is already on the company's books and only needs the receipt matched.
Step 3. Use one place for every claim
Claims that arrive by email, chat message and paper envelope are impossible to track. Pick a single place for submissions and stick to it. A shared spreadsheet is a reasonable start, but it struggles with receipts, keeping claims private and knowing who changed what.
Whatever you use, every claim should have a reference number and a status that everyone can see. That alone ends most "did you get my claim?" messages.
Step 4. Keep the approval simple
For a small team, one approval step is usually enough. The approver checks three things: that the spend is allowed under the policy, that the receipt matches the claim and that the claim has not been made before. Then they approve it or send it back.
When a claim is rejected, always say why. "Missing receipt" or "Please split the hotel and the meals" lets the person fix it and resubmit straight away. A rejection without a reason only creates another conversation.
Two habits help keep approval honest:
- Nobody approves their own claim. Directors' expenses should be approved by another director or checked by your accountant.
- Approve on a rhythm. A weekly slot in the calendar stops claims piling up and keeps repayments on schedule.
Step 5. Track every claim from submitted to reimbursed
A claim moves through a short life cycle, and each stage should be visible:
- Submitted. Waiting for the approver.
- Approved. Allowed and ready to be paid.
- Rejected. Sent back with a reason, ready to be corrected and resubmitted.
- Reimbursed. Paid back to the person who claimed.
Keeping approved and reimbursed separate is important. Approval is a decision about the spending. Reimbursement is a payment. Whoever runs payments can then pay every approved claim in one batch and mark them as done, and the person claiming can see that the money is on its way.
Step 6. Pay out on a fixed schedule
Paying claims as they arrive is tiring and easy to forget. A weekly or monthly payment run is simpler. Pay approved claims by bank transfer or through payroll, then mark each one as reimbursed.
In the UK, repaying genuine business expenses does not usually create a tax charge or need reporting on a P11D, as long as the cost would have been allowable for the employee. Mileage is the common exception to plan for. If you pay a mileage allowance for business journeys in a personal car, HMRC publishes approved mileage rates, and paying above them creates a taxable amount. Check the current rates and rules on GOV.UK before you set yours.
Step 7. Keep records your accountant will thank you for
HMRC expects a limited company to keep its records, receipts included, for at least six years from the end of the financial year they relate to. Sole traders generally need to keep them for at least five years after the 31 January Self Assessment deadline. A digital copy of a receipt is acceptable as long as it is clear and complete.
Good records also make month end easier. When every claim has a category, a VAT amount and a status, your bookkeeping system can take it from there instead of someone retyping receipts.
Common mistakes to avoid
- No policy at all. People guess, and the guesses differ. A short written policy settles most arguments before they start.
- Accepting claims without receipts. It saves a minute today and costs much more if a claim is ever questioned.
- Letting claims pile up. Old claims are harder to check and land in the wrong month.
- Mixing approval and payment. When "approved" and "paid" are the same step, nobody can tell what is still owed.
- Deleting claims after the fact. Keep an approved claim on record even if it later turns out to be wrong, and correct it with a note so the history stays intact.
How Wizard Application handles expense claims
Expense claims are part of HR in Wizard Application, alongside onboarding, time off and team records. Expenses are included on the Standard plan and above.
- One place to claim. Each claim records the description, amount, VAT, currency, date, supplier, category and payment method, with optional project and department and a billable flag for costs you recharge. Attach as many receipt files as you need.
- Reference numbers. Every claim gets its own number, so it is easy to find and to talk about.
- Categories you control. Start with ten common categories such as travel, meals and entertainment, office supplies and training, then rename, reorder or add your own.
- Clear statuses. Claims move from submitted to approved or rejected, then to reimbursed. A rejected claim can be edited and resubmitted, and a claim that has been approved stays on record.
- Approval by role. Give the approve permission to the roles that should approve claims. Approvers are notified of each new claim, a rejection always needs a reason and the person claiming is notified of every decision. Marking claims as reimbursed is a separate permission, so payments can sit with whoever runs them. Read more about roles and permissions.
- Privacy by default. People who cannot approve only see their own claims and totals.
- An audit trail. Every submission, decision and change is recorded.
- Reports. See spending over time and by category, with totals kept separate for each currency.
- Xero sync. On the Professional and Enterprise plans, approved claims can be sent to Xero as expense claims, with an account code set for each category. Read more about the Xero integration.
Frequently asked questions
What should an expense policy include?
What can and cannot be claimed, spending limits, the receipt rule, the deadline for submitting claims, who approves them and when people are paid. One page is usually enough for a small team.
How quickly should expense claims be reimbursed?
A fixed schedule works best. Many small businesses pay approved claims weekly or with the next payroll run. What matters is that staff know when to expect the money.
Do employees need a receipt for every expense?
Yes, as a rule. A receipt shows what was bought, when and from whom, and a VAT receipt lets a VAT registered business reclaim the VAT. A clear photo or scan is fine.
How long should I keep expense receipts?
A limited company should keep its records, including receipts, for at least six years from the end of the financial year they relate to. Check GOV.UK for the rules that apply to your business.
Are reimbursed expenses taxable for employees?
Repaying genuine business costs is not usually taxable in the UK. Mileage allowances above HMRC's approved rates and payments that are not really business costs can be. If in doubt, ask your accountant.
Expenses are one of several everyday HR routines that are easier with a clear process. Our guide to running time off and leave covers another, and if you bill clients for your team's time, see how to invoice for billable hours.
