Reimbursement is the act of compensating someone for an
out-of-pocket expense by giving them an amount of money equal to what was spent.
Companies, governments and
nonprofit
A nonprofit organization (NPO), also known as a nonbusiness entity, nonprofit institution, not-for-profit organization, or simply a nonprofit, is a non-governmental (private) legal entity organized and operated for a collective, public, or so ...
organizations may compensate their
employee
Employment is a relationship between two party (law), parties Regulation, regulating the provision of paid Labour (human activity), labour services. Usually based on a employment contract, contract, one party, the employer, which might be a cor ...
s or officers for necessary and reasonable expenses; under
US
law, these expenses may be
deducted from taxes by the organization and treated as untaxed income for the recipient provided that accountability conditions are met.
UK law provides for deductions for
travel and subsistence. Reimbursement is also provided for supply,
day care
Child care, also known as day care, is the care and supervision of one or more children, typically ranging from three months to 18 years old. Although most parents spend a significant amount of time caring for their child(ren), childcare typica ...
, mobile, medical, or education expenses, as determined by the payer. Similarly, a
university
A university () is an educational institution, institution of tertiary education and research which awards academic degrees in several Discipline (academia), academic disciplines. ''University'' is derived from the Latin phrase , which roughly ...
,
academic conference
An academic conference or scientific conference (also congress, symposium, workshop, or meeting) is an Convention (meeting), event for researchers (not necessarily academics) to present and discuss their scholarly work. Together with academic jou ...
, or
business conference may reimburse the expenses of an invited speaker or attendee.
Reimbursement is also used in insurance, when a provider pays for expenses after they have been paid directly by the policy holder or another party. This is especially relevant in
health insurance
Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among ma ...
, due to urgency, high costs, and administrative procedures which may cause a healthcare provider to incur costs pending reimbursement by a private or public provider (in the US, e.g.,
Medicare or a
Health Reimbursement Account). Segments of the
healthcare industry, such as
medical device
A medical device is any device intended to be used for medical purposes. Significant potential for hazards are inherent when using a device for medical purposes and thus medical devices must be proved safe and effective with reasonable assura ...
manufacturers, rely on reimbursement for income and produce resources assisting their customers (hospitals, physicians, etc.) in obtaining reimbursement.
Governments may reimburse
taxpayers in several ways. A
tax refund reduces the net tax paid, such as income tax, potentially to zero. Taxpayers may receive complete reimbursement for other taxes, such as for
Value-added tax
A value-added tax (VAT or goods and services tax (GST), general consumption tax (GCT)) is a consumption tax that is levied on the value added at each stage of a product's production and distribution. VAT is similar to, and is often compared wi ...
due to low income, subsequent export of the goods sold, or not being the final recipient. A local government may use reimbursement to reduce property taxes for a favored organization or low-income individual.
Employee reimbursements for travel are very popular. Often times when an employee is travelling for work, they will need to track expenses and submit to their employer for reimbursement.
Reimbursement management
Reimbursement management is a crucial process that ensures individuals, government entities, and corporations are properly compensated for expenses incurred. It involves the careful tracking, verification, and processing of reimbursement claims, aiming to provide fair and timely reimbursements.
For individuals, reimbursement management plays a vital role in maintaining financial stability. Whether it's for travel expenses, medical costs, or business-related expenditures, individuals rely on reimbursement management systems to accurately calculate and reimburse their eligible expenses. By efficiently managing reimbursements, individuals can maintain their financial well-being and avoid unnecessary financial burdens. Reimbursement are sometimes performed vi
tax reliefor other forms o
welfare compensationto reduce the administration costs.
In the government sector, reimbursement management is essential for various reasons. Government agencies often deal with extensive financial transactions, includin
an
employee expenses, and vendor payments. Effective reimbursement management ensures transparency, accountability, and compliance with financial regulations. It helps government entities track expenses, control costs, and provide accurate financial reports to taxpayers and stakeholders.
In the corporate world, reimbursement management is equally important. Companies have various expense categories, such as employee travel, training, and client-related costs. Streamlining the reimbursement process ensures employees ar
reimbursed promptly which boosts morale and productivity. Moreover, efficien
reimbursement managementhelps organizations maintain accurate financial records
and comply wit
To effectively manage reimbursements, organizations utilize dedicated reimbursement management software and systems. These systems automate the reimbursement process, allowing for efficient expense tracking, verification, and approval. They also provide real-time visibility into reimbursement status, reducing errors and delays.
Barriers to reimbursement
Organizations have motive to limit reimbursement expenses, whether
fraud
In law, fraud is intent (law), intentional deception to deprive a victim of a legal right or to gain from a victim unlawfully or unfairly. Fraud can violate Civil law (common law), civil law (e.g., a fraud victim may sue the fraud perpetrato ...
ulent,
frivolous, or
legitimate.
If a reimbursement process is made cumbersome or inconvenient to the applicant, then the probability that the applicant will successfully obtain the funds decreases, regardless of legitimacy, resulting in fewer paid reimbursement claims overall.
Elements of cost-reducing reimbursement processes include:
* Insistence on submission of printed reimbursement forms (instead of email or online forms)
* Lengthy forms requiring detailed explanations
* Requiring that the applicant submit paper forms
* Requiring that original
receipt
A receipt (also known as a packing list, packing slip, packaging slip, (delivery) docket, shipping list, delivery list, bill of the parcel, Manifest (transportation), manifest, or customer receipt) is a document acknowledging that something h ...
s (instead of copies) be attached with form
* Requiring that the applicant personally deliver documents to specific locations, which may be distant and have narrow and inconvenient operating hours
* Stringent rejection of forms with errors, even if the errors are minor or inconsequential
* Issuing paper
checks (instead of cash or
direct deposit), and possibly requiring that these be received at specific locations
In addition, a variety of tactics for denying reimbursement, including
rescission, are associated with the insurance industry.
References
{{Authority control
Insurance
Tax
Expense