From time to time, our employees have to purchase things for the company using their own funds, most often by using their personal credit card. I am a new Office Manager, and I see that the prior bookkeeper put the expense reimbursement through the payroll rather than giving them the employee a check. This feels very wrong to me. I don’t want to continue doing it this way if it is wrong. Can you tell me which way is correct?
Handling employee reimbursements for business related expenses, including mileage, should NOT be run through payroll in QuickBooks.
When an employee uses his/her own money to pay for a business related expense, it is money that they have loaned the company. The company should account for those expenditures in the same manner in which they would if the company had made the expenditures themselves. The employee reimbursement should be correctly assigned to the appropriate expense or cost of goods sold accounts in QuickBooks.
Recording the reimbursements in QuickBooks can be accomplished by using either the Write Checks window or the Enter Bills window. It is important to remember that if your company has an operating bank account and a payroll account, be sure to use the operating account for expense reimbursements.