What Is a Reimbursement, and How Does It Work (With Example)?

A reimbursement is a payment made to cover the cost of something that has already been paid for. Reimbursements are often used to cover business expenses, such as travel, meals, and lodging.

There are two main types of reimbursements:

• Expense reimbursements are payments made to cover the cost of a business expense that has already been incurred.
• Advances are payments made to cover the cost of a business expense that will be incurred in the future.

Expense reimbursements are typically processed through an employee's employer. The employee will submit an expense report, which includes receipts for the expenses they have incurred. The employer will then review the expense report and approve or deny the reimbursement. If the expense report is approved, the employer will issue a reimbursement payment to the employee.

Advances are typically processed through a company's finance department. The employee will submit a request for an advance, which includes an estimate of the amount of money they will need. The finance department will review the request and approve or deny the advance. If the advance is approved, the company will issue a payment to the employee.

Reimbursements are an important part of managing business expenses. They help to ensure that employees are not paying for business expenses out of pocket. They also help to keep track of business expenses and ensure that they are being properly accounted for.

Here is an example of how a reimbursement works:

• An employee travels for business and incurs the following expenses: $200 for airfare, $100 for a hotel room, and $50 for meals.
• The employee submits an expense report to their employer, along with receipts for the expenses they have incurred.
• The employer reviews the expense report and approves the reimbursement.
• The employer issues a reimbursement payment to the employee in the amount of $350.

The reimbursement process is a simple and effective way to manage business expenses. It helps to ensure that employees are not paying for business expenses out of pocket, and it helps to keep track of business expenses and ensure that they are being properly accounted for.