Step-by-Step Guide to Recording Reimbursements in QuickBooks Desktop

Business Aug 30, 2024 0 83 Add to Reading List

QuickBooks Desktop is a powerful accounting software that allows businesses to manage their finances with ease. One essential task for any business is accurately recording reimbursements in QuickBooks desktop. Whether you're reimbursing employees for out-of-pocket expenses, billing clients for expenses incurred on their behalf, or handling vendor reimbursements, QuickBooks Desktop can help you manage these transactions efficiently. This detailed guide will walk you through the process of recording reimbursements step-by-step, ensuring your financial records are accurate and up-to-date.

Understanding Reimbursements

Reimbursements are payments made to individuals or entities to cover expenses they incurred on behalf of your business. These could include:

Employee Reimbursements: When employees pay out-of-pocket for business-related expenses, such as travel or supplies, they should be reimbursed.
Client Reimbursements: If your business incurs expenses while working on behalf of a client, those costs can be billed to the client for reimbursement.
Vendor Reimbursements: Occasionally, you may receive a refund or credit from a vendor due to overpayments or returned goods.

Accurately recording these transactions in QuickBooks Desktop is crucial for maintaining clear and accurate financial records.

Setting Up Accounts for Reimbursements

Before you start recording reimbursements, it's important to set up the appropriate accounts in QuickBooks Desktop. This ensures that the reimbursements are categorized correctly in your financial reports.

Step 1: Create an Expense Account for Reimbursements

If you haven’t already, create an expense account specifically for tracking reimbursements.

Open QuickBooks Desktop:

Go to Lists > Chart of Accounts.

Create a New Account:

Click on Account at the bottom of the screen and select New.
Choose Expense as the account type and click Continue.

Name the Account:

Enter a name for the account, such as "Reimbursable Expenses" or "Employee Reimbursements."
Fill in any additional information as needed.
Click Save & Close.

Step 2: Set Up an Income Account (for Client Reimbursements)

If you need to bill clients for reimbursable expenses, you'll also want to set up an income account.

Go to the Chart of Accounts:

Navigate to Lists > Chart of Accounts.

Create a New Income Account:

Click Account > New.
Select Income as the account type and click Continue.

Name the Account:

Name it something like "Client Reimbursements" or "Reimbursable Income."
Click Save & Close.

Recording Employee Reimbursements

When an employee incurs an expense on behalf of the company, you need to reimburse them and record the transaction in QuickBooks Desktop.

Step 1: Enter the Employee Expense

To start, you’ll need to record the expense that the employee incurred.

Open the Employee Center:

Go to Employees > Employee Center.

Enter a New Expense:

Click on Enter Time > Use Weekly Timesheet.
Select the employee's name.

Record the Expense:

Fill out the timesheet with the details of the expense. Be sure to allocate the expense to the correct account, such as "Reimbursable Expenses."
You can add notes or attach receipts as needed.
Click Save & Close.

Step 2: Reimburse the Employee

Next, you’ll need to issue the reimbursement to the employee.

Write a Check:

Go to Banking > Write Checks.
Choose the bank account you’ll use for the reimbursement.

Enter Check Details:

Select the employee as the payee.
In the Expenses tab, choose the "Reimbursable Expenses" account you set up earlier.
Enter the amount of the reimbursement and any relevant memo notes.

Save the Transaction:

Once all details are entered, click Save & Close.
Print the check if necessary.

Step 3: Include in Payroll (Optional)

If you prefer to include reimbursements as part of payroll, you can add the reimbursement amount when processing payroll.

Go to the Payroll Center:

Navigate to Employees > Payroll Center.

Start Payroll:

Click on Start Scheduled Payroll.

Add Reimbursement:

In the paycheck details, add the reimbursement as an additional payroll item, ensuring it is categorized correctly.
Complete the payroll process as usual.

Recording Client Reimbursements

When you incur expenses on behalf of a client, these costs can be billed to the client for reimbursement.

Step 1: Record the Expense

First, record the expense that will be reimbursed by the client.

Enter the Bill:

Go to Vendors > Enter Bills.
Enter the vendor details and select the correct expense account (e.g., "Reimbursable Expenses").

Mark the Expense as Billable:

In the Expenses tab, check the "Billable" box next to the expense.
Select the client’s name in the "Customer

" field.

Save and close the bill.

Step 2: Create an Invoice for the Client

After recording the expense, invoice the client for reimbursement.

Create an Invoice:

Navigate to Customers > Create Invoices.
Select the client and enter any relevant job details.

Add Billable Expenses:

QuickBooks will prompt you to add any billable expenses associated with the client. Click Yes and review the expenses.
Add the selected expenses to the invoice.

Finalize the Invoice:

Add any other necessary items or adjustments to the invoice.
Save and send the invoice to the client.

Step 3: Record the Payment

Once the client reimburses the expense, record the payment in QuickBooks Desktop.

Receive Payment:

Go to Customers > Receive Payments.
Select the client and enter the payment details.
Apply the payment to the appropriate invoice and save.

Recording Vendor Reimbursements

Vendor reimbursements occur when you receive a refund or credit for a payment you've already made.

Step 1: Record the Credit from the Vendor

Start by recording the vendor credit in QuickBooks Desktop.

Enter the Vendor Credit:

Go to Vendors > Enter Bills.
Select the vendor and then choose Credit at the top of the screen.
Enter the credit amount and allocate it to the correct expense account.
Save and close the transaction.

Step 2: Apply the Credit to a Bill

If you have an outstanding bill with the vendor, you can apply the credit to reduce the amount owed.

Pay Bills:

Go to Vendors > Pay Bills.
Select the bill you want to pay and click on Set Credits.

Apply the Credit:

Review the credit and apply it to the bill.
Save and close.

Step 3: Record a Refund

If the vendor issues a cash refund instead of a credit, record the refund as a deposit.

Make a Deposit:

Navigate to Banking > Make Deposits.
Choose the bank account where the refund was deposited.

Enter the Deposit Details:

Select the vendor as the payer and categorize the deposit to the appropriate expense account.
Save and close the deposit.

Best Practices for Recording Reimbursements

To ensure accuracy and avoid potential issues, follow these best practices when recording reimbursements in QuickBooks Desktop:

Regular Reconciliation: Regularly reconcile your accounts to ensure that all transactions, including reimbursements, are recorded correctly.
Detailed Record-Keeping: Attach receipts, invoices, and any other relevant documentation to your reimbursement entries for clear and complete records.
Consistent Categorization: Always use the same accounts for similar types of reimbursements to maintain consistency in your financial reports.
Review Reports Frequently: Regularly review your expense and income reports to monitor reimbursements and overall financial health.
Automate Where Possible: Consider using integrated apps to automate expense tracking and reimbursement recording, reducing the risk of manual entry errors.

Conclusion

Accurately recording reimbursements in QuickBooks Desktop is essential for maintaining precise financial records and ensuring that all parties are properly compensated. By following this step-by-step guide, you can efficiently manage employee, client, and vendor reimbursements, ensuring that your books are accurate and up-to-date. Regularly implementing best practices, such as detailed record-keeping and consistent categorization, will further enhance the accuracy and efficiency of your accounting processes.