Managing Expense Claim and Reimbursement in Adempiere


Business Need

An expense or expenditure is an outflow of money (or asset) to another person or group or company to pay for an item or service. This either eats up the asset or increase liability of the business. There are different types of expenses that business has to account for (Operating Expense, Financial Expense and Capital Expense ). Some of the expenses are prepaid (short term asset – e.g. insurance) and some of the expense are committed expenses (liability – for example bonus announcement, payables), while others are counted as immediate expense. While business often get bills for most of the expenses and by creating vendor invoice they settle the due payments, there will be certain expenses which will be incurred by the employee for which either they can produce the bill or they may not be able to produce any bill. The business often need a way to manage such expnese claim recording and corresponding reimbursement & claim.

Following diagram represents the typical process involved in expense claim management

Expense Claim

How Do we do this in Adempiere?

Adempiere allows you to manage expense in general and expense claim in particular by allowing you

  • to define Expense Type and associate corresponding accounting information for posting reasons
  • record expenses against products as well as expense type
  • to general account payable invoices for reimbursement to employee and
  • to generate account receivable invoice to other business partners

Define Expense Type

The first thing you need to do is to list out the expense types that you have in your company and create corresponding entry in your ERP System.

Expense Type

The “Invoiced” tickbox allows you to specify if this expense will be invoiced to a customer.

Important Note

–          You will see that creation of expense type has also created a product entry with Product Type as “Expense Type”. The system allows you to keep only one product per expense type and this product will be used at the time of reporting expense against this product type. This often confuse business when they start seeing expense type product getting mixed with their main products. If required, You shall change your product window to ensure that your customer doesn’t get confused.

–          Rest of the properties (e.g. Product Category, Tax Category, UOM, Revenue Recognition Principle, etc.) of this product remains similar to the standard products. Also, like other products

  • the price tab allows you to associate this product with one or more price lists.
  • The accounting tab allows you to define / override financial account information against which you wish to post the transaction.

Record Expenses

Since you have already configured Expense Type, now you are all set to use them while recording your expense. Adempiere has “Expense Report” window, which allows you to capture expense detail.

Record Expense

Important Note

If you are familiar with Sales Order or Purchase Order then you will notice two important comman things

–          Selection of Business Partner (this guy must be an employee with an Address and Contact detail defined in the system)

–          Selection of Price list based on which the cost of products (or expense) will be automatically pulled-in

–          The warehouse which will be impacted after the completion of this transaction

–          The approved flag indicates if the recorded expense has been approved or not. By default, once you complete the transaction it gets marked as approved. However, if you have a situation where expense will be entered by someone and approved by someone else then you need to setup workflow accordingly.

Enter your actual expenses on the “Report Line” tab. This tab allows you to enter all your expenses and then complete the same.

Expense Report Line

Important Note

–          You can link expense detail with business partner, project and campaign to be able to track expenses for specific aspect of the business.

–          By ticking “Time Report” tick box you can indicate if the line contains only time information (and there is no expense amount mentioned as such).

–          By ticking “Invoiced” check box you can indicate if this expense line will be invoiced to concerned business partner

  • If you have selected this invoice then you must supply business partner information. When you raise Sales Order from Expense (using Create Sales Order from Expense process), the system will use this information to create Sales Order with document type “On Credit Order”
  • The expenses to be invoiced can be seen on “Expenses (to be invoiced)” window
  • Optionally you can also specify the invoiced amount (if it is different from the expense amount)

–          Product assignment allows you to select any product available in the system.

  • (wish list) If you intend to use this window primarily for general expense capturing then you shall apply required filter and provide filtered list of expense types (products) to the business.
  • (wish list)Many times we have customer asking us to link these expense types with budget to allow them have more control on expenses.

Once you are done with creation of all the lines, you are ready to complete the expense document. Go ahead and click on “Complete” button.

In addition to recording the expenses, Adempiere allows you to do following from the expenses

–          Create AP Invoice for Expense reimbursement

–          Create Sales Order for Customers (On Credit Order)

–          Create AR Invoice for business partners

Create Sales Order from Expense

Create Sales Order

After successful execution of the process, you get to see output similar to following

Now that you have sales order already created, you can review and complete the order. Notice that by default the order line contains the amount that you have put in the field “Expense Amount” on expense line. If you have a need that the orderline shall contain different price than the expense amount then that shall be mentioned in the field the “Invoice Price” field of the expense line. Once you are done with review of Sales Order document, click on Prepare to get the action list and select Complete option to complete the document. Following image shows the completed order:

After completing the sales order the system generates shipment and invoice, which you can see in the status bar (as shown below):

Important Note

  • Notice that the order type is “On Credit Order”. After completion of this order the system automatically creates and completes following document
    • Shipment Document
    • Invoice Document
    • The Expense (to be invoiced) window shows all the expense line which has been marked as “Invoiced” and related expense report is in processed status, but sales order has not been created for them.
    • The Expense (to be reimbursed)lists expense items for the business partner on the expense header where the expense lines were not invoiced yet (i.e. AP Invoice has not been generated for reimbursement to the employee).
      • You can generate AP Invoice for an employee by using “Create AP Expenses Invoice” process

AP Expense Invoice Process

The AP Expense Invoice process allows you to generate account payable invoices for the employee (reimbursement calculation).

Important Note

Typically when business thinks of reimbursement, they do need a way to approve the amount being claimed by the employee. Sometimes the business may approve lesser amount than the claimed amount.

Accounting Facts

Open the generated invoice and click on Post button to view the account posting.

Reference

Summary

This article has enabled you to understand how expense recording, expense reimbursement and expense claim from your customer/vendor can be managed using Adempiere. Of course there are few things which you need to setup as part of the implementation to be able to use it more effectively. For example – by default you don’t have expense review and approval mechanism in place. Also, some times people want to have approval control at expense line level.

I hope you have enjoyed reading this blog. In case you need professional assistance to be able to achieve your business need. You can always reach us by visiting our Contact Us page. If you have any specific question then feel free to post the same on our forum or the blog related to your topic of concern.

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Posted in ADempiere, EagleRP

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