When you or an employee uses personal funds to pay for a legitimate business expense, it's crucial to have a formal process to pay that person back from the company's funds. This is called a reimbursement. Dappr's reimbursement feature provides a clear, organized way to claim these expenses, ensuring your books are accurate and your business finances remain separate from personal ones.
This guide explains how to set up individuals for reimbursement and how to submit a claim through Dappr Accounting.
Why reimbursements are important
For LLCs and corporations, maintaining a strict separation between business and personal finances is essential. This practice, often called upholding the corporate shield or corporate veil, is what provides you with liability protection. If business and personal funds are mixed (for example, by paying for business expenses with personal cards without formally reimbursing them), it could risk this protection.
A formal reimbursement system creates a clear paper trail, proving that an out-of-pocket payment was a loan to the company which was subsequently repaid. This correctly categorizes the expense in your books and reinforces the legitimacy of your business as a separate entity.
Dappr is not a law firm and this content is not legal advice. Maintaining your corporate shield involves many factors, and we recommend consulting with a legal professional for guidance specific to your situation.
Setting up a claimant
Before a claim can be submitted, the person or organization must be set up with a reimbursement account in Dappr. This requires admin, manager, accountant, or equivalent custom access privileges.
From the main menu, navigate to Accounting, select the Bookkeeping tab, and then click on Reimbursements in the secondary menu.
Click the Add person or organization button in the top-right corner.
In the pop-up, enter the Full legal name of the person or organization.
An Account number will be suggested automatically, but you can change it if needed.
Select the Reimbursement account type (Individual or Organization).
Click Save reimbursement account.
After the account is created, a new window will appear asking for additional details. While optional, completing this step is highly recommended.
Team member: Link the reimbursement account to a specific user on your Dappr team. This is important, as it grants that user the ability to submit their own reimbursement claims, even if they do not have broad access to Dappr Accounting.
Address, Account Number, and Routing Number: Entering the claimant's banking information here will streamline the process of paying out the reimbursement later. The address is only required to pay out funds using wire transfer.
Click Save details to finish the setup. The person or organization will now appear on the Reimbursements page, ready for claims to be filed.
How to submit a claim
Once a person is set up, you or the assigned team member can submit a claim for an out-of-pocket business expense.
Navigate to the Reimbursements page (Accounting > Bookkeeping > Reimbursements).
Find the person or organization you are filing the claim for in the list.
Click the New claim button on the right side of their row.
Note: If this person already has an outstanding balance waiting to be paid, this button will instead say Pay out funds. In this case, click the three-dot actions menu to the right of the button and select New claim from the dropdown.
A pop-up window will appear to enter the claim details.
Date: Enter the date the purchase was made.
Expense account: Categorize the expense by selecting the appropriate account from your Chart of Accounts (e.g., "Travel," "Meals and Refreshments," "Office Supplies").
Claim amount: Enter the total amount of the purchase.
Description: Briefly describe what was purchased.
Upload a receipt: Drag and drop or select the receipt file. Attaching a receipt is critical for documentation and auditing purposes.
Click Save new claim.
When you save the claim, Dappr automatically records the transaction in your books. It increases the "Amount due" to the claimant (creating a liability for your business) and simultaneously records the expense in the category you selected. The claim is now officially logged and awaits payout, which is covered in a separate article.