Article: Be alert if employer's expense reimbursements lag

Discussion in 'Chit Chat' started by TwoCatDoctors, Mar 6, 2011.

  1. TwoCatDoctors

    TwoCatDoctors New Member


    Business Section in various newspapers
    Business Column: Ask Steve
    by Steve Sanghi of Microchip Technology
    Mar. 6, 2011

    QUESTION: I work out of my home in one state for a small company located in an adjoining state. I use my personal credit card to charge expenses for company business. Their guidelines are that all expenses are to be reimbursed within 45 days after expense reports are turned in.

    But the owner of the company waits several months to reimburse. Despite repeated requests, the issue has not been addressed. This is not an isolated case, because there are other co-workers who are having the same problem. We are worried that if anything goes awry with the company, we will not be able to recover our expense money. Any suggestions?

    ANSWER: This is a classic case where your small company is short of cash and the owner is using every trick in the book to extend his working capital. Some good practices to extend cash include working to expedite collections, trimming inventory, leasing rather than buying equipment and buildings, getting a working-capital line, factoring receivables and seeking venture-capital funding or bank loans. Sometimes, the company is unable to garner venture-capital money and does not have enough collateral to get a bank loan or line of credit.

    Companies that can't obtain any capital often start pushing out payables to their vendors, landlords, banks and everyone else. Eventually, this practice can even lead to delaying payments to the employees and using their money as working capital. That is where your company is today. I don't condone the practice, but it is not that uncommon. So, what can you do?

    You can ask the company for a cash advance. Then, when you submit the expense report, you account for the cash advance. Your request will likely be denied. My next suggestion is to request that the company open up a business credit card in your name. Then, you can charge business expenses directly to that credit card, which will be billed to your company. Many employees of Microchip who travel on business carry a company credit card for expenses.

    If the company denies that, too, then you are carrying the risk. If the things go awry, your expense report is like a loan to the company. If your company files for bankruptcy, you will be standing in line with its other creditors to collect pennies on the dollar. If the company owes you salary, you have the first claim over other creditors. But when you are owed an expense reimbursement, you don't get a higher priority. So, you should be compensated for taking this risk.

    You may ask the company to give you extra stock options or a higher salary, to compensate for your risk. If the company denies all of that, then you have a decision to make. If you are confident about the company's prospects and will benefit handsomely from its success, then maybe the risk is worth it. If the company's demise would drive your own finances in