Manage employee expenses

[This article is prerelease documentation and is subject to change.]

Business Central includes expense management features that help organizations track, review, approve, and reimburse business expenses. Whether employees travel, entertain clients, or pay for supplies, expense management gives everyone a clear, auditable process from receipt to ledger entry.

Important

• This is a production-ready preview feature.
• Production-ready previews are subject to supplemental terms of use.

With and without Expense Agent

You can use expense management in two ways:

• With Expense Agent enabled. Expense users submit receipts through a web app or email. Expense Agent automatically extracts data, categorizes and itemizes expenses, creates expense records, and groups them into expense reports. You view and edit agent-created expenses inside Business Central. Learn more in Expense Agent overview.
• Without Expense Agent. Expense users create expense reports in Business Central and add expense lines manually. Individual expenses aren't available without the agent, and there's no AI-powered receipt scanning, extraction, or automatic categorization. This option is useful in regions where the agent isn't enabled or when you prefer to work entirely in Business Central.

Without the agent, you still have access to:

• Expense report creation, release, and posting
• Itemization, participants, per diem, and mileage on report lines
• Travel requests for expected travel costs
• Rule validation and approval workflows
• All setup features (categories, rules, posting groups, locations)

Tip

We recommend enabling Expense Agent for the full experience. With the agent, expenses are created automatically from receipts, categorized, itemized, and grouped into expense reports. Without the agent, all data entry is manual.

Who is expense management for?

Expense management involves three roles:

• Expense users who incur expenses and submit expense reports for reimbursement.
• Managers who review and approve or reject expense reports submitted by their team.
• Accountants who review VAT calculations and reclaim eligibility, and then post approved reports.
• Administrators who set up expense categories, rules, policies, approval workflows, and posting groups.

Key concepts

The following concepts are central to how expense management works.

Expenses

An expense is a work-related cost, such as a hotel stay, a meal, or a taxi ride. Each expense has a category, date, amount, and optionally a receipt attachment. You can also add participants, itemizations, and mileage or per diem details depending on the category.

Expense reports

An expense report groups one or more expenses into a single document for submission. After you add expenses to a report, submit it for approval (if approval workflows are enabled). After the report is approved, you can post it to the general ledger and other entries.

Travel requests

Travel requests help you review planned travel before employees incur expenses. A request captures its purpose, travelers, dates, and estimated costs. After approval, you can link the request to an expense report and compare posted spending with the total expected amount. Learn more in Manage travel requests.

Expense report statuses

Expense reports move through these statuses.

Status	Description
Open	The report is being prepared. You can add or remove expenses.
Pending Approval	The report was submitted and is waiting for a manager's decision.
Released	The report was released for processing.
Approved	A manager approved the report. It's ready to post.
Rejected	A manager rejected the report. The submitter can make changes and resubmit.
Processed for Payment	The report was posted and payment processing started.
Completed	Reimbursement is complete.

Expense categories, rules, and policies

Expense categories classify expenses by type, such as meals, travel, or office supplies. Administrators can configure categories with default payment methods, posting groups, and detail requirements like itemization or per diem. To have more accurate itemization for all lines, administrators can add subcategories.

Expense rules enforce measurable requirements, such as amount limits, merchant restrictions, and required justification. Business Central checks rules during expense entry and submission.

Expense policies describe expected business behavior in natural language. When an administrator enables AI-assisted policy evaluation through Configure Expense Agent, Expense Agent evaluates applicable policies and presents the results to submitters and approvers.

Learn more in Set up expense categories, rules, and policies and How expense policy and rules compliance work.

VAT calculation and reclaim

When VAT reclaim is enabled, Expense Agent identifies VAT information on receipts and creates a VAT breakdown for each applicable rate. The breakdown includes the VAT percentage, VAT base, VAT amount, total amount, and expense category or subcategory. When the expense is added to a report, category or subcategory setup provides the suggested reclaim percentage.

The VAT workflow carries the extracted values into the expense report, so expense users don't need to calculate VAT manually. An accountant must review every VAT reclaim suggestion and approve or reject it before the expense report can be posted. The accountant remains responsible for the final tax decision. Approved VAT amounts are included in posting and retained with the posted expense report for reporting and audit.

Learn more in Set up expense management and Approve expense reports.

Refundable versus reimbursable

Understanding the difference between refundable and reimbursable is important:

• Refundable means the expense complies with company policy and is eligible for processing. Non-refundable expenses (such as personal charges on a hotel bill) cannot be reimbursable and aren't posted to the general ledger.
• Reimbursable means the employee paid personally and is owed money. An expense paid by company credit card is refundable but not reimbursable, because the company already covered the cost.

A single receipt can be partially refundable. For example, a hotel bill with three refundable line items and one non-refundable minibar charge results in a partial reimbursement. Administrators set the default refundable status on expense categories and subcategories.

Per diem and mileage

For travel expenses, expense management supports per diem allowances and mileage reimbursement. Administrators configure per diem calculation methods and partial-day rules. Learn more in Set up per diem and mileage allowances. Administrators can also define effective-dated mileage rates by vehicle type and currency. Learn more in Set up mileage rates for expense management.

Licensing requirements

The license you need depends on how you interact with expense management:

How you use expense management	License required
Submit expenses through the web app, email, or Microsoft Copilot chat only (no Business Central access)	No Business Central license. You're charged based on Copilot credits.
Manage expenses and submit expense reports inside Business Central	Team Member license (minimum)
Approve expense reports inside Business Central	Team Member license (minimum)
Post expense reports and process payments in Business Central	Essentials or Premium license

Note

Expense users who work exclusively through the Expense Agent web app or email don't need a Business Central license. They can also approve reports through the web app, but in this case they must have minimum Team Member Business Central license. However, if a user signs in to Business Central to perform any expense task, they must have at least a Team Member license.

Related information

Manage expenses with Expense Agent web app
Set up expense management
Set up mileage rates for expense management

Create and manage expenses
Manage travel requests Record and reimburse employees' expenses
Financial management

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