When an employee incurs an expense on behalf of your business, follow this procedure:
1. Request receipt from employee.
2. Enter the expense into Xero as a draft bill - attach a copy of the receipt to the invoice and use the reference "Paid By". For example, an expense paid by John Smith should have the reference "Paid By JS."
3. Reimburse the employee via bank transfer.
4. After the payment has been made, match it to the invoice within the reconciliation section in Xero.
Video demonstration below or via this link.