Business Central 2026 release wave 1 (BC28.1): Expense Management module (Manage employee expenses)

Hi, Readers.
Dynamics 365 Business Central 2026 wave 1 (BC28.1) is generally available. More details: Cumulative Update Summary for Microsoft Dynamics 365 Business Central (May, 2026)

I will continue to test and share some new features that I hope will be helpful. In this post, I would like to talk about Expense Management (Manage employee expenses). This is a brand-new module in this wave that addresses a long-standing gap: Business Central’s native inability to handle employee expenses efficiently.

Manage employee expenses using expense reports

Business value:
Expense management is a critical process for most organizations, yet many Business Central customers have relied on external solutions to handle it. With native expense reports, you can capture, approve, and reimburse employee expenses directly within Business Central. This reduces complexity, improves data accuracy, and ensures a seamless experience across finance and operations without additional integrations or costs.

Feature details:

The new Expense Management module introduces Expense Reports as a built-in Business Central capability. Employees can create expense categories, expense reports, add multiple expense lines into expense reports, itemize costs, calculate per diem, and record mileage. Managers can review, update, and approve or reject reports, while accountants can post reimbursements and configure posting accounts for different expense types.

https://learn.microsoft.com/en-us/dynamics365/release-plan/2026wave1/smb/dynamics365-business-central/manage-employee-expenses-using-expense-reports?wt.mc_id=DX-MVP-5004336

First of all, public preview is available in English and in the US only, but following with these countries/regions in July 2026:

• Australia
• New Zealand
• UK

Therefore, if you want to test or experience this new module over the next two months, you will need to create a US 28.1 environment.

PS: Although I did not find the Expense feature in the newly created BC28.1 W1 environment, according to Aleksandar Totovic, it is also available in countries/regions outside of the US.

The core of this feature is Expense Reports.
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.

In short, select the Expense User in the Expense Report header, and then add each expense in the lines.

Then you can post it to the general ledger and other entries.

However, this is a full-fledged module that supports a wide range of expense functions. Below are some details I have compiled, which I hope will be helpful to you. Please note that the Expense Agent was not enabled for any of the tests below.

Set up expense management

Let’s take a look at the settings first.

Expense Agent Setup (General expense settings)

Before employees can record expenses and submit reports, an administrator must configure expense management features in Business Central. More details: Set up expense management

This is somewhat similar to Sales & Receivables Setup, acting as the global configuration for Expense Management.

Microsoft recommends starting with the provided default configuration and then adjusting the settings to match your organization’s needs. These default settings establish a baseline setup with standard categories, rules, and other master data.
To apply the default configuration, on the Expense Agent Setup page, choose Related -> Setup, and then Apply default settings.

The following configuration options are excerpted from the official Microsoft documentation:

The following table describes the settings on the General FastTab.

The following table describes the settings on the Rule & Controls FastTab. These settings define expense policies.

On the Number Series FastTab, assign number series in the fields described in the following table.

When the agent is enabled, you can configure reminders about open expense reports on the Communication FastTab.

The Agent Access Control FastTab lets you specify which users can configure the agent and which users the agent can work on behalf of. When you enable the agent, the current user is automatically added to the access control list.

Set up expense categories, payment methods and rules

Expense categories define how expenses are classified for reporting and processing purposes. Payment methods specify how an expense is paid and reimbursed, distinguishing between employee-paid and company-paid scenarios. Expense rules enforce policy compliance by validating expenses against predefined conditions. More details: Set up expense categories, payment methods and rules

Set up expense payment methods

Payment methods define how expenses were paid, such as cash, credit card, or company bank account, specifying reimbursement types for expenses.

When creating a new expense payment method, you must assign a Reimbursement Type (Employee Paid, Credit Card, or Company Paid). Each reimbursement type can be used by only one payment method.

Expenses with the Employee Paid reimbursement type are reimbursable, as they are paid out-of-pocket by the employee. Expenses with Credit Card or Company Paid reimbursement types are posted but not reimbursable, as they are covered directly by the company.

Create expense categories

An expense category represents a type of expense or allowance, such as meals, travel, office supplies, per diem, or mileage. Each category can be configured with its own posting group, default payment method, and specific requirements for additional details.

For example,

Category description is critical, as the accuracy of the agent depends directly on it. When creating your own descriptions, follow these guidelines: the description should clearly explain the primary purpose of the category and include enough detail to help the agent understand the context of extracted receipts and assign the correct category accurately.
For example for the hotel stay you can use this: ‘Expenses for hotel and accommodation stays related to business travel. Includes room charges, mandatory hotel fees, city or tourist taxes, and in-stay services charged to the room.‘
Or for airline you can use the following example: ‘Expenses for commercial air travel, including airline tickets and airfare. Covers flights, passenger names, routes, carriers, booking references, fares, taxes, seat selection, baggage or change fees, and boarding passes.‘

A refundable expense is one the company can accept and reimburse according to internal policy. Because employees might occasionally submit nonbusiness expenses, the Refundable toggle helps identify and restrict nonallowable items early in the process.

Create expense subcategories

Each expense category can include one or more subcategories. Subcategories are especially important when itemization is required, because they let users break down a single receipt into multiple types of charges (for example, a hotel stay versus a minibar charge).

For example,

Each subcategory can be configured as refundable or non-refundable. Even if the main category is marked as refundable, it does not guarantee that all expense lines are compliant. Subcategories allow accurate calculation of refundable and non-refundable amounts.

Set up expense locations

Expense locations define the geographic areas used for calculating per diem allowances. A simple country/region definition is often not enough because daily rates can vary due to differences in purchasing power or travel policies. Expense locations let you define country/regional, or city-level areas with distinct per diem rates.

For example,

When configured, you can use these locations in per diem calculations and reference them in expense management rules.

Set up expense groups

Expense groups let you group categories for reporting and analysis.

Create expense rules

Expense rules define conditions that expenses must meet based on category and location. Rules can require justification, restrict merchants, or enforce amount limits.

For example,

On the Merchant Requirements FastTab, turn on the Required Specific Merchant toggle if only a specific vendor is allowed, and then enter the merchant name. Use this setting when your company has contracts with vendors and doesn’t allow alternatives.

On the Rule Conditions FastTab, add one or more conditions. For each condition, choose a Condition Type and enter a Value:

You can create multiple rules for the same category with different locations and effective dates. Business Central applies the most specific matching rule.

To enable rule enforcement, turn on Apply Rules on the Expense Agent Setup page. If this setting isn’t turned on, rules aren’t applied. The exception is per diem calculations, which are always considered.

When rules are enabled, Business Central automatically checks expenses against the matching rules. If an expense violates a rule, the violation appears in the Rule Violations FactBox on the expense card and the expense report. Violations don’t block submission, but they’re visible to approvers.

Set up expense users and teams

Before employees can create expenses, they must be set up as expense users in Business Central. A user with SUPER or admin rights must define which employees become expense users. You can also organize expense users into teams for easier management and reporting.

Create an expense user

In the Employee No. field, select the employee to link to this expense user.

Each expense user must be linked to an employee record that has a valid company email address set in the Company E-Mail field. The employee posting group can’t be empty.

When an expense user is linked to an employee, the user inherits the employee’s posting groups and assigned dimensions.

Optionally, assign an Expense Team Code to add the user to a team. Expense teams let you group users for reporting and management purposes. Each team can have one team manager. Defining teams simplifies classification and approval structures.

If you assigned an Expense Team Code and the user is team manager, turn on the Team Manager field.

Only one team manager is allowed per expense team.

Instead of creating users one by one, you can import them from your Microsoft Entra tenant.

Or add all active employees from this company as expernse users.

Set up expense approvers

If your organization uses the approval workflow, you must define who can approve expense reports.

Open the Expense User Card for the user who should act as an approver. Turn on the Can Approve toggle.

The Can approve for these expense users FastTab displays. Add the expense users that this approver is responsible for.

PS: An expense user can act as an approver only if their email matches the Authentication Email on the User Card page. Approvers must have a Business Central license.

In order to be an expense approver there must be a user in Business Central for email eh@cronus-demosite.com for expense user EH.

You can also view and edit all approval relationships on the Expense Approval Setup page.

4. Set up per diem and mileage allowances

Organizations that reimburse travel expenses often use standard rates such as per diem for meals and lodging, and mileage rates for the use of private vehicles for business travel. Some of the settings in this section can be found in the Expense Agent Setup, which you can refer to as supplementary information.

Configure mileage rates

Select Search (Alt+Q) in the upper-right corner, enter Expense Agent Setup, and then choose the related link.

On the Allowance FastTab, set the Standard Rate of Mileage to your organization’s reimbursement rate per distance unit.

In the Default Mileage UOM field, choose the default unit of measure. For example, miles or kilometers.

When an expense user creates a mileage expense, the amount is calculated automatically based on the distance entered and the configured rate.

1. They select a mileage category.
2. They enter the starting and ending points as descriptions to clarify the route.
3. They enter the value in the Mileage field representing the distance.
4. If this is a round trip, select the Round Trip field, so Business Central will multiple amount with 2 to get the proper Total Mileage amount.
5. The Amount field for reimbursment will be automatically calculated.

Configure per diems

Per diem rates reimburse employees for daily travel expenses using a fixed amount instead of requiring individual receipts.

As the standard per-diem calculation depends on location where you are traveling, there are a few prerequisites you need to complete before you start using related to location and rates.

You first need to have created dedicated locations for all destinations you will use in your expense reports. To do so, follow next steps:

Select Search (Alt+Q) in the upper-right corner, enter Expense Locations, and then choose the related link.

Select New and set the Code and Description and in the Country/Region Code select the country you want to use. Optionally select the City you want to use in combination with the selected Country/Region Code and/or enter the applicable State.

Expense Locations are used instead of only Country/Region Codes because per diem rates can vary within the same country based on local purchasing power. By combining Country/Region Code with City or State, you can define locations more precisely and configure accurate per diem rules for different areas.

To ensure all required details are defined for each Expense Location, you must configure rules that determine how per diem is calculated in Business Central. These rules are set up in Expense Management Rules. Follow these steps:

Select Search (Alt+Q) in the upper-right corner, enter Expense Management Rules, and choose the related link.

Select New to create a new rule. In Expense Category Code, select the per diem expense type. Select the Expense Location used to determine the per diem rate.

Optionally, specify the Effective Date and select a Currency Code if the per diem is paid in a different currency than the local one.

Under Rule Conditions:
Select Daily Rate as the Condition Type. Enter the per diem amount in the Value field.

Once per diem rates are configured for all locations, you must define how the system calculates full and partial per diem amounts based on applicable company and country-specific standards.

On the Expense Agent Setup page, on the Allowance FastTab, choose the method in the Full Per-Diem Calculation field.

In the Per Diem Rounding Precision field, enter a number to control decimal rounding on per diem amounts. And in the Minimum Hours for Per Diem field, enter the minimum hours of travel required to qualify for a full per diem if this is less from 24 hours.

When travel doesn’t cover a full day, partial day rules determine the reimbursement.

On the Expense Agent Setup page, on the Allowance FastTab, in the Partial Day Rules field, specify how to handle partial days.

In Min Hours for Partial Per Diem, enter the minimum hours required to qualify for a partial per diem. And in Percentage For Partial Day, enter the percentage of the full per diem to pay for partial days (used with the flat percentage option).

Work with expenses

Expenses

If you use Expense Agent when you incur a business expense, you record it in Business Central as an individual expense. Each expense captures the amount, date, category, and supporting details like receipts or merchant information. After you record expenses, you can add them to an expense report for submission.

• Select Search (Alt+Q)  in the upper-right corner, enter Expenses, and then choose the related link.

• Choose New to open a blank Expense card.

• In the Expense User No. field, select the expense user who incurred the expense.

• In the Expense Category field, choose the category that matches the type of expense.

• In the Expense Date field, enter the date the expense occurred.

• In the Description field, enter a brief description.

• In the Amount field, enter the total amount in the expense currency.

• In the Merchant Name field, enter the name of the vendor or merchant.

• Optionally, fill in the Receipt No. field with the receipt or external document reference number.

• In the Currency Code field, choose the currency if it differs from the local currency.

If your organization uses expense rules, any violations appear in the Rule Violations FactBox on the right side of the page. Review and address violations before submitting the expense in a report.

You can attach receipt images or PDF files to an expense for documentation purposes.

If you attach a PDF, a Preview FactBox displays the document directly on the expense card.

For expenses that require itemization (based on the category), you can break down the total amount into line items. More details: Add itemizations

On the Expense card, choose the Itemizations action.

Add line items with the relevant details and amounts.

The Total Amount of all lines in the Expense Itemizations page must exactly match the Expense Amount.

For expense categories that require participants, such as business meals, you can list the attendees. More details: Add participants

On the Expense card, choose the Participants action.

Add each participant with their name and type.

When the expense category requires mileage details, more fields appear in the Travel section. More details: Record a mileage expense

• Create an expense and select a mileage category.

• In the Starting Point field, enter where the trip began.
• In the Ending Point field, enter the destination.
• In the Mileage field, enter the one-way distance.

• If the trip was a round trip, turn on Round Trip. The Total Mileage field doubles the distance automatically.

The amount is calculated based on the mileage rate configured on the Expense Agent Setup page.

When the expense category requires per diem details, the Travel section shows date and time fields. More details: Record a per diem expense

• Create an expense and select a per diem category.

• In the Expense Location field, choose the travel destination.

• In the Starting Date and Time field, enter when the travel period began.
• In the Ending Date and Time field, enter when it ended.

• Choose the Per Diem action to view or edit the calculated per diem entries.

Business Central calculates the per diem amount based on the rates and rules configured on the Expense Agent Setup and Expense Management Rules pages. So, before start, be sure you have properly configured whole setup.

The Billing FastTab on the Expense Card page lets you specify more details. More details:
Billing and reimbursement fields

The terms refundable and reimbursable describe different aspects of an expense:

• Refundable means the expense complies with company policy and is accepted as a valid business expense. The default value comes from the expense category, but you can change it on individual expenses if you have permission. Nonrefundable expenses aren’t posted to the general ledger, but they must still be tracked in the system. For example, if an employee uses a company card for a nonbusiness purchase, the amount needs to be recorded and potentially recovered from the employee.
• Reimbursable means the employee paid out of pocket and is eligible to receive money back. An expense paid with a company credit card or bank account is refundable but not reimbursable, because the company already covered the cost.

When itemization is required, individual subcategory lines can have different refundable settings. For example, a hotel receipt might have the room charge as refundable while a minibar charge is marked as nonrefundable. The employee is reimbursed only for the refundable portion.

You can link an expense to a project for tracking and billing purposes. More details:
Connect an expense to a project

You can assign global dimensions to an Expense using the Dimensions FastTab, and add additional dimensions by selecting the Dimensions action.

Before an expense can be added to an expense report, it must be released.
On the Expense card, choose the Release action, or press Ctrl+F9.

And, you can quickly create a new expense report directly from an expense.

Expense Reports

An expense report groups related expenses into a single document that you submit for approval. After approval, the report is posted to the general ledger and reimbursement is processed.

Approvals in Expense Management are optional when the agent is not enabled, and can be configured on the Expense Agent Setup page.

• Select Search (Alt+Q)  in the upper-right corner, enter Expense Reports, and then choose the related link.

• Choose New to open a blank Expense Report card.

• In the Expense User No. field, select the expense user.

• In the Description field, enter a description of the report, such as “March travel expenses.”
• In the Expense Report Date field, enter the report date.
• Optionally, set the Posting Date if it differs from the report date.

Then we need to add expenses to a report.

You can add existing released expenses to the report.

• On the Expense Report card, choose Get Expense Line in the action bar. (Microsoft states that this functionality is only available when the agent is enabled, but interestingly, I can still use it even with the agent turned off)

• Select the expenses you want to include, and then confirm.

The selected expenses appear as lines on the Lines FastTab.

If you don’t use Expense Agent, you can add expense lines directly to the expense report without creating individual expenses first. This method is also useful when you want to add a line manually.

• On the Expense Report card, in the report lines subpage, enter the expense details directly: category, amount, description, and other relevant fields.

• If the category requires itemization, choose the Itemizations action to break down the line.

• If the category requires participants, choose the Participants action to add attendees.

• If the category is per diem type, enter the Expense Location, Starting and Ending Date and Time to the expense line, and choose the Per diem action to adjust per diem lines.

• If the category is mileage type, enter the Starting and Ending Point, Mileage and optionally if it was the Round Trip to the expense line.

All rules existing for expenses apply to the expense report lines, i.e., rule violations, justification, currencies…

If expense rules are enabled, Business Central checks each expense line against the applicable rules. Violations appear in the Rule Violations FactBox.

Review all violations before you submit the report. While violations don’t block submission, they show to the approver and might cause the report to be rejected.

Releasing the report locks it for editing and prepares it for submission. On the Expense Report card, choose the Release action, or press Ctrl+F9.

To make changes after you release a report, choose Reopen.

If your organization requires an anti-corruption attestation, the Attestation section appears on the expense report. More details: Add an attestation

• Turn on Anti-Corruption Attestation to confirm the attestation.
• Optionally, enter details in the Anti-Corruption Description field.

You can print reports for documentation or filing purposes.
On the Expense Report card, select an action under Report to generate different report views:

Expense Report Details provides a detailed breakdown of all expenses in the report, including categories, dates, merchants, payment methods, amounts, and other related information.

Expense Report Summary Page displays a summarized view with grouped totals and category-specific details, and includes designated areas for signatures.

Expense Report Cover Page generates a cover page with key information such as the employee name, submitted to and approved by fields, expense report date, and total amounts.

When the approval workflow is enabled, submitted expense reports require manager review before they can be posted.

Select Search (Alt+Q)  in the upper-right corner, enter Manager Expense Reports, and then choose the related link.

The list shows expense reports that are pending your review. If the approval workflow limits visibility, you see only reports assigned to you for approval.

The approver can approve or reject an expense report.

If you need to reconsider a decision, you can reopen a report.

After an expense report is approved/released, you post it to the general ledger. Posting creates ledger entries for each expense line and processes reimbursement.

Before you post, you can review what entries Business Central creates.

• Open the Expense Report card for the approved report.
• Choose Preview Posting, or press Ctrl+Alt+F9.

The preview shows the general ledger entries, employee ledger entries, and other entries in the report. If expenses link to projects, the preview also shows project ledger entries. Close the preview when you’re done reviewing.

Post an expense report:

• Open the Expense Report card for an approved report.
• Choose Post, or press F9.
• Confirm the posting.

When you post an expense report, Business Central creates the following entries:

After you post a report, it moves to the Posted Expense Reports list and is no longer editable.

The posted report shows all the expense lines, amounts, and dimensions that were recorded at the time of posting. You can also access attached documents and statistics.

Posted Expense Reports:

Posted expense reports create expense ledger entries that you can use for analysis and reconciliation.

Select Search (Alt+Q)  in the upper-right corner, enter Expense Ledger Entries, and then choose the related link.

The list shows all posted expense entries with details like the expense user, category, amount, posting date, and document number.

In conclusion, while Microsoft recommends turning on the Expense Agent, you can still successfully utilize all the features mentioned above without it.
Great, give it a try!!!😁

PS: Introducing: Expense Management

END

Hope this will help.

Thanks for reading.

ZHU