How To Create A Simple Expense Policy in 2023: The Complete Guide by ExpenseOnDemand image

How To Create A Simple Expense Policy in 2023: The Complete Guide by ExpenseOnDemand

In today's climate, when many employees work from home, a clear and concise company expense policy is extremely important to your business success.

onTuesday 10 October 2023

The result is that many businesses and organisations have clearly defined their expense policies regarding whenwhere, and how they will reimburse their employees for travel expenses and company expenses.

Unfortunately, this is not the case with all, because many businesses and organisations do not have a formal business expense policy.

In today's climate, when many employees work from home, a clear and concise company expense policy is extremely important to your business success.

Therefore, your employees need to know what they can claim. The business may also save money on unnecessary expenses this way.

We will also explain how you can use ExpenseOnDemand to drive efficiencies to your team and eliminate manual work, which create errors and additional work, and how & why you should embrace automation to increase productivity and value add.

Let’s see how your business can implement an expense policy with ease.

Level up with your expense policies with these help guides

What is an Expense Policy?

An expense policy is a set of rules that define what an employee can and cannot claim as a business expense. For example, expenses made for leisure are not acceptable to claim as work related expenses. Whereas, if you require an Uber from the office to a clients office, employee claim this as a travel expense.

An expense policy is a guideline for employees which states what they can and cannot claim. A policy outlines the process that an employee should follow when filing work/business expenses.

Depending on how you communicate with your teams, the policy can be either formal or informal. It should clearly state the parameters within which an employee can make business-related purchases.

For example, if your company has a limit on how much you can spend on travel per trip or per year, this should be stated in your expense policy to avoid confusion when it comes to time of expenses being claimed.

An effective company policy will cover all aspects of your company's budget:

  1. Expenditures for office supplies

  2. Utilities

  3. Phone lines

  4. Business travel expenses like flights and taxi fares

  5. Entertainment costs like tickets to movies or sporting events

  6. Gifts (like flowers) given by employees during client visits

  7. Phone bills and meals purchased with colleagues after work hours outside the office.

  8. Online payments and purchases

There are better ways of managing your team(s). It's not enough to send reminders on Microsoft Teams, Slack or even WhatsApp to clarify work related expenses.

In order for HR and finance to productive with their time, a well-created business expense management system can save a lot of time with managing

You can't change people, but you can change the situation.

A system increases employee morale by showing them how much their efforts are appreciated by their employers and that their expenses are reimbursed fairly.

If you're starting out and learning about how to implement a company expense policy, setting up a Microsoft Excel or Google Sheet for this would be a great step in the right direction.

It's important to note that using a spreadsheet to manage employee spend can become distracting, repetitive and unclear.

In other words, there is room for duplicate expenses to be submitted to the company.

If you'd like to see how we help thousands of businesses create and monitor an spend policy, you can book a demo with our team.

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Importance of an Expense Policy During Expense Management

When employees incur and request reimbursements for work related expenses, a policy provides guidelines and structure which they should follow to manage expenses effectively.

That apart, a well-articulated spending policy prevents misunderstandings and disputes between employees and management regarding expenses.

It also helps organisations maintain control over their business expenses and promote fiscal responsibility within the organisation.

In addition to helping reduce the risk of fraud, it can also ensure compliance with local laws and regulations.

As a result, a good policy ensures that the expense management processes are efficient, transparent, and fair for all employees.

Finally, to ensure the success of the organisation, it is important for expenses to be:

  1. necessary

  2. appropriate

  3. documented

  4. account for promptly.

Let's deep dive into how you can create your policies.

How To Create A Simple Expense Policy in 2023

To get started with creating your employee spending policy, there are a few steps worth considering before rushing off to it. Take a moment to understand the contents of a reimbursement policy and how to create a robust policy for your business.

To follow along, you can download a sample expense policy we’ve created for you here.

Begin with an overview

  1. Start your expenses policy with an overview of your company's standards and the reasons why the policy document has been created. List which types of purchases are eligible for reimbursement and explain why the business may not reimburse employees for certain expenses. Reviewing these concepts at the beginning of your document can help employees understand the expenses policy clearly.

    For example: all must have receipts, no personal expenses can be charged to the business.

    A classic case would be where an employee has gone to New York for work, and they take their spouse with them. The difference in the room charges for single and double occupancy, a percentage of meals / room service, etc should be subtracted from the expenses booked to the employer.

  2. Expenses should be reasonable, keep in mind the nature of the business

    Example 1: For example some businesses add a point, which says, “spend the company’s money, as if you were spending your own money”. Essentially, this forces the employee to think twice before they splurge on expenses.

    Example 2: Another example would be, if you are a middle level executive, would you fly First Class for business (Screen 2), but only Economy for personal travel. This ensures that money is not wasted.

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In the above example, the employee is not entitled to travel First Class (Screen 2), but chooses to travel First Class, because there is no policy.  The employee can only travel Business Class, and the ticket limit is GBP 3000. 

In ExpenseOnDemand the limit would have been set in the background for a Grade 6 employee, and they could not spend more than GBP 3,000, without a pre-approval and proper justification.  Even so, if they provided a justification, the expense would have been logged on the Expense Policy Dashboard, and perhaps would have also gone for Counter Approval (if this function was turned ON).  

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