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Your easy to follow expense policy checklist

By February 27, 2024No Comments6 min read

Your easy to follow expense policy checklist

 

An expense policy is like a rulebook for business expenditure. It provides explicit guidelines for your team on how to spend company money without causing confusion for the finance team.  
 
This framework outlines what business expenses can be reimbursed, what can’t, and the process for getting money back after spending it. 
 
In this blog, we outline everything you need to know about business expense policies and the steps you can take to build the perfect policy, tailored to your organisation

 

What are 5 the biggest expense policy challenges businesses face?

 

1. Enforcing the policy

It’s one thing to create a policy, making sure it’s implemented company-wide is another story.

Finance teams often struggle with the time-consuming nature of tracking receipts and reconciling corporate credit card data.

2. Poor communication

It’s difficult to ensure that all employees, read and save a copy of the policy, especially if it’s extensive. 

Generally speaking, it’s best to send ongoing reminders to your employees and ask line managers to redistribute a copy to their teams. 

3. Unwillingness to move away from manual processes

Relying on manual practices, such as saving physical receipts and using paper spreadsheets, can overwhelm your finance team.

This is not only an outdated way of working, but more importantly, it can lead to inefficiencies and human errors.

4. Lack of visibility over company spend

Numerous finance teams encounter difficulties in managing and controlling expense spending, and this problem intensifies as organisations expand their headcount. 

5. Downstream impacts on month-end close

Discrepancies, unaccounted receipts, or unapproved business expenses can cause delays, preventing your finance team from closing the books promptly.  

  

 What makes a successful expense policy? 


You might think the key to a successful policy is length and over explanation. In actuality, an efficient policy should be short and to the point.
 

In essence, your policy should be:

Clear and easy to understand: Avoid unnecessary financial terminology and focus on establishing a standardised set of rules without numerous exceptions. 

Well structured: Enhance readability by incorporating a solid structure. A recommended starting point involves creating a comprehensive overview, followed by outlining which expenses can and cannot be claimed back.

Concise and straightforward: Regularly review and update it to ensure alignment with the company’s size, culture, and compliance with fiscal laws and regulations in the relevant countries of operation. 

 

Your easy to follow checklist when creating an expense policy


Creating an effective policy involves several key steps to ensure clarity and consistency within an organisation:

 

1. Collaborate with key stakeholders

“It takes a village” this predominately refers to raising a child, but it also applies to creating an efficient expense policy.

You’ll need support from the leadership team, the finance team, HR, marketing, and sales to understand company spend needs.

 2. Categorise your business expenses

Well defined expense categories will help you streamline your accounting, taxes, and reporting.

These categories should cover all company expenses, from travel and accommodation to meals and entertainment. 

3. Set pre-defined budgets for each category

A good way to establish spending limits for each category is by examining previous business expenses. 

This entails analysing the average costs of travel and accommodation for the sales team, and adjusting budgets based on changes in organisational size. 

4. Define the approval process 
 
Ensure that your employees are well-informed about the procedures for submitting their expenses and the individuals responsible for approval.  
 
These processes should be transparent and include guidelines for contesting a rejected expense.

5. Outline the reimbursement procedure

You need to outline the entire process for filing expense reports, specifying the reimbursement timeline.

This approach ensures clarity, prevents misunderstandings, and streamlines the overall reimbursement process, contributing to effective financial management.

6. Outline employee responsibilities and compliance expectations

A well-constructed policy will clarify what type of proof is expected when submitting a business expense (i.e., paper receipts, digital screenshots…).

It should also define the consequences of any policy violations. Disciplinary actions for noncompliance should be communicated during employee onboarding and included within the expense policy. 

7. Regularly update your policy 
 
As businesses evolve, expanding their operations and workforce, expenses naturally increase.  
 
A dynamic and adaptable expense policy is essential to navigate the evolving landscape of employee spend as the organisation grows and prospers. 

8. Streamline the entire process with tech 
 
Regardless of the size of your company, receipts get lost, and mistakes happen.  
 
That’s why many organisations turn to expense management software that seamlessly integrates with their payroll and accounting systems, ensuring a smooth and efficient reimbursement process. 

  

 

What is a business expense?

A business expense refers to the costs incurred by a company in its day-to-day operations. These expenses, which cover a range of common costs related to the regular functioning of the company, are tracked for tax purposes.

What are employee expense reimbursements?

Expense reimbursements for employees involve receiving repayment for costs incurred during work duties, commonly associated with travel, accommodation, subsistence, and various other expenditures.

Why should you automate your expense management process?

Automating the expense management process enhances efficiency by saving time, minimising errors, providing real-time spending insights, and facilitating streamlined audit and compliance checks.

What are the different types of business expenses?

There are three primary categories for corporate expenses:  

  1. Fixed expenses: These are consistent costs that remain stable or only slightly fluctuate over time, such as car payments, WiFi bills, loan repayments, and rent.
  2. Variable expenses: These costs vary from month to month and include items like supply costs, mileage, and utility bills.
  3. Periodic expenses: Occasional or infrequent costs, like those paid every once in a while, make up periodic expenses, making them challenging to plan for. 

How are reimbursement requests processed?

Reimbursement requests are typically processed by submitting the relevant expense documentation, such as receipts or invoices, to the appropriate department within an organisation.  
 
The documentation is then reviewed, verified, and approved for reimbursement, after which the employee receives the funds owed for the incurred expenses.  
 
The specific process may vary among organisations, but it generally involves a systematic review to ensure accuracy and compliance with company policies. 

Want to keep track of your company spend?

 

With our accurate expense tracker your management team enjoys a comprehensive data overview, enabling them to discern trends, monitor business expenses, and maintain a firm grip on budget management and cash flow. Book a demo here, to see Capture Expense in action.   

Empowering your organisation,
one expense at a time.

Experience the power of our all-in-one platform and say farewell to spreadsheets! Save valuable time and money with effortless automation for reimbursements, vehicle mileage, and credit card reconciliation.

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