Creating a comprehensive company expense policy is crucial for effectively managing and controlling company expenses. A well-drafted policy provides clear guidelines on what expenses are reimbursable, sets spending limits, and ensures compliance with regulatory requirements.
Here’s a comprehensive guide to help you create a robust business expense policy.
A company expense policy is a set of guidelines and rules established by a company to govern the reimbursement and management of expenses incurred by its employees, contractors, or anyone acting on behalf of the organization.
The primary purpose of such a policy is to ensure that business expenses are incurred for legitimate and necessary purposes and that there is a standardized and efficient process for reimbursement.
Here’s why having a expenses policy template is essential:
You may ask how having a powerful expense policy is helpful? Here’s how:
Here is a free, customizable copy of the business expense policy template you can use in your company. The company expense policy template contains general reimbursement guidelines, reimbursable and non-reimbursable categories, payment methods, and policy exceptions.
Download your free copy of the sample expense policy template today to create a comprehensive business expense policy.
Here is the 8-step process to create a robust expense policy for your company (with free business travel expense policy templates).
Before you start creating your business expense policy, decide the approach you would want to
take. Our sample business travel expense policy will give you an insight on this. See if you want to go for a detail-oriented policy or the one that just outlines broad principles.
There is no right or wrong approach. Some businesses prefer a detailed the expenses policy template where everything is written down and all scenarios are covered, so there is less room for doubt.
On the other hand, there are businesses that believe that employees don’t read exhaustive policies and it is best to just lay out the broad principles and leave the rest to employees’ judgment. Netflix is a good example of this. Their expense policy is just five words “act in Netflix’s best interests”.
How you draft your company expense policy will depend on the approach you take. Choose wisely! To help you out in this regard, we have created a business travel expenses policy template you can download for free.
Pro-tip: It is a good idea to involve all the stakeholders right from the moment you decide the structure of your expense policy. This ensures complete visibility and better adoption in the long run.
Ensure your company expense policy is expressed in straightforward and easily comprehensible language. This clarity is essential to ensure employees understand business-related expenses’ dos and don’ts. An uncomplicated and clear policy facilitates understanding and enhances the likelihood of widespread adoption among the workforce.
Your expense policy should have clearly defined annual budgets for teams and spend limits for employees (based on their bands). They should know upfront how much they can spend on the company’s behalf.
Another critical aspect is defining various expense categories and clearly stating what is eligible for employee expense reimbursement and what isn’t. You can refer to the free business travel expense policy template that we have given in the blog to understand more.
Your organization might have different kinds of payment modes for various spends. For instance, you might have a card for subscription payments of tools, cash advances for some impromptu purchase, etc. Your policy should detail out the scenarios to use a specific payment mode, spend limit, and process of reimbursement for each. Listed below are the most commonly used modes of payment by employees for business purposes:
No matter how your employees pay the business travel expenses, ensure that they are well aware of limits, approvals required, and the process of reimbursement.
While it’s advisable to avoid crafting a policy necessitating the CEO’s approval for every expenditure, certain substantial expenses, such as international travel, necessitate the endorsement of senior management.
Establishing a clearly defined approval workflow that encompasses exceptions streamlines the process and contributes to a positive employee experience. This approach saves valuable time and effort for all stakeholders involved.
While drafting the policy, do spend some time creating a simple reimbursement process. You can refer our corporate travel expenses policy template.
Along with these prerequisites, spend some time defining the whole expense reimbursement process, from approvals to repayment, with a timeline at each stage. Please go through our sample business travel expense policy for better insight.
While you move towards the end of drafting a business expense policy for your organization, ensure your expense policy complies with the local legalities. Consult with an expert, include necessary clauses, and mention what happens in case of any legal violation.
Building a travel company expense policy isn’t limited to just circulating it once – it is important to closely observe the changing times, trends, and requirements and make edits accordingly. For example, with work-from-home becoming the new trend, it is essential to include evolving expenses like home office supplies, internet, physical and mental wellness, masks and PPEs, and more. However, you might have to revisit your policy once the office restarts for everyone.
