While it’s not everyone’s favorite, paperwork is a necessary part of running a business. Among the documents and signatures, you’ll need to create space for an expense policy.
An expense policy provides guidelines around how employees should spend company money. This policy will help your company avoid payroll complications and misuse of company funds.
If you’re ready to begin developing an expense policy for your company, there are a number of things to consider. Here, we’ve laid out those considerations.
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Building an Expense Policy
To begin developing your company’s expense policy, do your research and determine what you’d like your policy to cover. Expense policies often cover things like:
- Travel expenses and any expenses directly related to travel
- Accommodations, and what hotels are acceptable
- Food and entertainment, and if there’s a maximum amount that will be covered per day
- Expectations for how employees should follow the policy and how it will be enforced
- Expense reimbursement timing and process
- Local laws and regulations to follow
You’ll want to break down all of the types of expenses your employees might have, and determine which of those expenses the company will reimburse and how. You should also aim to calculate budgets for each team or department in the company when possible to ensure you’re planning for any costs that might come up throughout the fiscal year.
You also want your expense policy to be as efficient as possible. Build the claim approvals process into the policy to limit uncertainty. Make sure you’re utilizing any technologies to automate claim submission and approvals. Find a process that allows for timely reimbursement to limit financial issues for your teams. Consult employees who travel often to make sure the policies align with employee and company needs.
Simple and Accessible
This policy will help your company avoid payroll complications and misuse of company funds.
Once you’ve landed on the right policies for your company, you’ll need to put them in writing. As you begin to document the expense policy, make sure to keep the language clear and simple. If the policies are easy to digest, your employees will have an easier time understanding and following them. Expenses policy violations are often the cause of misunderstanding the policies or the inability to find answers to questions about the policy.
Take your clear and simple policies and make them easily accessible to your employees. Some companies include a written copy of the expense policy in the employee handbook. Others include the policy language directly in the system that expense claims are processed so that it’s accessible to employees whenever they need it.
Relevant and Compliant
Once you’ve built your expense policy and provided it to your employees, the work isn’t quite over. As with most finances, you can’t set it and forget it here.
Continually evaluate how the policies you’ve created are serving your company. Get feedback from your employees on how well the policies are working for them. Are your employees having trouble working within the guidelines? Do they fully understand the expectations? If not, it may be time to revise them.
It’s also important to keep an eye out for updated regulations to ensure your expense policy is compliant. Changes in local or federal laws may impact your expense policy, requiring changes to how your company handles certain expenses.
It can be difficult to stay on top of these things, so consider assigning a primary stakeholder to do so. If they’re able to monitor and make recommendations for changes as needed, you’ll have an easier time managing the expense policy. Learn how Justworks can make expense reimbursement easier by visiting our Payroll feature page.
Building an expense policy may not be fun, but it’s an invaluable tool for business operations. If you can remember to keep the policy efficient, accessible, relevant, and compliant, you’ll be well on your way to running your business more smoothly.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.