Expenses Policy And Procedure – Best Practices
A good expenses policy can vastly simplify expense management. Yet few companies take the time to create one. Here we give you some tips to make your policy effective. Check out our next article for an expenses policy template to get you started.
But before we dive in, here is a reminder of the two major benefits of using an expenses policy:
- Employees’ compliance will improve, as they will know what expense is legitimate. This in turn will smooth the entire expense management process.
- It will be simpler and faster for your finance team to review expense reports. In addition, it will be easy for them to reject out-of-policy claims. No one will blame them because they themselves have to follow the rules.
Here are 10 tips that will help you create and, over time, improve your own expenses policy:
1. Be concise to ensure people read and remember it
An expenses policy is a document that should be easy to read and understand. Its length should be no more than a few pages; otherwise few employees will read it.
2. Clarity is paramount
The expenses policy is a set of rules that employees will consult from time to time, especially when they are not sure what constitutes an acceptable business expense. You should resist the temptation to use financial jargon that employees in other departments won’t necessarily be familiar with.
3. Get everyone’s input
It may be tempting to spend a couple of hours to produce a document that every one should follow. But a better approach would be to take time to get everyone on board. Ask your team to participate and consult frequent business travelers in your organization. People are more likely to respect the rules if they were involved in their setting
4. Make it fair to increase compliance
Enforcing the expenses policy shouldn’t be a permanent battle between managers, finance people and business travelers. If the expenses policy is perceived to be fair, it will be easy to enforce and people won’t push back and complain at every opportunity.
5. Make it flat, everyone should play by the same rules
Unless you have some very good reasons, the rules should be the same for everyone, regardless of their role or hierarchy. You don’t want a junior employee to find out that he can’t stay in the same hotel as his manager because according to the expenses policy he wouldn’t be fully reimbursed while the manager would be
6. Don’t be afraid of over-communicating
The expenses policy should be easy to find for employees. In other words, there is no point in producing a document that stays hidden in your drawer.
Some actions you can take to communicate the expenses policy include:
- Email your expenses policy to your employees.
- Print copies and distribute them, then hang a version on a visible wall.
- Make a presentation and invite everyone to attend it.
- Whenever a claim is out-of-policy, use the opportunity to send the copy as well as explain why the expense is not inline with the company rules.
7. Get managers on your side
Managers are key to the success of the expenses policy. They are the one who clear (pre-approve) the expense reports before they land on your desk. Therefore, you should put an extra effort in presenting them with the reasoning behind the rules and what is expected from them.
8. Frequent updating helps stay relevant
The expenses policy need not be perfect the first time. This document should be regularly updated and improved as you get feedback from your employees and auditors. If you find people are making the same mistake time and again, add more guidance. If they are confused about certain types of expenses, clarify the rules.
9. Pay back: be quick to reimburse claims
The expenses policy is just a cog in your expense management process. All the pieces should work well together to make the entire experience pleasant. If you ask your team to respect the rules, it’s natural that they will ask for something in return. Here are some ideas you can implement to pay them back:
- Make it easy to submit expense reports.
- Make the process transparent. It should be easy for them to track the status of their expense claims.
- Get them reimbursed quickly.
10. Adopt technology
Let technology do most of the heavy lifting on your behalf. A good expense management solution should help you enforce your company expenses policy. It should notify claimants when they violate the rules and give them a chance to amend their reports before submitting them. When a claim is submitted, it should also draw the attention of managers and finance people to any potential out-of-policy expense.