Does your organisation have an expense policy? Is it easy to understand? If you answered "no" to one or both questions, don’t worry. We have some pointers to get you started on drafting a comprehensive yet easy to follow travel and expense policy.
A written, clear and easy to understand company expense policy is crucial for any organisation of a certain size. In this article, we will explain why this is and what should feature in any effective T&E policy.
A business expense policy is a formal document that lists the do's and don'ts regarding work-related expenses such as allowable business expenses and maximum amounts per category of expense.
Employee expenses, such as business lunches, business trips, home working equipment, etc. represent a significant proportion of a company's total costs (sometimes up to 10% of the total turnover). It is therefore only logical that, as your company grows, the need for an expense policy grows to ensure you remain in control of costs.
While no two corporate travel or expense policies will ever be exactly the same, here are a few common principles to keep in mind:
These are just a few important guidelines to keep in mind. But what about the specifics: what are expense policy best practices.
Transparency creates goodwill. Briefly explain why these rules exist and what the underlying motivation is. That way, both parties know where they stand.
It can be helpful to you and your employees to explain to them the general workflow, approval process and basic rules relating to employee expenses.
For example, that corporate expenses can only be incurred in a business context and in principle cannot take place during the weekend. The deadline for submitting expenses and providing receipts should also be mentioned. This is to avoid expenses being submitted past the useful timeframe for VAT declarations and recovery.
To start, we suggest you identify and name the person in charge of setting and managing the budget for each team or type of expense. This way, employees will know who to turn to with questions or when in doubt.
Ideally, your corporate expense policy should include specific budgets for each type of expense: home office equipment, transportation, lodging, meals, office expenses, and so on. However, it may not be possible for you to create such a clear list as budgets can fluctuate based on seasons, needs and strategic priorities.
Here are a few examples of rules per cost item that may work for you or could serve as a base.
Employees have the right to be reimbursed for expenses they incur on behalf of their employer in the course of doing business. Transparency will only create more goodwill in this area as well.
What is the maximum processing time? Can employees appeal a partial reimbursement? Within what timeframe?
Make sure to answer these questions - and stick to what you’ve said, or risk disgruntling your employees.
How your employees pay for business expenses also matters. Your travel and expense policy should reflect permitted payment methods and clarify them. For example:
Every organisation has its own culture and way of dealing with expense management. It is important for your expense policy to take this into account and officialise reimbursement processes that work for you in a written format. Having a clear policy also makes it easier to implement expense reporting software down the line that will automate policy compliance for you and your employees.
At the same time, writing or reviewing your corporate travel and expense policy is also a time for reflection - there is always room for improvement. Being consistent in the way you write and review your policy will help you come up with a logical and coherent system that works for you, your employees and your finance department.