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A template for what to include in your expense policy

Expense policies outline how a company will reimburse its employees for money spent in carrying out duties for their employer. The policy will contain details of expenses that are reimbursable, and will often also include expenses that are not considered reimbursable.

expenses management

It’s important for companies to have guidelines in place:

  • to ensure control over costs and be able to better manage and predict travel and expense spend
  • to provide the rules for employees so they don’t end up out of pocket
  • to make it clear to line managers and finance what expenses they should accept or reject

Although every company has its own expense policy, there will definitely be similarities across organisations. One thing that is very clear. An expenses policy should be simple to understand, be concise and clear in its expectations of employees.

Our experience in helping customers digitise their expense management has given us insights into the shared features of an expenses policy. Here we’ve put together a list of things that you should consider including:

What to include in your expense policy

Introduction

This should be brief and explain why the company has issued this expense policy, who it applies to and what date it was issued.

Employee compliance and responsibility

The policy should clearly outline what consequences would occur if an employee does not comply with the details within and should set out the responsibilities expected from the employee e.g. using prudent judgement, ensuring that they do not seek to gain financially through the policy.

This section should also detail the consequences if an employee is found to have committed fraud, bribery or acted in a corrupt manner.

Some companies may require “pre-approval” (i.e. the employee should not incur the cost of those expenses before knowing whether they will be reimbursed) for certain expenses and that should be made clear here. Often expensive items such as airfares are subject to pre-approval.

This part of a policy might also include expectations on timeliness of expense claim submission. Many companies have shifted from gathering piles of receipts to submit as one big claim once a month or quarter, to a system that allows expenses to be submitted as they are incurred.

Types of expenses allowed

The next part of the policy should indicate which type of expenses the company will reimburse. It might also include details on whether the expense needs to be pre-approved or not.

Typically the policy will split out the expenses in general categories as follows:

Travel

This section would detail the policy for:

  • Airfares
  • Train fares
  • Taxi or Uber fares
  • Mileage, including details on cost per mile that can be claimed
  • Car hire, including limits on the class of vehicle that can be hired

Where applicable the travel section would include expectations on the class of travel (most companies state economy travel only), limits on costs and where exceptions can be made. Some companies will ask employees to limit taxi travel and aim to use public transport wherever possible.

Travel-related expenses

In addition to the transportation expense of travel, there are other expenses that can be incurred in relation to travel. This section of a policy would detail:

  • Baggage fees
  • Visas e.g. ESTA when travelling to the USA
  • Foreign currency exchange fees
  • Credit card fees when travelling abroad
  • Parking
Communications

A policy would include information about what can be claimed in terms of business calls made away from home, WiFi costs in the now rare event that an employee needs to pay for WiFi. It might also include the costs of using a personal phone’s hotspot to access the Internet. In all cases, a business is likely to include the need to show an itemised bill to support these expense claims.

Accommodation

Some companies indicate that any required accommodation should be booked through a specific provider, online travel agency or TMC (travel management company).

For some businesses, a policy might suggest that employees find accommodation under an average price – and the average price would usually be different for inner city rates versus out-of-town accommodation.

Meals

When staying away, there are likely to be limits set on how much can be spent per day or per meal and an expenses policy should make clear what those limits are.

Some companies specify that employees can have a “per diem” amount e.g. they have £50 per day which can be spent on meals and other incidentals and have to budget accordingly.

Some expense policies allow you to claim for meals if you are travelling before 7am or after 8pm and will have been away from your usual place of work for more than half of a full day.

Entertainment

An expense policy should explain what is reasonable in terms of entertaining customers, partners or other business associates and in many countries details of who attended the entertainment must be declared alongside the claim.

Some companies will want to include firm restrictions on what can be spent per person so as not to be accused of bribery and it’s important for employees to be mindful that some clients will not be allowed to accept certain “gifts” e.g. meals, if the value exceeds a certain amount. This type of information is usually documented in an expense policy.

Miscellaneous

There are other expenses that companies might wish to allow claims for that do not easily fit into the categories above. These include:

  • Necessary medical expenses
    For example a vaccination required to travel to another country
  • Annual eye test
    Some policies allow employees to claim optician fees for standard eye tests. In some countries this is a legal requirement for employers to pay for eye tests, especially where employees are using a computer screen in their work
  • Postage
    It’s reasonable to include the reimbursement of postage for mail sent on behalf of the company
  • Membership fees for a professional body
    Some companies will reimburse membership fees for the membership of a professional body, especially where that membership is essential to conducting one’s work
  • Training fees
    Some job roles require regular training to keep up to date and where that is the case, one would expect an expenses policy to provide for reimbursement of any training fees and materials

What isn’t covered by the expenses policy

The next section of an expense policy should include clear details on what is not covered by the policy.

Examples of expenses that are commonly excluded from reimbursement are:

  • Mini-bar contents
  • Fines e.g. for parking
  • Pay-per-view TV, newspapers
  • Clothes
  • Gifts e.g. flowers, sweets, birthday cakes
  • Tourist attractions e.g. trips to a zoo or to the theatre (though this may be acceptable if part of client entertainment)

Add any other exclusions that relate to your specific business.

Who should you involve when creating an expense policy?

To create a policy suited to your business, you should always involve the team around you and those that will be using the policy most e.g. salespeople, consultants etc. If you gain input company-wide, you’ll have a policy that will reflect what’s best for the whole company and you’ll have something that people are willing to follow.

Some companies have really short policies. Take Netflix as an example. Their policy is: “Act in Netflix’s best interests.” You can read more about their policy and others here.

But an expenses policy is just one piece of managing expenses properly. You should ensure that it’s a great employee experience to submit expenses – not a mindless, drudgery commitment every month or quarter. That’s why we would recommend using a cloud-based, mobile enabled expenses management system which allows you to submit expenses when you incur them, uses OCR scanning to extract and input the details of a receipt automatically, and a system that attributes costs to a specific business purpose such as A sales opportunity or a customer meeting.

Consider whether a static expenses policy is right for your business

There’s nothing wrong with static expenses management policies, but there can be instances in which their rigidness and inflexibility can unintentionally hurt an organisation.

Businesses that employ meticulously detailed expenses management policies detailing what is and isn’t allowable, end up with a rigid structure that can be counterproductive when it comes to real-world business scenarios.

Dynamic expenses management policies, which assess the need for spend in the first instance, allow for greater flexibility based on the circumstances of the trip. For example, a dinner at an expensive restaurant may look excessive, but the expense may be warranted if the meeting is with a high-revenue client and generates a positive ROI for your business in return.

So consider moving to a more dynamic expenses policy that empowers your people to make real-time decisions. This will ultimately benefit the organisation in terms of revenue and long-term profit. You can also ensure this is effective by tracking, reporting and analysing all expenses management data in real-time, ensuring you don’t over or underspend based on projected ROI.

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