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How to Create an Effective Business Expenses Policy (With Template)

Introduction

You may already have an expense policy or you may be an organisation just starting to realise you need one.

Either way, this guide is for you:
It provides all the basic help and information you will need to create a robust expenses policy document.

It’s the foundation on which effective expense management is built.

What is an expense policy?

A business expense policy is a document that outlines how your organisation handles business-related expenses. It gives employees guidance on what can and can’t be claimed for.

It provides a guide to the process of making claims, as well as what happens if there are disputes over expenses.

[ Download our free guide ]

Why your business needs an expenses policy?

Research suggests that implementing an effective expenses policy reduces an organisation's transport and entertainment costs by up to 20%. And who doesn't want that?

An expenses policy helps keep things fair

The primary aim of an expense policy is to provide a fair system of compensation for employees who incur personal expenses for business reasons.

Without an effective business effective policy, an organisation leaves itself open to spiralling costs and legal risks.

The key objectives of the policy, therefore, are to:

  • Be fair and transparent
  • Control costs
  • Prevent fraud
  • Ensure compliance

A clear expenses policy can even help with morale

If employees view the expenses policy as being fundamentally fair, it prevents expenses from developing into a breeding ground for low morale, discontentment, and exaggerated claims.

With a robust and fair policy in place, everyone knows where they stand. Employees may not agree or like aspects of the policy but they know exactly:

  • how the expense policy works
  • what they can expect from the company
  • what the company expects of them

As with many company policies, an expense policy can set the foundations for a fairer, more transparent workplace.

How to make a business expenses policy work

It sounds obvious, but the most effective expense policies are those that people adhere to. It's something that is understood, accepted, and followed. The policy also has to be effectively managed and maintained.

1. Strive for fairness

The most effective policies are those which employees view as being fundamentally fair. They may not agree with all of the rules and limits, but they accept them as being fair and transparent.

"While there will always be a certain amount of discontent towards an expense policy, it is this perception of unfairness which is commonly used to justify expenses fraud. It's how employees, who normally consider themselves law-abiding citizens, can 'legitimise' the act of fiddling their expenses."

Andrew May, Managing Director
Webexpenses

The way in which an expenses policy is presented to employees plays a large part in how it will be perceived.

Allowing employees to have input into the process of creating or revamping an expenses policy can help to engender acceptance. Rather than being something imposed from above, to be battled against; it’s viewed as a collective agreement.

This can be done with meetings and presentations where the policy is communicated and employees are able to provide feedback.

2. Keep it simple

No matter how fair, reasonable and robust a policy is; it’s of little use if nobody reads or understands it.

Left to our own devices, few of us will voluntarily take the time needed to fully understand and absorb a long document; especially when it’s dealing with the intricacies of an

organisation’s expenses.

It is vital, therefore, to present the policy in a concise, simple-to-understand and user-friendly manner. It should be viewed as a guide to help employees understand.

This means it should:

  • Avoid unnecessary jargon and corporate speak.
  • Be concise; provide only the information needed.
  • Find a tone appropriate to your organisation’s culture.

One option used by many companies is to present the expenses policy in the form of a company ‘wiki’—allowing it to be easily searched and accessed via the company intranet.

3. Keep it updated

One of the major mistakes made with an expenses policy is to create it and then forget about it. To treat it as a box that has been ticked.

An effective policy should be thought of as a continual work in progress. It needs to be regularly updated and adapted to match changes to both your organisation and the wider legislative world.

"Senior managers need to treat an expenses policy as something which is organic; always ready to adapt and change to the business environment."

Andrew May, Managing Director
Webexpenses

A policy should be reviewed and revised every few months to take into account price inflation, legislation updates and technological advances.

4. Choose the right tools

The way we manage our expenses has been revolutionised by advances in technology.

A slow and cumbersome paper-based process has been replaced by fast and efficient cloud-based systems.

It means that an expenses policy can now be managed, monitored and policed in a way not previously possible. Rather than being a static document, these tools allow the policy to be seamlessly integrated into the day-to-day life of your organisation.

The Webexpenses system allows managers to:

Set spending limits

The system is fully customisable to match your organisation’s policy with spending limits allocated to specific spending categories. Employees can be warned about a potential breach or they can be prevented from  making an illegitimate claim.

Flag areas of interest

Various ‘flags’ can also be set to trigger an alert when certain spending limits are hit. This can be used to help identify issues before they are allowed to become resource-sapping problems.

Ensure mileage accuracy

Ensures employees are able to record the exact distance they travel for any mileage claims to track business journeys. A mobile app is also available for claims on the move.

Integrate compliance

Confirmation screens can be set up to ensure that employees are aware of any compliance requirements at the point they are making a claim. These can be customised and specific to different categories.

5. Monitor and maintain

The digital management tools now available also transform the way expenses can be monitored and

maintained. A move to digital systems means that real-time information is now available for finance teams giving visibility overspend as and when it occurs.

There is no longer the need for a backlog of paper claims to build up. Claimants can now build their claims anytime and anywhere through mobile apps—uploading digital or photographed receipts to their claim, and submitting them for approval—all from their mobile device.

Without the drudgery of processing expenses, you can create a policy that is much easier to maintain.

Employees no longer view it as an onerous task; it becomes a seamless part of working life.

The other major advantage is that automated systems mean that finance teams can spend less time processing paper and more time monitoring the rich set of data now generated by expense

management systems.

This information can help to monitor the effect of any policy changes, as well as helping to identify troublesome trends and potential policy breaches.

Create an effective document with our business expenses policy template

With digital expense management tools helping us monitor and maintain an expenses policy, there’s no longer any excuse for a failure to take control of your expenses. Sometimes, it’s just a case of knowing where to start.

Our business expenses policy template is designed to help you quickly put together an expense policy.

[ Download your business expenses template ]

And once you’re ready to truly take control of your expenses, book a demo to try Webexpenses for yourself. 

You may be surprised by how much time our easy-to-use platform could save you, and your team.

[ Request a demo ]