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As the saying goes, you need to speculate to accumulate. Expenses are a big part of any business, but not every company has a clear expense policy.
To keep costs down as much as possible you need to provide employees with clear guidelines on expenses.
Keep reading to learn the importance of having a well-thought-out policy in place and get the building blocks you need to write your own.
What is an expense policy?
Expense policies are documents that are available to all your staff and have clear instructions on what they can spend. Helping them to understand how much they can spend on things such as working lunches, overnight stays, tools, equipment, and more.
Generally, the rules vary depending on the worker’s position within the organisation.
Expense policy benefits
Staff having and knowing expense guidelines can only be a good thing; it makes their lives easier, whether that’s the accountant, the manager, or front-end workers.
It can reduce costs, increase compliance, and help your team get paid back faster if they’re out-of-pocket.
Company expense policies can also provide clear evidence for any reimbursement disputes; how many times have disgruntled staff claimed for expenses that haven’t been reimbursed either partially or in full? Having a policy can help to avoid these awkward conversations and improve staff harmony.
Learn how to empower your team with accountabl.
Do your research
Firstly, do you understand HMRC tax rules? One of the first things you need to know is what expenses are deemed allowable by HMRC. If you’re opening expenses to the wider organisation, it makes sense to only allow expenses where you can get the VAT back.
Speak with your finance director or consult with an accountant for advice. Not only will you potentially save your business money but knowing this early on can help you define what’s acceptable for your business expense policy beforehand.
Define expenses and limits
Next, create your list of allowable expenses. Write a list of all the things employees are and are not allowed to claim. There may be instances where staff can claim for some but not all the expenses on a receipt; alcohol with their evening meal is a prime example.
Consider who might claim, because the rules for managers might be different from the rules for other staff.
You should also think about how much you're prepared to spend on expenses, and consider limits for expense types, weekly or monthly limits, which may vary for different workers. This section of your company expense policy can be tricky, given all the types of expenses your business might incur.
You may want to look back over your business’ historic spending to get an idea of how much things cost. If you’re using expense software, you should be able to look back over company-wide transactions, helping you decide how much to allocate to different expense categories.
Learn more about expense software.
Create procedures
Have clear guidelines for how staff claim; when do claims have to be submitted, and in what format? And finally, have a clear and well-defined disputes procedure for staff to reference. It’s vital to understand from the get-go what happens when an expense is unauthorised.
Expense software
Expense software can help inform policy creation, and boost compliance.
Information is key to a successful business expense policy. You need to be able to see detailed and accurate information easily. Systems like accountabl allow you to see a comprehensive analysis of all your expense transactions in one place. You can see who made the transaction, a picture of the receipt, the expense category, and where and when they made the purchase. So, it’s quick and easy to cross-reference against your policy.
Plus, prevention is better than cure. With accountabl you can pre-set spend limits on our cards against each employee, so they can’t break policy rules.
Armed with all of that info, you’re now ready to start writing your company expense policy.
For more support, check out our free downloadable expense policy template.
