Formulating an Expense Policy for Your Business

While paperwork isn't for everyone, it's a necessary part of running a business. In addition to the documents and signatures, you also need to make room for a cost guideline.

An expense policy provides guidelines for how employees should spend the company's money. This policy will help your company avoid payroll complications and misuse of company funds.

If you want to start developing an expense policy for your business, there are a number of things to consider. We have outlined these considerations below.

Creating an expense policy

To begin drafting an expense policy for your business, you should research and determine what you want your policy to cover. Expense policies often cover things like:

• Travel expenses and all costs directly related to the trip
• Accommodation and which hotels are acceptable
• Meals and entertainment and the question of whether there is a maximum amount that will be covered per day
• Expectations for employees about how they should adhere to the policy and how it will be enforced
• Timing and procedure for reimbursement of costs
• Local laws and regulations to follow

You should break down all types of expenses that your employees may incur and determine which of these expenses the company will reimburse and how. You should also try to calculate budgets for each team or department in the company to ensure you plan for any costs that may arise during the fiscal year.

Additionally, your spending policy should be as efficient as possible. Integrate the claims approval process into the policy to avoid uncertainty. Make sure you leverage all technologies to automate application submission and approval. Find a process that allows for timely reimbursement to avoid financial problems for your teams. Survey employees who travel frequently to ensure policies meet employee and company needs.

Simple and easily accessible

This policy will help your company avoid payroll complications and misuse of company funds.

Once you find the right policies for your company, you need to put them in writing. When documenting expense policies, use clear and simple language. If the policies are easy to understand, your employees will have an easier time understanding and following them. Expense policy violations often result from a misunderstanding of the policy or an inability to find answers to questions about the policy.

Make your clear and simple policies easily accessible to your employees. Some companies include a written copy of the expense policy in the employee handbook. Others include the policies directly in the system used to process expense reports so that employees can access them at any time.

Relevant and compliant

Once you've created your expense policy and made it available to your employees, the work isn't quite over. As with most financial matters, you can't just go ahead and forget about it.

Continually evaluate how the policies you create serve your business. Get feedback from your employees about how well the policies are working for them. Are your employees having difficulty adhering to policies? Do they fully understand the expectations? If not, maybe it's time to rework them.

It's also important to keep an eye out for updated regulations to ensure your expense policies are compliant. Changes in local or federal laws may affect your expense policy and require changes to how certain expenses are handled.

It can be difficult to keep track of these things, so you should assign someone in charge of this. If this person is able to monitor policy compliance and suggest changes when necessary, you will have an easier time managing expense policies.

Creating an expense policy may not be fun, but it is an invaluable tool for business operations. If you remember to keep the policy efficient, accessible, relevant and compliant, you will be well on your way to running your business more smoothly.

Check out IceHrm's payroll and expense modules to understand how they can help your business.