What are the key components of an effective company expense policy?
Employee expenses can be an afterthought, but they are at the crucial intersection of two key business imperatives. Keeping control of spending protects your bottom line, and ensuring employees are happy protects your other key asset: company talent.
A balance can be struck that ensures that unnecessary spending is kept to a minimum while employees feel that they are being taken care of and treated with fairness and transparency.
To do this, it’s important to create a well-crafted company expense policy. With some strategy and foresight in the short term, this will create compound benefits as the company grows. It will help you avoid time-wasting queries, grey areas and any potential claims of preferential treatment.
This article will go into depth about how you can create a comprehensive company expense policy.
Create clear categories and budgets
Go into detail about which expenses are reimbursable and which are not, and create categories to facilitate the process. Common categories of business expenses include:
Travel expenses, such as flights, accommodation and meals
Transportation, such as car rentals, taxis and public transportation
Entertainment and client meetings
Office supplies and equipment
It is advisable to create specific limits for each category, and specify what would count as an unacceptable luxury, rather than a necessity. Expense management tools can help automate this, notifying employees when they are approaching a limit.
Address issues such as class of travel, use of corporate discounts, the type of accommodation that is acceptable, and any preferred suppliers. If international travel is commonplace, you may want to outline approved methods for currency conversion and guidelines for transactions in foreign currencies.
Explain protocol for approval and reimbursement
It should be clear who has the ability to approve which expenses and whether expense limits must be established in advance in every case. Set out how to document expenses and submit them for approval. Deadlines may be needed to prevent unnecessary delays.
Are screenshots of bank statements or email confirmations acceptable documentation of employee expenses, or do you need paper receipts? Lay out all the details and the information, such as date and purpose, that should be included when submitting. If your expenses system requires employees to pay for business expenses out of their own pocket, employees should have a clear sense of how and when they will be reimbursed to avoid frustration and potential financial strain.
Ensure there is clarity, transparency, and compliance
Employees should feel like they are taken care of fairly and the rules make sense. Take the time to explain the purpose and scope of your company expense policy and how it is applied across the board. Consider how expenses will be reported to management and stakeholders, especially as regards any special exceptions.
At the same time, you need to consider legal and tax compliance. It should be clear which expenses are tax-deductible, and a powerful expense management tool will help when it comes to accounting and reconciliation.
Think about consequences and exceptions
What consequences will follow if employees don’t adhere to the expense policy? Examples might be warnings, financial penalties, or disciplinary actions. Are there any circumstances in which deviation from the policy may be necessary, or do certain employees have access to certain types of business expenses?
Clarifying the answers to these questions now will make troubleshooting easier later on. Be aware that special approvals for exceptional circumstances and a certain degree of flexibility can be part of a fair and transparent policy.
Share widely and update often
There’s no point crafting the perfect expense policy if no one reads it. Think about a clear layout, about making it available in printed form as well as in shared drives or on a company intranet, and make sure people know how to access it if they need to refer back to it.
Company policies should evolve as the business inevitably grows and changes. Expenses that were seen as unacceptable luxuries may become justifiable, for example, if clients need to be entertained to a high standard or if employee retention is a priority. In other circumstances, the reverse may be true.
How expense management tools can help
With advances in expense management technology, there’s no longer a good excuse for sticking to outdated, time-consuming, manual solutions for tracking and approving expenses. These may leave employees out of pocket and disgruntled, syphon away valuable time from your accounting staff, and make real-time oversight of company spending much more difficult than it needs to be.
Streamline your expense management with Airwallex
Airwallex is a payments and financial platform that helps companies streamline global money management while expanding their international ambitions. This includes end-to-end expense management.
Employees can be issued with multi-currency Borderless Cards with built-in expense management. Your business can track spend in real-time, set a variety of spend limits for each card, and restrict purchases to specific merchant types as needed.
Airwallex cards allow employees to make purchases in multiple currencies from held balances in your Airwallex account, eliminating unnecessary foreign exchange (FX) fees. If the right currency isn’t available, funds will auto-convert at market-leading FX rates.
Employees can upload pictures of receipts, catagorise spend, and submit expenses for your finance team to track, review, and approve, all within the Airwallex platform. You can build multi-layer approval workflows and set expense submission criteria. With the Airwallex mobile app, expenses can be submitted and approved on the go. It’s a better all-round solution for employees, managers, and finance teams.
Airwallex provides company cards for expenses such as software subscriptions and advertising spend, and employee cards for expenses such as travel and team events. Expenses can be synced with your accounting software, so accounts will be automatically reconciled. If your company is running several business entities, separate expense accounts can be created and managed for each one.
Sign up to Airwallex today for a more streamlined approach to expense management.
Tilly manages the content strategy for Airwallex. She specialises in content that supports businesses in their growth trajectory.