What is an Expense Policy?
An Expense Policy is a set of rules defined by a company that specifies how employees are reimbursed for expenses they incur on its behalf. Simply put, it is a list of all the do’s and don’ts for your employees when incurring expenses.
However, there’s much more to it.
From the employee perspective
For the employee, it’s a guideline on how they can spend the company’s budget when travelling for work. By holding on to these guidelines, they can be sure to be reimbursed for the amount that’s allowed within their policy. They don’t have to negotiate the expenses because the standard has already been laid down in the policy.
From the employer perspective
For the employer, there are a few more advantages. By having a good Travel & Expense policy, it’s possible to avoid fraud, set boundaries, and make it easier to make estimations. By including the right guidelines and workflows in the T&E policy, employees will know exactly what’s expected from them when reporting their expenses. By setting boundaries you’ll keep spending under control, avoid discussions and it will be easier to trust your employees.
Also, having a good set of rules will make it easier for finance departments to forecast expenses. Oftentimes, T&E accounts for the second largest cost for companies. This means that having better rules will not only give you more transparency and more insights into employees’ spending, but also enable you to start optimising this cost centre.
What makes a good Travel & Expense Policy?
You may be thinking an expense policy needs to be long, covering every type of expense in detail when, in fact, it’s actually the opposite. A good expense policy should be short, simple, well structured and relevant. It shows how the employee can spend the company’s money, but in a thoughtful way.
Nobody likes to read a 20+ page document to understand how they should travel. Compliance with your expense policy will be higher when things are kept short and readable.
You Expense Policy Should Be
Don’t lose yourself in the details. The Travel & Expense policy is there to exclude exceptions and create a standardised set of rules.
Make it easy to read by adding structure to it. A great way to start is to make a good overview by organising your T&E policy per category.
Make sure your policy stays up to date. This means that it should fit your company size and culture, but also that it stays up to date with fiscal law and regulations.
How to write an Expense Policy?
Start your expense policy by explaining the purpose of these guidelines. This will ensure trust between the employee and the employer. Both parties will know what can be expected from them.
Set Your Expense Policy’s Rules
Next, explain the workflow of filing expenses, the approval process and some general rules. Such as that expenses can only be made in a business context and can’t occur during the weekend.
For fiscal reasons, receipts will often be required, this can depend on the location and the amount of the expense. Don’t forget to set a deadline on how long employees can file an expense, you don’t want to receive receipts that can’t be used for tax reclaim anymore.
The core of the Travel & Expense policy will be the overview of the different categories of cost centres. Each category will require specific rules. Common categories are transportation, lodging, meals, and office expenses.
To get you started we’ve listed 3 example rules per category
- If the mileage expenses are below €250/month, only 1 level of approval is required
- An Uber expense can maximum be €30/fare
- You can only expense a parking ticket if you have the actual receipt
- Items from the minibar will not be reimbursed
- Max amount based on function and location
- Laundry expenses are only reimbursed if the stay is longer than 5 days
- All attendees should be mentioned when submitting the receipt
- Lunch limits per country e.g. €25 as the maximum amount in Belgium, €20 in Portugal
- The maximum amount that can be reimbursed for dinner is €20, the excess amount will not be reimbursed
- Expenses below €10 are auto-approved
- Office expenses can’t exceed €30/month
- Mobile subscriptions can’t exceed €40/month
How to improve your Travel & Expense policy?
Expense management platforms are built to help companies automate their expense processes. Not only to improve the submission but also to automatically enforce expense policies. Submitted expenses are analysed against Travel & Expense policies and instantly flagged or rejected if non-compliant.
Automating the control of expenses, it allows users and approvers to immediately see the expenses that are out-of-policy and add an explanation or remove them altogether from their expenses list.
How to communicate about your T&E Policy?
The way you present your policy is as important as its content. You can’t expect employees to read and remember an 8 page word document.
Work with an internal or external designer to build a T&E document that will impress your employees. Your expense policy is only effective if employees know about it, so it’s important to make this easily accessible but also to give regular feedback when employees violate the corporate policy.
A good way to do this is to include your policy in your expense platform, making it available for employees every time they expense something.
Looking for an example of a T&E policy? Look no further and download our template.