Is Your Expenses Policy In Need of a Makeover?
When was the last time you reviewed your expenses policy? If you’re anything like the average business, your expenses policy hasn’t been updated for years, perhaps not since you first wrote it.
Your policy might not have changed, but the way your employees expense has. Uber, Airbnb, apps & data - the way employees are spending money has been completely transformed in the last few years, and for many business expenses, you’re more likely to see a digital receipt than a physical one.
Despite this shift, most expenses policies are critically out-of-date, creating an opportunity for confusion that frustrates your employees and adds to the workload of your finance team.
An outdated expenses policy makes it easier for employees to submit exaggerated or outright fraudulent expense claims. 85% of workers in the UK admit to submitting an expense claim that stretches the truth at least once a year, and 5% over-claim every time.
Every time this happens your business loses money: out-of-policy claims cost organisations £197 per employee, per year. Additionally, if these mistakes are spotted by HMRC your business will be subject to further fines. Further resources are wasted because many expense claims are incorrectly filled out.
Updating Your Expenses Policy
Your expenses policy is a key tool in improving your employee’s expenses behaviour. By education employees and clearly setting out what can and cannot be claimed, you can reduce incorrectly filled expense claims and exaggerated or fraudulent claims. A clear policy makes ‘I didn’t know’ an invalid excuse, enabling HR to act on incorrect behaviour.
Ideally, your policy should be a regularly-updated tool that is widely published for the whole business to see and read, not a document that an employee glances at once when they receive their contract, then never refers to again.
If you are going to update your expenses policy, you should consider the following:
Consult Key Stakeholders First
Your CFO and finance team aren’t the only people who will have valuable input on your expenses policy. You should also speak to heads of departments and managers responsible for signing employee reimbursement requests, as they are key allies in ensuring employees report their expenses accurately and on time.
Your policy is far more likely to be respected and followed if you can get these individuals on board by creating a document that works for them.
Review The Types of Expenses Your Employees Claim
Your expenses policy should cover every conceivable expense your employees might claim for and include details that make it clear exactly what is and isn’t allowed. Common sections you may need include travel expenses, dining & entertainment (for meetings with clients), and car rental.
You might want to consider questions such as:
- What happens if an employee extends a business trip over a weekend?
- What about if a spouse accompanies the employee on the trip?
- What is your policy concerning home-office expenses for employees that can work from home?
Set Reasonable Limits
An open-ended expenses policy is asking for trouble. Calculate how much food, drink, travel, and accommodation is likely to cost in the areas where your employees work from or travel to. Set reasonable limits based on these likely costs.
You’ll also want to provide a detailed explanation of payback periods so that employees know when they’ll receive the money.
Content & Format
The way you present your policy is as important as its content. You can’t expect employees to read and remember an 8 pages’ word document.
Work with an internal or external designer to build an expense policy document that will impress your employees. Better still, include your policy in your expense platform dashboard, making it available for employee’s every time they expense something.
Communicating Your Policy
Your expenses policy is only effective if employees know about it. Emailing the policy to your employees is not enough; it is unlikely most of them will read it.
Instead, introduce the changes to the policy during team meetings. Employees will take more in when listening to someone presenting, and they’ll have an opportunity to ask questions that may help make your policy even more effective.
Automate your policies enforcement
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 expense policies and instantly flagged or rejected if non-compliant.
By automating the control of expenses, it allows your 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.
Regularly Review and Update
It is inevitable that your document will need updating: changes in internal policy, HMRC guidance, and employee behaviour mean you need to take a proactive approach towards your new policy.
Book regular review meetings, perhaps bi-annually, and bring together stakeholders to review the expenses process and document. These regular updates and changes give you another opportunity to communicate the policy, ensuring it stays top-of-mind for employees.
Is Your Policy The Only Part Of The Process Holding You Back?
Your policy is important, but keeping it updated won’t solve every problem. Businesses using manual processes, such as Excel, for expense management experience higher costs and longer payback periods than businesses using a fully-automated expense management system.