expense policy best practices

Expense Policy Best Practices

1. What is an Expense Policy?

A T&E policy is a set of rules a company defines, that specify how employees are reimbursed for expenses they incur on behalf of their company. Simply put, it is a list of all the do’s and don’t for your employees when incurring expenses. But actually, it’s much more than that.

 

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 T&E 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. Good agreements make good friends, right? And finally, a good set of rules will make it easier for your finance department to forecast expenses. Often times, T&E accounts as the second largest cost for companies. This means that having better rules will not only give you more transparency and more insights into your employees’ spending but also enable you to start optimising this cost center.

2. What makes a good T&E Policy?

You may be thinking an expense policy needs to be long, covering every type of expense in detail, but it’s just the opposite. A good expense policy is 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. The adoption of the expense policy will be higher when you keep things short and readable.

 

You Expense Policy Should Be

 

Simple

Don’t lose yourself in the details. The T&E policy is there to exclude exceptions and create a standardised set of rules.

Structured

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.

Relevant

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.

3. How to write an T&E Policy?

Start your expense policy by explaining the purpose of these guidelines. This will create 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, the receipt 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 T&E policy will be the overview of the different categories or cost centers. 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

Transportation

  • 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

Lodging

  • 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

Meals

  • 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 a dinner is €20, the excess amount will not be reimbursed

Office expenses

  • Expenses below €10 are auto approved
  • Office expenses can’t exceed €30/month
  • Mobile subscriptions can’t exceed €40/month

We've made you an editable Travel & Expense Policy template

4. How to improve your T&E 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 T&E 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.

5. 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 pages’ word document.

Work with an internal or external designer to build a T&E document that will impress your employees. Your expenses 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 employee’s every time they expense something.

Looking for an example of a T&E policy? Look no further and download our template.

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