It’s a known fact that running a business is expensive. Various costs go beyond operational expenses such as business travel, meals for clients, and transportation can add up at the end. A good expense reimbursement policy should be in place to track these costs.
Necessary components of an expense reimbursement policy
Knowing what to mention in an expense policy can be challenging, especially when considering different elements to ensure compliance. The following are some critical elements in the expense reimbursement policy:
Define rules for employees
The foremost aspect of any expense policy is to set rules and guidelines for employees to ensure compliance. When you are allowing employees to spend money, it is essential to set guidelines to restrict the amount to be spent on unnecessary expenses.
Good expense management policy defines guidelines easy-to-understand for employees. If the objective is to ensure that employees comply with rules and regulations, you can never be clear about what is expected.
Easy to find
A good expense reimbursement policy is easily accessible so they can understand what is within policy when spending on travel, food, transportation, or other expenses. No matter how good a policy is, it is not effective until and unless it is easily accessible for employees. The policy should be kept up-to-date in terms of changes made to the travel terms and allowances.
Managers and employees consent
Both managers and employees have to agree to the expense policy created. When creating a policy, you’ll have to understand what employees and managers think alike, so only a few compliance issues will run from your employees.
One-size-fits-all expense policy is difficult to implement. A good expense policy defines standards for business spending based on optimal business performance. Know about industry trends and set standards for different obligations, so employees will be having the necessary funds for their business activities.
While it is crucial to have an expense management policy, it is also essential to let employees know how they will be penalized for spending more than the policy. Companies will face trouble when employees spend more on luxurious hotels and expensive meals. Ensure you avoid any financial issues created by vague policy enforcement, and it is important to educate employees on the consequences of spending outside the policy limits.
When evaluating the benefits of corporate travel, client meals, and transportation, you have to quantify the exact amount that was spent by employees with company money. Leveraging tools such as expense report software to track business expenses give you easy ways to measure company spending.
Make finance team understand what is acceptable
Clearly, state what is acceptable and what is not in the expense policy. Not only does this help employees understand what kind of spend incurs, but it also makes the finance department’s job easier by outlining which expense types they can approve and what they can reject.
Defining the reimbursement process
Employees primarily care about reimbursement when it comes to expense management. Making quick reimbursements will let your employees know you care about their efforts on tasks, and they’ll be more willing to take on these tasks going forward if they know they are going to be reimbursed quickly.
Plan your policies
Having a clearly-defined policy will ease the pain that accompanies expense management. When your policy is clear, efficient and quantifiable, employees and management don’t have to face many issues about expense reporting and reimbursement process.