For small businesses, creating an expense policy is a crucial step to ensure that proper spending rules are put in place. An expense policy prevents employees from overspending and allows them to perform their duties with clarity and confidence.
In this article, we’ll look at the meaning of an expense policy and what you should consider when creating one for your business.
What is an expense policy?
An expense policy is a written document that highlights your company's rules on paying for work-related expenses. It covers employees' roles and responsibilities, what expenses are covered by the company, and what expenses cannot be reimbursed.
Here are some important considerations when creating an expense policy template.
Automation
It's not hard to see why automation is a popular trend, and companies that automate will find it easier to draft an expense policy. Businesses that move towards automated expense management software have seen many benefits, such as:
- Reduced time chasing receipts
- Get better control of their finances
- Automatic expense reconciliation
- Increased employee morale
- Reduced administrative time
- Overall streamlining of expense management processes
One of the most successful ways of automating expenses is through prepaid corporate cards. Staff can use these cards to transact and capture receipts using the app - with most transaction details already pre-filled. Meanwhile, finance teams can also see all transactions in the software, which are automatically reconciled with the budgets.
If your company hasn’t automated your expense management, it’s highly recommended before creating an expense policy.
Expense process
Besides automation, also consider the current process in your organisation. Here are some questions you can ask when creating an expense policy:
- Who approves the budgets in my company?
- How are budgets determined in my company?
- How many employees do I have in my organisation?
- How do employees currently pay for expenses?
- Do I engage external contractors, volunteers, or support workers that are included in my expense management process?
- What are the relevant responsibilities of staff and managers when dealing with company expenses?
- What are the biggest hurdles in managing expenses in my company?
Having a clear picture of your current process will enable you to draft a policy with minimal questions from staff.
Exceptions and discretionary circumstances
Often there may be confusion on what is covered under ‘company expenses’ and what isn’t. Therefore, your expense policy should provide concrete examples of qualifying and nonqualifying expenses to eliminate employees paying for items they shouldn’t.
When listing these expenses, understand that every business is different, and your business may have exceptions. Communicate to employees that they should seek clarification from a relevant party if in doubt.
Communicating the policy
Your new expense policy should be distributed and understood by all staff and external parties working for your company. For example, companies that provide staff with prepaid corporate cards must communicate how it's used clearly, either through email, training, or face-to-face meetings.
To ensure that all staff have received the expense policy, you should have all staff sign a receipt of acknowledgement.
Budgetly’s Expense Policy Template
To help get you started incorporating prepaid corporate cards into your organisation, we’ve developed an expense policy template suitable for all SMEs.
Use this template as a guide to automating your company’s expense management process. You can also personalise it with your own company’s rules and regulations by changing or adding to the sentences.
Managing your organisation's expenses with Budgetly
If you'd like to automate your expense management process and save time in your company, Budgetly helps Aussie businesses eliminate up to 40 hours a month in admin time.
To learn more about Budgetly and our expense management platform, download our eBook, Managing Expenses with Budgetly. Alternatively, schedule a demo with us today to find out how we can make your expense management effortless.
