Even if you’re only a tiny business, drafting an expense policy can save you a lot of time and grief in the future. Depending on your business, your employees might have to pay for things out of their pocket, such as transport or travel expenses, food, office spaces, supplies — all things that help them work more efficiently. As an employer and business owner, it’s your job to be aware of these employee expenses that help keep your company running and reimburse your employees when the time calls for it.
That’s why you need an expense policy. It sets boundaries for your employees, so they know what counts as business expenses and keep their spending in check, and keep tabs on your company funds, so you know where the money is going and how much you have left.
If you’re unsure how to create your expense policy, here are but a few ways you can get started.
Determine your budget
The first step is, of course, to check your budget and take note of how much you can relegate to employee expenses. After all, you don’t want to give too much of your budget away. Be aware of how much you can spend at a given time and how much you should keep to other company expenses to keep your business running.
There’s no shame if you can’t afford to reimburse your employees, as long as you’re transparent about it. Especially for a small business, you might not be able to have the funds to create your expense policy right away. But it’s important to know that your employees should still be compensated appropriately for the expenses they incur for the company’s benefit.
Make a list of all expense categories.
It helps to group every possible expense into categories to keep track of them better and define how much should be spent on each. In your written expense policy, it’s essential that you clearly state what expenses count as reimbursable company funds and what doesn’t. An example of a few expense categories is travel and hotel expenses, transport expenses employees use to commute to work every day, subscriptions to productivity tools and apps regularly used in the office such as MS Office, and internet or data plan allowances.
Make sure that these are all expenses that benefit the company and help your employees to work better. Personal expenses should be left out of this.
For example, if an employee needs to travel to attend a seminar or meeting with a client, plane tickets to and back, hotel accommodations for all the days they’re there, and allowances for food and fare should be counted as reimbursable funds. If, however, your employee decides to spend money on shopping and souvenirs for their benefit, then the company isn’t obligated to reimburse them for that.
Keep track of all expenses.
This should come as a no-brainer, but you should keep track of your employees’ company spending the moment you’ve implemented your expense policy. As much as possible, you want to avoid expense fraud, which is when an employee claims to have spent more money than they did in their regular expense reports. Setting clear boundaries on reimbursable funds is one way to do this.
Another is to make sure that all payments made in the company’s name are made with a separate credit card or payment account for online payments, then your employee’s bills. Your trusted local business bank can provide specially made business credit cards for your employees to use on business expenses. It’s also a quick way to access the company’s shared funds and keep tabs on exactly how much your employees are spending on certain things.
Automate your expense policy operations
The time when companies would file expense reports by hand using pen and paper is long past. Automating all your business operations, including expense reports, should be done as soon as possible. Not only is it more secure this way, but it’s more efficient and relatively easier to use and access.
Nowadays, there is plenty of accounting and office management software and programs specifically designed to help all sorts of businesses to streamline their operations. Consider doing the same to yours if you want to maximize productivity and efficiency.
The most important thing when it comes to business expenses is always honesty. Above all, be transparent with your employees and make good on your promises. Not only will it benefit your business in the long run, but it can improve your employees’ trust in you and your company, and in turn, they’ll be honest with you.