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1. Taking the pain out of expenses
11 Tips for Creating an Expense Policy
Creating an expense policy can be a time-consuming process; but when you
consider that almost 20 percent of T&E expenses fall outside of policy1, it makes
sense to invest the time and effort. Here are some tips and a template to help
you get started.
1. Ditch the jargon
Write the policy to cover the basics but don’t be afraid to revise it later; it probably
won’t be perfect on the first attempt, so remind people to use common sense. Also,
be sure to edit your policy for clarity before it’s published. Double-check that it’s
easy to read and not bogged down in jargon. The easier a policy is to understand,
the easier it is for your employees to follow.
2. Make it fair
No one should have to pay out of pocket if they spend sensibly. Create a policy that
is generally regarded as fair and then make it easy to find and follow.
3. Invite participation
Get buy-in from your staff before you implement the policy. Ask team members to
participate in the process. If they help develop the expense policy they’ll see why it’s
necessary and will be more likely to stick to the rules and encourage others to do
the same.
4. Use sensible, localized rules
Sometimes a one-size-fits-all policy won’t work across an entire company. Write your
policy to guide behaviour, but be flexible enough to adapt to local requirements—
such as higher hotel costs in more expensive cities. You could include a table of
acceptable regional rates or use a system that flags out-of-policy spend at the time
it’s booked, to avoid unpleasant surprises later in the expense-claim process.
5. Make it flat
Unless there is a very good reason to have different rules for different people,
create a policy that applies to all employees across the company. Keep it fair and
simple. All-encompassing policies are also easier to implement, manage and control.
6. Make it easy to find
Even the most fair and equitable policy won’t be followed unless people know about
it. Make sure yours is visible. Email it to employees, put it on your noticeboards or
intranet, or print a copy for every staff member.
1 Travel & Entertainment Expense Management Report, Aberdeen Group, August 2006
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2. 7. Emphasize the positives
Implementing a new policy will require a period of adjustment for employees. You might
hold a training to explain the reasons for implementing/changing the policy so that
everyone understands its benefits and purpose. If there’s a policy in place that everyone
understands, the chances are it will be easier to approve submitted expenses.
8. Help managers lead by example
Since almost 20% of all submitted expense claims contain out-of-policy spend, it’s
sensible to focus on reducing that percentage.
Managers who approve expenses are your first line of defense in the expense-claim
process, so it’s good to get them on your side. Setting management targets for
policy compliance can drive down the number of out-of-policy claims. Similarly,
familiarizing managers with the content, the importance of compliance, and the
reasons for implementing the policy can help them confidently enforce the rules.
9. Remember it’s emotional
Consider the emotional side of expense claims. Employees are usually spending
their own money when they pay for expenses, so they will want it back as soon as
possible. A good system makes it easy for employees to submit their expenses and
receive status updates; it also speeds the payment process.
10. Consider helpful software tools
Implementing an expense policy is a first step, but it shouldn’t end there. Once you
have a great policy, you might want to consider using time-saving tools to manage
the entire expense-claim process.
Turning your paper-based expense process into an automated one will soon provide
real cost savings. You can take advantage of free trials to test the software tools
before you commit to buying. Most providers will be able to demonstrate a rapid
return on investment.
Moreover, implementing an automated solution will save time and allow you to focus
on your core business.
11. Leverage existing technology
If your employees are using smartphones, you’ve probably already invested in
mobile hardware; if this is true, make sure you choose a solution that works
with your existing mobile devices and allows for the submission of digital and
photographed receipts.
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3. An Example Expense Policy Template: How to use the template:
At its simplest, an expense policy should cover the following categories: Read the notes in the center column.
Then use the headings in the left column
1. Statement of purpose
to create your own document. Feel free
2. Company expectations and policy compliance to copy or edit the examples to suit
your needs.
3. Areas of ambiguity
Please note:
4. Subject areas:
This is not a legal document—it’s a
a. travel starting point.
b. travel-related expenses The values included on this policy are
only approximate guidelines, but you
c. accommodation
can check the amounts against your
d. food & entertainment industry sector, company size and
employee averages.
e. other expense types
The following pages provide a more detailed explanation for each category, as
well as examples of language you can use when you create your own template.
Section Explanation Example wording
Statement of Why is there an expenses policy? This expense policy applies to all employees of (insert company’s name
here; e.g., Our Company) when they travel for business purposes or incur
purpose Set some basic guidelines—make it factual, not
business-related expenses.
scary. Include:
Please also refer to the following company documents:
• Who the policy applies to (managers
and employees) • HR policy
• Date of policy implementation • Travel policy
Company Write a brief note here to explain: When you incur or submit expenses we expect you to:
expectations • What the company will do to help people • Behave honestly, responsibly, and within the guidelines of this policy
claim expenses • Submit expenses within 30 days of incurring them (to help you get paid
and policy
compliance • What the company expects in order to more quickly and support our finance team’s needs)
reimburse employees • Keep all your receipts
• What happens if they fail to comply with policy We take this policy seriously and expect you to do the same. Breaches of
policy may result in disciplinary action or termination of employment.
Areas of This section explains common areas of Your manager should authorize all expenses, but if it’s not possible, their
ambiguity/confusion, such as: manager may also approve expenses.
ambiguity
• Who authorizes expenses If you’re traveling/incurring expenses with other Our Company employees
• How quickly they are reimbursed the senior person should always pay.
• Who pays (when more than one employee If you are in doubt over whether an expense is in policy, ask your manager.
is present) When you submit the claim, provide written justification in the space provided.
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4. Section Explanation Example wording
The nitty gritty: types of expenses—what’s allowable
The main body of your expense policy should cover the standard expense categories—complete with rules about what is or isn’t permitted.
Travel This section should cover the basics, This travel section of the policy covers the various ways we think people at Our
such as: Company are likely to travel in the normal course of business.
Which suppliers (if any) are preferred. If you are traveling in a way that is not covered by this policy or have questions
that are not answered here, talk to your manager and include a note with your
Which booking methods are preferred
expense claim when you submit it.
(e.g., via a chosen travel agency vs.
through an integrated travel booking The policy includes information about how and when you should travel by car,
system) for air, train and taxi. It includes details about our commitment to sustainable travel
options as well as the importance of choosing the lowest-priced logical method of
• air travel
transport available at the time.
• rail travel
Please note: All bookings should be made through our travel agent XYZ Travel.
• rental cars
Travel that is not booked at least 3 days in advance will not be reimbursed without
• mileage approval from the CEO.
What range of fares are acceptable; e.g.,
All travel should be booked in standard/economy class. You are welcome to use
lowest logical fare vs. always cheapest.
your own loyalty schemes, as long as this does not prevent you from booking the
It should also include a section on: lowest-priced logical choice available.
• The use of company cars Personal travel may be combined with business as long as there is no additional
• The use of personal cars for business cost to the company.
• Mileage reimbursement rates (Other applicable company-related details should be added as needed here.)
• How far out of their normal commute
must people travel to be able to
claim mileage?
• Insurance (is this covered by the
company or must individuals
insure themselves?)
You might also include answers to
these questions:
• Do you encourage use of
sustainable transport?
• When is it okay to take first class or
business class?
• Does public transport take
precedence over taxis vs. personal
cars? If so, when?
• How far in advance must trips
be booked?
• Is pre-approval needed before
employees book travel or only if the
cost is over a certain value?
Cont. overleaf.
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5. Section Explanation Example wording
Travel-related This section should be a list of travel- The following travel-related expenses are acceptable and Our Company
related expenses that are acceptable employees will be reimbursed for these expenses:
expenses and in policy.
• Baggage (no more than 2 bags) and advanced-seat bookings
• Parking
• Foreign-currency charges
• Visas
• Tips (up to 15%). This does not apply if the tip has already been included in the bill.
• Use of a GPS with rental cars for driving in unfamiliar territory
The following travel-related expenses are not acceptable. Do not put these on
your expenses claim:
• Laundry service/dry-cleaning (unless you have stayed for business for more
than 4 nights)
• Mini-bar contents
• Movies/videos
• Parking fines
• The loss/theft of goods (this should be covered by your own travel insurance—
of which you can reclaim $170 annually)
• Childcare
• Petcare
• Any personal elements of your business trip
• Personal car maintenance or damage to personal vehicles while on business
• Spa treatments and health/fitness clubs
• Toiletries
Section Explanation Example wording
Accommodation Any preferred booking methods (e.g., When booking hotels we expect you to use our preferred hotels.
through a travel agent online booking
The maximum we will reimburse per night is $160 + taxes (for example—but this
tool) or preferred suppliers should be
depends on region). This amount does not include meal costs.
listed here.
You are responsible for all hotel cancellations and for reclaiming reimbursements
It could also include instructions
(less cancellation fees) from the hotel directly.
regarding reimbursement if people stay
with friends/relatives. You must always indicate your overnight accommodation location so we can
comply with Duty of Care requirements. Either inform your manager or share your
travel itinerary with your manager using TripIt ®. If your manager is not working
when you are traveling you must inform their replacement. If this is yourself,
please tell HR.
You are not allowed to upgrade your room while traveling on business with
Our Company.
Section Explanation Example wording
Food & This section should set limits on Our Company will reimburse employees for all meals while they’re traveling—up to
meal prices, explain what is covered $10 for breakfast, $15 for lunch and $25 for dinner.
entertainment by a per diem, provide guidelines on
Client meals/entertainment costs may be higher. All entertainment claims must
when to claim meals and explain any
include the following details: business reason, venue name and location, name
other ambiguities surrounding
and company of all attendees.
food/entertainment.
Alcoholic drinks may only be claimed if consumed with a meal.
Unless you are entertaining clients, in order to claim meals/food you must have
met the following conditions:
• You’ve been away from the office for more than half a working day
• You’ve traveled more than 5 miles from the office/your home
• You may claim for breakfast if your journey started before 7:00 am.
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