Expense Report Policy : all you need to know
If your business is facing these types of challenges, then it's time to introduce a company expense report policy. When making your company expense report policy, the goal is to give your employees guidelines on spending company funds for business purposes. When you make decisions about rules for your team members, they should be straightforward so that all employees understand.
How to Create a Company Expense Report Policy
The basic rules of the policy should cover the following:
- How much company money employees can spend
- When are employees authorized to spend company funds
- Which financial tools employees can use for spending company funds (personal funds, a corporate credit card)
The following tips will help you with making an expense report policy for your company:
1. Choose language that is easy to understand.
Don't make employees guess your meaning when setting your expense policy. Use simple language that anyone can understand without having to consult a lawyer. If the language is too complicated, employees may become confused about your requirements. Their confusion could lead to misuse of the company expenses policy.
Let your employees know they can always ask for guidance if they have questions or concerns about their expense reports to avoid this situation. They are more likely to speak up if they encounter a difficulty if they know managers are available to answer questions.
2. Set employee spending limits by category.
Divide each type of employee expense into categories. From there, set clear spending limits for each one. Your expense policy will include categories such as:
- Company Car
- Technology (Software, Mobile Phone)
- Travel (Flights, Accommodation, Cabs)
Before setting fair spending limits for employees, research and think about what your company can realistically afford.
3. Consider whether a broad policy or a detail-oriented one is a better fit for your business.
A well-established company may wish to create a detailed expense policy that spells out answers to potential questions to all employees. This approach may seem as though it would be more efficient since it spells out all the information for the employees in detail. In practice, it often has the opposite effect. Employees feel overwhelmed by the amount of reading required to understand the policy and don't read it through.
If your company decides to move forward with this option, follow up with mandatory meetings or presentations to review the policy with all employees.
Smaller companies may wish to create a broad set of guidelines that allow employees to make their own decisions about business expenses.
This approach covers the main principles of what's acceptable and how they can spend company money without violating the policy.
4. Ensure your expense policy complies with local laws and regulations.
Every country has its own laws and regulations about employee expenses and how to handle them for tax purposes. Consult with a local tax expert to ensure your company is compliant with local laws and regulations in this regard.
Suppose you are running a business in the United Kingdom. In that case, you must make sure that all your expense policies comply with HMRC's criteria. UK law states that an expense only qualifies if an employee uses company money for business purposes. Visit GOV.UK Expenses and Benefits: A to Z for a complete list of eligible expenses.
A business exemption applies to routine business expenses which do not appear on your year-end reports. These expenses are as follows:
- Business Entertainment Expenses
- Business Travel
- Phone Bills
- Uniform and Tools for Work
5. Ask your employees for their input.
Top-level executives often write expense policies without consulting the team members who have to work within its parameters. The employees who have to spend company money for employment purposes will have the most insight on what and how much they need to pay.
Team leaders know the types of expenses their members incur and can offer upper management valuable insights for setting realistic expense budgets. Team members can also advise whether proposed budget levels are too low (or too high) and ensure that staff feel content with the final result.
6. Share details on expense payments and reimbursements with employees.
Explain to your staff exactly how they pay for business expenses and how your company will reimburse them. Your company expense report policy should indicate where they should submit their expense reports. It should also specify if there is a set time limit for submitting expenses.
There are several methods your employees could use to pay for a business expense:
- Pay with a Company Card
This option makes it easy for the company to track expenses. Employees should still track their use of the company card if there are any questions later. Rather than using one shared company account, consider issuing individual company cards to each authorized employee. It will make single purchases much easier to track and save time when controlling employment expenses for all qualified company cardholders.
- Pay Out of Pocket
Employees may need to pay for some employment expenses with their own money. They may need to do so in exceptional circumstances, such as taking a taxi to a conference following a train delay due to bad weather. The company expense report procedure should specify when employees may need to pay out of pocket and the reimbursement procedure.
- Expense Advances
When a business expense is too high for an employee to cover personally, a business may give the employee an advance on their pay to cover the cost. This option is a unique method for paying business expenses. The company expense report policy should cover when the employer uses advances and the payment limits.
7. Leave room for the unexpected.
No policy can cover every potential situation. Include a paragraph in your policy letting employees know there may be times when they have to use their best judgment in expense-related cases. Employees need to know the company will stand behind them if they use their common sense when making choices.
8. Add approval protocols for various levels of expenses.
It wouldn't be efficient to need a manager's advance approval for each business expense in advance, no matter how minor. That type of policy would only bog down the system and slow down employees who must travel for work. However, some business expenses, such as plane fares for international flights or several days of accommodation on a sales trip, should be approved in advance.
Formalize the approval protocol by writing it down. Employees will know how long it should take and how far in advance they need to seek approval for more considerable expenses. It should streamline the process so that employees get the permission they need to do their work without undue delays. The CFO and the accounting department are also aware of how much money employees are spending to track it and ensure that it doesn't go over budget.
A Visa payment card for your business expenses
With Mooncard, expense claims are over! The Mooncard payment card allows you to pay all your employee business expenses directly. Mileage costs, supplies, customer meals, or subscriptions: the employer can cover all professional costs online or in person. Employees present multiple payments representing routine procedures when doing business. Their reimbursement and accounting management can be stressful for employees.
- With Mooncard, it's straightforward: every time you pay with your Mooncard card, you take a photo of your receipt, and it's over. No more re-entering receipts, no more advancing personal expenses, no more chasing receipts...in short, no more wasting time! In addition, digital archiving with a “search” function allows you to throw away your supporting documents.
- We make sure you keep your photos and receipts safe in a digital safe. They are electronically signed and enforceable against Her Majesty's Revenue and Customs (HMRC) and other tax authorities.
Your professional expenses are 100% secure
It is easy to entrust payment cards to your employees when they are configured independently and remotely.
- Thanks to more than 60 authorization parameters that can be activated online and in real-time on our management application, you are in charge of the cards!
- Choose spend limits, days and hours of use, authorizations by type of expenditure, manager alerts, etc. Mooncard is the assurance of giving your employees a payment card with complete security and peace of mind!
As for your accountant, they receive all the information directly in accounting entries, and no data entry is required.
- Our bespoke accounting engine integrates the information into your software.
- Our solution interfaces with all the accounting software on the market. It integrates seamlessly with your tools.
Mooncard frees you from the mental burden of expense reports and transforms your administrative time into productive company time.
Would you like to learn more about Mooncard and how it can benefit your business? Contact us now for a free online demo!