The How and Why of a Great Expense Policy

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expense policyMost office managers have probably faced questions from employees about which type of restaurant is appropriate for a client lunch, or whether they?re able to take a convenient, but more expensive, flight home from a business trip. What is the best balance between being a responsible employee and being too extravagant (or stingy)?

While understanding proper business etiquette and using good judgment are often the best starting points, a company expense policy can help validate employees? selections and, more importantly, ensure corporate dollars are being spent on valuable items and initiatives.

Management should keep in mind the following considerations when developing their organization?s expense policy:

UNDERSTAND LEGAL LIMITS

Understanding IRS and state regulations is absolutely paramount when developing an expense policy. Regulations may vary for things like spending limits or rates for certain businesses and industries.

Information about national or state-specific policies (e.g., keeping expense records for three years) can be found on the IRS website or through the General Services Administration. Employers can also refer to independent tax firms that may offer more conservative suggestions.

SECURE EXECUTIVE AND DEPARTMENTAL INSIGHT

Expense policies may change based on corporate or departmental activity. For instance, the sales team may require specific rules around client lunches, whereas the marketing department may need to set particular policies for per diems. Connect with each team when finalizing the expense policy to get their feedback and ensure that the rules do not hinder departmental goals.

BE AS CLEAR AS POSSIBLE

Expense policies should clearly outline what must be included when expenses are submitted, the time frame for submission and what employees should expect for a reimbursement period.

However, it?s important to remember that there will inevitably be exceptions to these rules. For instance, sending an employee on a last-minute trip may require a hotel stay above the allotted policy budget.

PROVIDE EASY ACCESS

This one sounds simple but is incredibly important. If employees don?t have easy access to the expense policy, they won?t know what rules to follow. Businesses should consider using an internal website or expense management tool to make sure employees can quickly refer to the policy no matter where they are.

EASE REPORTING PROCESSES

Work expenses don?t always happen in the office. In fact, it?s rare that they do. Typically, expenses are incurred in cabs, restaurants or airports. To save employees the hassle of toting crumpled receipts at the bottom of their briefcases, businesses should think about using an expense management solution that can be used on the go.

If companies do invest in technologies that simplify the expense management process, they should make sure that the solution can integrate with their existing accounting software.

This will decrease manual data entry and administrative tasks for the finance team.

(Source: TNS)