When running a business, expenses arise. That is inevitable. They can arise when employees travel on behalf of the company, when a salesperson hits the road and has to refuel their car, or when an employee in the marketing department buys ads or software. More times than not it is the employees who use the company’s money – either with outlays or with a company card. In these cases, employees might wonder what amount is acceptable to spend on behalf of the company. And what is seen as a business-related purchase and what is not? Companies owe it to their employees to communicate clear messages about what is okay and what is not okay. This is where an expense policy comes into the picture.
What is an expense policy?The expense policy establishes guidelines and sets the framework for how expenses are to be handled in the company in question. In other words, it defines how the employees can spend the company’s money. A distinction is made between public and private expense policies, and in this blog post, we focus on the expense policies of private companies. One of the purposes of an expense policy is to clarify how employees can spend money within a certain limit. But it also needs to ensure that the company buys on terms where quality, functionality, price, delivery security, sustainability, etc. are essential parameters. The expense policy can also define which payment methods and suppliers employees should use. In this blog post, we will not dive into choosing specific suppliers, etc. but rather focuses on describing why having an expense policy is a good idea. Today, most companies have ambitious climate policies or sustainability goals, and expense policies are an effective tool for ensuring that employees buy from sustainable companies. Five tips for compiling an expense policy We will mention it just one more time. It is a good idea to have a clearly defined expense policy because that way there will be no doubt or confusion whenever employees swing either their own or company card. Here are five tips for compiling an expense policy:
- Clear rules for expense categories – make expense categories and define specific rules that apply to each category. Examples of categories could be meals, transportation, lodging, etc.
- Collect input from employees – the expense policy needs to be adapted to the company as much as possible. Especially when it comes to limitations. It would not make sense to set an amount limit of DKK 500 for lunch if most employees only spend DKK 250 anyway.
- Make the policy easy to understand – have your policy made in a format that is simple and straight to the point. All employees should be able to read and understand it without having to run by the finance department.
- Avoid exceptions – the expense policy will be easier to understand if everyone is aware that rules are rules. This will save the finance department time as they do not have to consider the exceptions.
- Updated and accessible – it is a bit of a no-brainer but the expense policy needs to be updated if consumption habits change or new suppliers are introduced. It needs to be easy and quick to get your hands on – online of course.