Policy

5 Steps on the Road to a Great Expense Policy

Many businesses struggle with business expenses and don’t know why. One reason is the lack of an effective expense policy. This article will help you easily craft an effective policy.

Maybe your company’s outgrown its old unspoken rules. Maybe it’s a jumble of one-liners, buried in dusty manuals somewhere. Maybe people don’t even know where to find it. Whatever the case, a simple, clear, fair and findable expense policy can do a lot to level up an organization.

What’s at stake?

It was a spending scandal involving a Canadian Cabinet Minister, who in one day spent $1700 of public money on a car service to drive her around Toronto. With that as a starting point, employment litigator and media commentator Sunira Chaudhri  recently wrote in the Toronto Sun  that “To avoid a spending scandal in your office…create an expense policy if you don’t already have one…” The kind of waste, errors and abuse that result from no policy, or a bad policy can cost employees their jobs, and can even be an existential crisis for an organization.

Shield…and security blanket

A good expense policy can be a security blanket for employees who want to do the right thing, and a shield for an organization against loss. And there can be a lot at stake. The Association of Certified Fraud Examiner’s 2016 Report to the Nations says expense reimbursement schemes make up 14% of actual fraud cases, with a median loss of $40,000. And it doesn’t have to be just fraud. According to Aberdeen Group research,1 almost 20% of travel and entertainment expenses fall outside of policy. It just makes sense to invest the time and effort to create an effective policy that people can find and will use.

Steps on the road

So how to do that?  Here are five tips to get you started:

  1. Ditch the jargon

Be sure to edit the policy for clarity before it’s published.  Double-check that it’s easy to read and not loaded with jargon. The easier a policy is to understand, the easier it is for your employees to follow. Write the policy to cover the basics, but remember you’ll probably want to revise it later as you learn from specific cases that arise.

  1. Make it fair

This isn’t a game of “Gotcha!” 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 follow.

  1. 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.

  1. Create flexible rules

Sometimes a one-size-fits-all policy won’t work across an entire company. Write your policy to guide behavior, but be flexible enough to adapt when necessary—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-reporting process.

  1. Make it easy to find

Even the fairest 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.

Make sense? The best expense policies are the ones that make sense to both employees and management, are clear, fair and easy to find. You can get more expense policy tips, including a template that makes writing one easy, here.

Christal Bemont is SVP & GM of Small, Midsized and Nationals at Concur.

Travel and Entertainment Expense Management Report, Aberdeen Group, August 2006