The most necessary part of running a successful business is keeping track of expenses. Companies use expense policies to ensure their expenses stay aligned with budgets, track their finances, and avoid unexpected costs. Your enterprise travel agency will advise you to implement a robust travel policy.
Here's a step-by-step guide on creating a company expense policy for better financial control and compliance. Let's get started!
The best tips to create a successful company expense policy for compliance
#1 Discuss collectively with key stakeholders
When it comes to creating an expense policy, it's all about getting input from the stakeholders of your business. Whether you're a start-up with just ten people or a mid-sized company with 200 people, it's crucial to get people from different parts of the company involved.
First, you should talk to the leaders in your company to get their intake on their spending needs. This way, you can make sure your policy is inclusive and diverse.
#2 Divide expenses into categories
If you want your employees to comply with the policies, you should break down expenses into categories. Having clear expense categories makes it easier to keep track of everything from travel to taxes and financial reporting. These categories should cover all the different expenses your company might have. Right from travel to meals to procurement. Here are some types of expenses you'll probably want to look into.
Accommodations: This expense refers to hotel stay expenses while on business trips. It can also include any per diem payments you make for days when your employees work away from the office.
Travels: These are travel expenses employees have to pay while on a work trip. It could include plane tickets, car rentals, mileage reimbursements for personal vehicles, documentation, and visa fees.
Food and beverages: Meal cost is what you pay for food and drinks on official work or a business trip.
Entertainment: These costs are the expenses spent on entertaining clients or customers for official reasons.
Incidental: These costs are the expenses that employees incur while they are on their trip, like tips, surcharges, service charges, taxis, insurance, and other things.
Miscellaneous: This category covers all the other expenses necessary for running a business but does not fit into the previous categories, like office supplies, health care, or special subscriptions.
MICE: If you're a company that conducts trade show marketing, product launches, employee training programs, or meetings, you can budget and track expenses in your system. This addition to your company expense policy will help track spending.
Ask your enterprise travel agent to help you draft and include instances of each expense in your expense policy to give people a good idea.
#3 Draft effective company expense policy
Check your policies and expense reports and see who breaks the rules often. Usually, habitual offenders don't follow the rules. After you finish, ask them why they're not following the rules. The problem is they may not have a satisfactory response.
If you want to make sure everyone is on board with the new policies, why not give them a financial incentive to follow them? That way, you'll save money in the long run.
#4 Categorize with budgets
First, look at your past expenses and use that as a guide to what you should be budgeting for now. If you don't have any historical spending data, don't worry. Ask yourself what's reasonable and what your key stakeholders need. That could be your founders and the people in charge of your department.
Then, work with each person in charge to understand what they need. There might be some arguments, but at the end of the day, the budget should be clear, understandable, and accessible to everyone.
The goal is to ensure the company expense policy process has clarity and transparency and aligns with what your company is trying to achieve. It should help you be accountable, make sure your business runs smoothly, and you make the right decisions. This is very essential for business travel management.
#5 Automation to streamline expenses
AI-powered automation technologies help an enterprise travel agent or manager handle cash flow. These solutions can make it easy to capture receipts, verify, approve, track, and reimburse employee expenses.
Automation also helps your business save money, free up time for other revenue-generating activities, and get a better return on investment. Gartner predicts that by 2024, companies that use automation will cut operational costs by up to 30%.
Whatever expense management solution you pick should integrate directly into your finance and business systems so that spending data can move quickly and easily. Also, it should have mobile apps and tools your employees can use to make life easier when they're on the go.
#6 Educate your employees
See that your team knows about the new company expense policy by having an informal meeting. Make the policy easily accessible through the company's intranet or location. Give employees the help they need to stay compliant. Don't just tell them what the policy is, but also why it's necessary. When employees are aware of the potential consequences, like being audited, government laws, or accountable for tax purposes, etc., they will be more likely to abide by the policy.
#7 Define reimbursement process
Determine how expense reports should get filed and set deadlines to make it easier and better for employees to follow the rules. Ensure you tell them what they have to do to get reimbursed. Define the process, how it will work, who will approve expenses, and the duration for reimbursement.
Hire an enterprise travel agent and use expense management tools to check, verify, and automate expenses. This tool will keep employees from getting frustrated and not following the rules. Outline the authorization process, including approvers, reimbursement schedule, pre-authorizations, and spending thresholds.
#8 Ensure company expense policy compliance
The expense policy should explain expectations for reporting and handling receipts, like proof and limits. Clarify the disciplinary action for not following the rules during the onboarding process. Make it clear that the policy may vary based on job role, location, and employee eligibility.
Wrapping up: Define your company expense policy
When creating a company expense policy, understand which costs get covered and if you need to use a company credit card. Ensure to share it with all your employees and your enterprise travel agent.
Take the help of automation with a travel and expense management solution like ITILITE. Remember, an expense policy is never set in stone and needs to be reviewed and updated regularly to be effective.
