LUTZ BUSINESS INSIGHTS
5 reasons your business needs an expense policy and how to implement one
EMILY OLSEN, senior accountant
Do your employees know what’s expected of them in terms of the company money they can spend when they travel? If they don’t, you might:
- End up with unnecessarily costly expense reports.
- Risk exceeding projections in your current budget.
- Alienate employees if you don’t reimburse them for everything.
- Have more trouble with future budgeting and forecasting.
Finally, an expense policy can save time and keep things fair. It will allow you to approve reports faster, instead of guessing whether you approved a certain expense before or not.
For all those reasons, your company needs an expense policy. This should be a written document that lays out the expenses that employees can legitimately claim when they travel on behalf of your company. This is the best way to keep travel expenses down. If employees know ahead of time what the rules are, they’re less likely to spend freely.
What’s In An Expense Policy?
Your expense policy should define what constitutes business travel and who is eligible to claim expenses. You can describe your expectations here, too. For example, you may ask employees to economize as much as possible. What happens if they submit claims for expenses that don’t follow the policy? How long do they have to submit their reports and how quickly will they be reimbursed? What kind of documentation is required and how should this and the report itself be submitted?
You’ll want to put a dollar maximum on some of the items you list in the policy or limit expenses in other ways. For example, are employees ever allowed to fly business or first class? How much can they spend on dinner or for a hotel room? Consider also spelling out the rules on things like cash advances, vehicle mileage, cabs or rideshare services, and “add-on” flights. You might also list expenses that aren’t covered, like the mini-bar, hotel gym, and movie rentals.
Many unanticipated situations can come up during business trips. What do employees do if they encounter one? You’ll probably have to amend your document periodically to include new expense types.
Keep your expense policy as simple and accessible as you can. If it runs too long, employees are less likely to absorb it. You’ll need to build flexibility into it, since things cost more in some parts of the country than others.
Finding the Right Solution
How do you handle completed expense reports? Getting that data into your accounting system can require a lot of duplicate data entry if you’re doing your bookkeeping manually, and errors are likely. It’s easier if you’re using QuickBooks, and easier still if you add an integrated expense-reporting app. Some even help you manage approvals, check reports against policies, and handle reimbursement.
Contact us if you’re struggling with this financial issue. We can help you find the best way for your business to manage your expense policies and reports.
ABOUT THE AUTHOR
EMILY OLSEN + SENIOR ACCOUNTANT
Emily Olsen is a Senior Accountant in the Client Accounting Services department at Lutz. She specializes in providing outsourced accounting services to clients with a focus on QuickBooks, tax and payroll compliance, small business consulting, as well as software implementation and training.
AREAS OF FOCUS
- Client Accounting Services
AFFILIATIONS AND CREDENTIALS
- Certified Public Accountant
- MAcc, University of Nebraska, Omaha, NE
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