How to write an expense policy your employees will actually follow.
How to write an expense policy your employees will actually follow.
Effortless expenses start here.
Introduction
Let's face it: expense reports are a pain. For employees, they’re a tedious chore filled with crumpled receipts and late-night data entry. For finance teams, they’re a compliance nightmare riddled with missing paperwork and questionable purchases. But what if there was a way to automate the expense reporting process and reduce the amount of work around expense management?
At Brex, we believe a well-crafted expense policy is the secret weapon in your fight for responsible spending, happy employees, and a streamlined financial process. But crafting a policy that gathers dust on a digital shelf isn't enough. You need an employee-centric policy that fosters trust, empowers responsible decision-making, and simplifies the entire expense reporting process.
Here's the recipe for a winning expense policy that your employees will actually follow.
The three pillars of a winning company expense policy.
A successful business expense policy rests on three pillars: clarity, trust, and efficiency.
Your policy should be crystal clear.
Ditch the legalese and jargon. Use plain language everyone in the company, from seasoned salespeople to fresh-faced interns, can understand. Imagine explaining the policy to someone new to the company. Define allowable expenses meticulously and set clear spending limits for different categories. Don’t leave room for ambiguity — “business meal” might seem straightforward, but what about that coffee before the client meeting? Specificity is key.
Your policy should foster trust, not fear.
Instead of a laundry list of things employees can't expense, highlight what they can expense. Employees appreciate knowing exactly what the company covers and what is reimbursable. Frame the policy as a benefit by emphasizing how it simplifies expense reporting for everyone. A user-friendly policy empowers employees to make sound financial decisions without worrying about getting caught in a bureaucratic web.
Your policy should promote efficiency.
Paper receipts and manual data entry will slow your expense processes to a halt. Embrace user-friendly, digital expense reporting tools like Brex. Brex automatically generates receipts for every corporate card transaction, eliminating the need for employees to keep and file physical receipts. Such expense automation, combined with seamless integration with your accounting software, creates a frictionless experience for employees and finance teams alike
See how Superhuman employees save 500+ hours a month on expense reports
How to create your company expense policy in 3 steps.
Now that you understand the core expense policy components, let's delve into the specifics of crafting your winning policy:
Step 1: Identify stakeholders and gather information.
Who are the key players using this policy? This includes all employees who incur business expenses, across different departments like sales, marketing, and product. Additionally, it’s crucial to understand your company's spending patterns. Analyze past expense reports to identify common expense categories. Those might include frequent travel or client entertainment. You might also consider conducting employee surveys to understand their needs and concerns regarding expense reporting.
Step 2: Outline expense categories and limits.
Use your understanding of the company's spending patterns and employee feedback to establish clear guidelines for different expense categories. Here are some key considerations:
Meals: Establish per diem rates for different locations, taking into account factors like cost of living and industry standards. Clearly differentiate between business meals (client lunches) and personal meals (individual dinners).
Travel: Set specific rules for flights, like economy class for standard trips and business class for long-haul flights exceeding a set number of hours. Detail hotel categories and mileage reimbursement rates. Consider including a table with specific limits for different travel durations. Expenditures for a weekend trip, for example, may differ from a weeklong conference.
Office supplies and equipment: Define what qualifies for company purchases and reimbursement. You’ll want to establish guidelines around the purchase of basic office supplies vs. high-end equipment like ergonomic chairs. Consider including a dollar limit for individual purchases to prevent unnecessary splurges.
Business entertainment: Establish clear guidelines for client entertainment (e.g., types of events, attendee limitations, etc.). Set spend limits for entertainment expenses, perhaps as a dollar amount or a percentage of a sale associate
Brex's auto-generated receipts streamline this process by automatically capturing key information from most corporate card transactions, eliminating the need for employees to save paper receipts or categorize expenses themselves.
Step 3: Set up the approval process.
Clearly define who approves expense reports — supervisor, finance department, or a combination. A two-tiered system can streamline the process — supervisors can approve basic expenses based on predefined guidelines, while the finance department handles larger claims or those exceeding set limits. Establish clear communication channels like an email address or internal help desk for employees to ask questions about the policy or specific expense situations.
Brex can automate approvals for any expenditure within policy, so managers only have to review and approve the exceptions. Medicinal Genomics saved 10 hours of unnecessary approvals a week with Brex’s customized approval workflows.
How to promote policy compliance and avoid common pitfalls.
Creating a user-friendly policy is just the first step. Here's how to ensure your employees actively engage with it:
Communicate effectively.
Distribute the policy across multiple digital channels, and print out and post copies around the office. Remember, a visually appealing and concise document will be more impactful. Conduct training sessions, especially for new hires, to explain key points of the policy. Incorporate interactive elements like Q&A sessions and case studies to make the training informative and engaging. You might even dedicate a short amount of time during a company all-hands meeting to go over the expense policy and review any changes.
When setting a corporate expense policy within Brex, your policy will automatically be applied to any transactions across your corporate card, reimbursements, travel expenses, and invoices, which prevents out-of-policy spend before it happens.
Emphasize the benefits.
Reiterate how the policy simplifies employee expense reporting and reduces administrative burdens for everyone involved. Highlight the positive aspects of the policy and why it matters to them. (They'll thank you for more timely reimbursements and fewer expense approvals!) Promote the policy to empower employees to make responsible business decisions. Ultimately, they can spend for their jobs with confidence if they know exactly what's pre-approved.
Raise awareness around non-compliance.
While outlining consequences for policy violations is important, focus on a fair and transparent approach. Emphasize that compliance is everyone's responsibility and acknowledge the learning curve. Progressive discipline, with initial steps focused on education and preventing future mistakes — e.g., warnings, reminders, or redirection to appropriate resources like Brex's user guides and training materials — is more effective than immediate punitive measures.
Advice for maintaining and updating your policy.
Think of your expense policy as a roadmap for effective spend management. It needs to be updated regularly to ensure employees stay the course as business needs evolve.
Regular reviews and updates.
Schedule regular reviews, ideally once or twice a year. This keeps it in tune with the ever-changing business landscape. Think of it like spring cleaning for your expense policy — a chance to declutter and ensure it reflects current regulations, industry best practices, and your company's evolving needs. Maybe your company has grown into new geographies with different costs of living, or perhaps a new department has emerged with unique spending habits. By proactively reviewing the policy, you ensure it remains a valuable resource for both employees and the finance team.
Continuous improvement and employee feedback.
The people who use the expense policy every day — your employees — have valuable insights to offer. Encourage your employees to share their feedback to ensure your expense policy is crystal clear and helpful. You can do this through surveys, suggestion boxes, or even casual conversations. Ask questions like:
Are there sections that are confusing and need clarification?
Are there missing expense categories, or ones that could be adjusted?
Are any parts of the policy too restrictive?
By actively listening to your team's feedback and incorporating their suggestions, you will create an easy-to-understand policy that reflects the real needs of your employees.
Make your expense policy easy to follow.
“Most people want to make the right decision for the company,” says Alexandr Wang, founder and CEO of Scale AI. “Most people aren’t trying to go out of policy or do bad things.”
An expense policy built on clarity, trust, and efficiency will empower your employees to make the right decisions, foster a culture of transparency, and streamline financial processes.
Brex is here to help you every step of the way. Innovative features like auto-generated receipts and memos, automated approvals, fast reimbursements, and popular accounting integrations eliminate manual workflows and accelerate expense management processes.
Remember, a well-written expense policy is a win-win for everyone:
Your employees will appreciate the ease and efficiency of expense reporting.
Your finance team will revel in the reduced administrative burden.
Your company will benefit from responsible spending and improved financial controls.
So ditch the outdated, cumbersome expense processes and embrace a new era of expense reporting with Brex.