Does a Small Business Need an Employee Expense Policy?

As an entrepreneur or business owner, you’re constantly navigating the shifting landscape to build a successful business. Managing your expenses always plays a big factor in the health of your cash flow, but these days it’s especially important to get clear on employee spend as your business evolves.

If you’ve been building your expense management process informally over time, it’s likely time to put a formal expense reimbursement policy in place.

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Even companies with fewer than 20 employees benefit significantly from having an employee expense policy, according to a review of SAP Concur customers. Companies that went a step further and moved from a manual expense management process to an automated, cloud-based solution saw a 42% increase in process efficiency by reducing error, risk, and cost.

But first, let’s cover the expense policy.

What’s an expense policy?  

An expense policy clearly tells employees the rules, responsibilities, and expectations when incurring expenses. It should be comprehensive, outlining all main expense types, yet concise so your employees can understand it at a glance.

It’s also a living document. Plan to review and update it regularly so it stays relevant as your business evolves.

What does an expense policy help you do?

An effective expense policy helps you communicate:

1. Who must follow the policy
2. Which expense categories are permitted
3. How expense reports are submitted, reviewed, and approved
4. The reimbursement process and timing
5. The expense approval dispute process
6. How to stay compliant, and what happens if an employee doesn’t comply
7. The company policy on bribery, fraud, and corruption

Setting up an expense policy: the basics

An effective expense policy is worth the work that goes into creating it, helping control costs and fostering accountability. So how do you start? Take a look at the SAP Concur guide: An expense policy for your business.

Establish context for the policy

Help employees understand the purpose of the policy by including:

• A statement of purpose: Why the policy exists plus basic guidelines.
• Expectations and compliance: How the company will help employees claim expenses, what employees must do to get reimbursed, and how non-compliance will be handled.
• Address fraud, bribery, and corruption: What’s the company’s stance on these issues?
• Address areas of ambiguity: Clarify who authorizes expenses and who pays.

Consider expense types that are relevant to your business

Outline which expenses are allowable and non-allowable. Some common expense types include:

• Home office/remote work
• Travel
• Communications and connectivity
• Transportation

Some common non-allowable expenses might include:

• Personal non-work-related items
• Parking fines
• Health club membership fees
• Personal credit card fees
• Damage to or theft of personal property while traveling for business

Beyond the policy: Automated solutions for spend management

Taking the first big step in staying on top of cash flow and setting up an employee expense policy is crucial. But you can take the guesswork out of employee expenses by moving from a manual, paper, in-house expense management process to an automated, cloud-based solution.

With Concur Expense, you can automate expense submissions and approvals, and employees can easily submit expense reports using a highly-rated mobile app. An easy-to-use dashboard gives you a unified view of your employee expenses so you can track key data and have a clear look at what’s being spent and where. Establishing an automated system can help you stay compliant and reduce risk, while meeting the needs of your growing business.

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