An Easy-to-Follow Expenses Policy (UK)

Note: Want to skip the guide and go straight to the free templates? No problem - scroll to the bottom.
Also note: This is not legal advice.

Introduction

Having an effective expenses policy in place is becoming increasingly important for businesses in the UK. Expenses policies can help protect businesses from financial losses, reduce the risk of fraud and misappropriation, and ensure greater transparency and accountability. So what makes an effective expenses policy? How can a business create an easy-to-follow expenses policy?

An effective expenses policy should outline the rules and regulations governing how expenses are recorded, tracked, approved, reimbursed and when they must be submitted by. It should include information on what types of expenses are allowed as well as cover details about payment methods and deadlines for submitting expense claims. Additionally, it may be beneficial to set up an expense management system to help track and manage all payments associated with the policy.

By having an effective expenses policy in place, businesses can protect themselves from suffering financial losses due to unapproved or fraudulent transactions. A clear set of guidelines also helps to reduce the risk of fraud or misappropriation; employees will understand what is expected from them regarding their expenditure whilst suspicious activity can be reported quickly. Furthermore, greater transparency ensures that all expenses are tracked correctly with any questionable activity being identified promptly - enabling quick action where appropriate.

Creating an easy-to-follow policy doesn’t have to be a difficult process - though do keep in mind that different countries may have different rules around taxes so it’s worth looking into these specific requirements before you start drafting your own document. Guidance on this topic is where Genie AI comes into play; our team has created a library of free legal templates designed specifically for UK businesses that provide step-by-step guidance on how to create your own customised document! Our template library also offers advice on how best to manage your newly implemented policies so that you can feel confident they’re fit for purpose - meaning you don’t even need a Genie AI account!
So if you’re looking for more information on creating an easy-to-follow Expenses Policy (UK) then take a look at our guide below today - we’d love to help make sure yours stands out!

Definitions (feel free to skip)

Expenses Policy - A set of guidelines for a company or organization to manage the reimbursement of expenses for its employees.
Expense Tracking System - A system that allows for the tracking, management, and approval of employee expenses.
Audit Process - A protocol for reviewing and verifying employee expenses, typically through the use of documentation such as receipts.
Internal Controls - Processes and procedures to review, verify, and detect any unauthorized expenses.
Appeals Process - A method for employees to challenge denied expenses, often by providing additional documentation.

Contents

• Establishing a Clear Expenses Policy
• Outline the necessary steps for setting up clearly-defined and documented expectations for employee expenses.
• Define acceptable and unacceptable expenses.
• Establish reimbursement procedures.
• Develop consequences for unauthorized expenses.
• Setting Up An Expense Tracking System
• Detail the necessary processes for creating and implementing an effective system for tracking and managing employee expenses.
• Establish a system for approving expenses.
• Establishing Guidelines for Submitting Expenses
• Outline the expectations and requirements for submitting expenses.
• Explain the timeline for submitting expenses.
• Describe the required documentation and information needed for submitting expenses.
• Creating an Audit Process
• Describe the steps needed for creating an audit process for verifying employee expenses.
• Outline the processes for conducting regular audits.
• Ensuring Compliance
• Discuss the importance of enforcing the policy and providing regular training and reminders to employees.
• Explain the process for monitoring compliance.
• Describe the process for responding to violations.
• Establishing Internal Controls
• Explain the importance of having internal controls in place to prevent fraudulent expenses.
• Outline the steps for setting up an internal control system.
• Establishing a Feedback System
• Describe the process for collecting feedback from employees on the expenses policy.
• Explain the steps for evaluating and responding to employee feedback.
• Developing Reporting Procedures
• Detail the necessary processes for collecting, analyzing, and reporting on employee expenses.
• Creating an Appeals Process
• Explain the process for employees to appeal denied expenses.
• Evaluating the Expenses Policy
• Outline the steps for regularly reviewing and updating the expenses policy.

Get started

Establishing a Clear Expenses Policy

• Establish a clear and concise expenses policy that outlines the expectations for employees when using company funds for business expenses.
• Ensure the policy is written in a manner which is easy to understand, and that it covers all necessary points such as allowable expenses, a process for submitting and approving expenses, and any penalty implications for failing to abide by the policy.
• Make sure to include the policy in any employee contracts, and ensure that all employees are aware of it.
• Have a system in place to track and audit expenses to ensure that all expenses are being used in accordance with the policy.

You can check this off your list once you’ve established a clear and concise expenses policy, included it in any employee contracts, and ensured that all employees are aware of it.

Outline the necessary steps for setting up clearly-defined and documented expectations for employee expenses.

• Create a document outlining the expenses policy and make it easily accessible to all employees.
• Include details of what is and is not an acceptable expense.
• Set out the limits and criteria for claiming expenses and any restrictions or exclusions.
• Include any processes and forms that must be completed to claim an expense.
• Outline the procedure for authorising expenses, with clear guidance on who is authorised to approve expenses.
• Make sure the policy clearly states who is responsible for paying expenses.
• Specify which expenses can be reimbursed in cash and which must be paid directly.
• Outline the timeframe within which expense claims must be submitted and approved.
• Ensure that the policy is reviewed and updated regularly.

You’ll know you can check this off your list and move on to the next step when you have completed all the steps in this section and have a clear, up-to-date expenses policy available to all employees.

Define acceptable and unacceptable expenses.

• Decide which expenses are acceptable and which are not acceptable for the company to reimburse
• Make a list of examples of acceptable and unacceptable expenses
• Determine whether there are any exceptions to the acceptable vs. unacceptable list
• Consider adding a clause in the policy for “unforeseen” expenses
• Ensure that any exceptional expenses are approved by the appropriate authorities
• Document all definitions of acceptable and unacceptable expenses

Once you have determined the acceptable and unacceptable expenses, you can check this off your list and move on to the next step of establishing reimbursement procedures.

Establish reimbursement procedures.

• Outline the reimbursement process for accepted expenses, including who is responsible for submitting the appropriate documents, how reimbursements will be paid, and any deadlines for submission.
• Ensure all employees understand the reimbursement process and what is required of them.
• Include a description of the reimbursement process in the company’s expenses policy.
• Put in place a system for tracking and approving expenses.
• When you are confident that employees are aware of the reimbursement process and the system is in place, you can move on to the next step.

Develop consequences for unauthorized expenses.

• Decide what consequences should be implemented for employees who fail to follow the expense policy.
• Consider the severity of the violation and the history of the employee’s compliance.
• Outline the consequences clearly in the policy document and communicate them to all employees.
• Make sure the consequences are flexible enough to allow for different types of unauthorized expenses.

You can check this off your list when you have outlined the consequences for unauthorized expenses in the policy document and communicated them to all employees.

Setting Up An Expense Tracking System

• Select a software or platform for tracking expenses
• Set up the software with categories for different types of expenses
• Develop a system for employees to submit their expenses
• Establish a process for approving or rejecting expenses
• Create templates for expense reports
• Establish a timeline for submitting and approving expenses

You can check this off your list when the software and system is set up and the templates, process, and timeline are established.

Detail the necessary processes for creating and implementing an effective system for tracking and managing employee expenses.

• Outline the types of expenses that can be claimed
• Set a maximum amount that can be claimed without prior authorisation
• Create a reimbursement form that employees must fill out when submitting expenses
• Clarify the documentation that must be provided (e.g. receipts)
• Decide when and how often expenses will be reimbursed
• Create a process for submitting, approving, and processing expense claims
• Set guidelines for handling expenses that are declined
• Create a system for tracking approvals and payments
• Establish a system for monitoring and auditing expenses

You’ll know you can check this step off your list and move on to the next step when you have a clear policy written out and have established the necessary processes for submitting, approving, and processing expense claims.

Establish a system for approving expenses.

• Identify who will be in charge of approving expenses for the company.
• Create a form for employees to fill out when submitting an expense for approval.
• Ensure the form includes all necessary information (date, amount, purpose, receipt, etc.)
• Establish a policy for how quickly expenses should be approved and paid.
• Set up a system for tracking expenses, such as using an online expense tracker.
• When the policy is in place, communicate it to all employees.

You can check off this step when you have identified the approver for expenses, created an expense submission form, established a policy for how quickly expenses should be approved and paid, set up an expense tracking system, and communicated the policy to employees.

Establishing Guidelines for Submitting Expenses

• Set out specific guidelines for submitting expenses, such as the maximum amount and the time frame to submit them
• Detail the types of expenses that are accepted and which are not
• Clarify if certain expenses require additional approval
• Explain the process for submitting and processing expenses
• Make sure that employees understand that they are responsible for submitting accurate and honest information
• Once you have established the guidelines, communicate them to all staff and make sure they understand them
• When all staff understand the guidelines, you can check this step off your list and move on to the next step.

Outline the expectations and requirements for submitting expenses.

• Employees must submit expenses no later than the end of the month following the month in which the expense was incurred.
• All expense claims must be accompanied by a valid receipt or proof of payment.
• All expenses must be related to work activities and be reasonable in amount.
• Reimbursable items should be listed on the expense report, with the date of purchase, cost, reason for the purchase, and any other relevant information.
• Employees must provide a valid, detailed explanation for all expenses.
• Employees must complete the expense report form accurately and in full.

Once you’ve outlined the expectations and requirements for submitting expenses, you can check this step off your list and move on to the next one.

Explain the timeline for submitting expenses.

• Employees need to submit expenses within 7 days of the transaction date.
• Employees must submit supporting documentation along with the expenses form to confirm all expenses claimed.
• All expenses must be signed off by a manager before reimbursement can be issued.
• Employees will be informed of the status of their expense claim within 7 days of submitting the form.
• Employees must keep proof of purchase or other supporting documents for all expenses for at least three years.

Once these steps have been completed, you will have successfully explained the timeline for submitting expenses and can move on to the next step.

Describe the required documentation and information needed for submitting expenses.

• Ensure that all receipts and invoices are itemized and include the date, description of services/goods, cost, and payment method
• Request additional documentation for any expenses over £50
• Encourage employees to save electronic copies for their records
• Ensure all expenses are reasonable and related to company-authorized activities
• When submitting a claim, employees must provide the following information:
• Name
• Date of expense
• Purpose of expense
• Amount of expense
• Payment method
• Receipt or invoice

Once all of the above is done, you can check this step off your list and move on to the next step.

Creating an Audit Process

• Explain the audit process in detail to employees, including the timeline and how it works.
• Create a system for tracking and verifying expenses, such as a spreadsheet or software program.
• Set up a timeline for when employees must submit expenses for review and when they can expect to receive reimbursement.
• Develop a process for verifying employee expenses, such as checking receipts and ensuring that the expenses are in line with the company policy.
• Establish a process for handling any discrepancies or issues that arise during the audit process.
• Train managers or supervisors to conduct the audit process.
• When the audit process is complete, check off this step as complete and move on to the next step.

Describe the steps needed for creating an audit process for verifying employee expenses.

• Create an audit checklist that includes all expenses that need to be verified.
• Assign a team to review the expenses, ensuring that someone with financial expertise is included.
• Establish a system for verifying receipts and other supporting documents.
• Establish guidelines for determining when an expense is considered reasonable.
• Create a process for resolving any discrepancies.
• Develop a clear procedure for recording and tracking the audit process.
• Create a process for documenting the audit findings.
• Set up a system for regularly reviewing and updating the audit process.

Once these steps are completed, you can move on to outlining the processes for conducting regular audits.

Outline the processes for conducting regular audits.

• Develop and document a system to audit employee expenses - this should include methods for gathering and verifying data.
• Establish an audit team to review the expenses and make sure they are valid.
• Establish a timeline for conducting audits.
• Set a process for resolving any discrepancies or issues that are identified during the audit.
• Document the results of the audit and track any discrepancies or issues that need to be addressed.
• Ensure that any changes or adjustments to employee expenses are made in accordance with the audit results.

Once you have developed and documented a system for auditing employee expenses, established an audit team and timeline, and set a process for resolving discrepancies or issues, you can check this step off your list and move on to the next step.

Ensuring Compliance

• Establish a date for the policy to go into effect
• Create a checklist for employees to ensure they are in compliance with the policy
• Ensure that all employees have received training on the new policy
• Make sure that employees understand the consequences of not following the policy
• Create a system for tracking and recording expenses
• Make sure that all expenses are approved and signed off by the appropriate authority
• Conduct regular audits to ensure compliance with the policy

Once you have established a date for the policy to go into effect, created a checklist for employees, ensured that all employees have received training on the new policy, made sure that employees understand the consequences of not following the policy, created a system for tracking and recording expenses, made sure that all expenses are approved and signed off by the appropriate authority, and conducted regular audits to ensure compliance with the policy, you can check this off your list and move on to the next step.

Discuss the importance of enforcing the policy and providing regular training and reminders to employees.

• Make sure that all employees are aware of the expenses policy and the importance of following it.
• Provide regular training sessions for all employees to ensure they understand the policy and the consequences of not following it.
• Remind employees of the policy on a regular basis to ensure that they are kept up to date and aware of their obligations.
• Ensure that all employees are aware of any changes to the expenses policy and that they understand the implications.
• When you have discussed the importance of enforcing the policy and provided regular training and reminders to employees, you can check this off your list and move on to the next step.

Explain the process for monitoring compliance.

• Have each employee submit their receipts and expenses forms on a monthly basis
• Set up a system to track expenses and receipts
• Use software or online tools to track expenses
• Conduct regular audits to ensure accuracy and compliance
• Ensure that all submitted receipts and expenses forms are reviewed and verified
• Have senior management review the submitted expenses and receipts
• Keep updated records of all expenses and receipts
• Once the process is in place, ensure that all employees are aware of their obligations and expectations
• When you have a system in place and all employees are aware, you can check this step off your list and move on to the next step.

Describe the process for responding to violations.

• Establish a procedure for investigating suspected violations of the policy.
• Notify the employee of their suspected violation and ask for an explanation.
• Review the employee’s explanation and make a decision based on the severity of the violation.
• Depending on the severity of the violation, take necessary disciplinary action.
• Document the details of the violation, the investigation and the disciplinary action taken.

When you can check this off your list and move on to the next step:

• When the investigation has been completed and any necessary disciplinary action has been taken.

Establishing Internal Controls

• Develop a system to capture expense information, ensuring all relevant details are included (e.g. date, expense category, purpose, amount, etc.)
• Create a system for verifying and approving expenses before payment is made.
• Establish a system to ensure that employees are reimbursed promptly and accurately.
• Establish a system to ensure that all expenses are documented accurately and that appropriate records are kept.
• Establish a system to ensure that all expenses are properly coded for accounting and reporting purposes.

Once all of the above steps have been completed, you can check this off your list and move on to the next step.

Explain the importance of having internal controls in place to prevent fraudulent expenses.

• Explain why it’s important to have an internal expenses policy in place (such as to ensure transparency and accountability of company funds, to protect against fraudulent activity, and to ensure compliance with HMRC regulations).
• Describe the potential risks of not having an internal expenses policy in place (such as the risk of employees making unauthorised purchases or submitting fraudulent expenses).
• Explain the possible consequences of not having an internal expenses policy, such as fines or other legal action.

Once you’ve finished explaining the importance of having internal controls in place to prevent fraudulent expenses, you can check this off your list and move on to the next step.

Outline the steps for setting up an internal control system.

• Establish a detailed expenses policy and make sure to keep it up to date.
• Assign a responsible individual or team to review any expenses submitted.
• Enforce a formal approval process for all expenses.
• Provide a clear procedure for submitting expenses.
• Ensure that all expenses are properly documented and recorded.
• Monitor expenses on a regular basis.
• Set up an audit system to detect any irregularities.
• Put in place a feedback system to allow employees to raise any questions or concerns.

Once these steps are completed, you can move on to the next step of Establishing a Feedback System.

Establishing a Feedback System

• Create a feedback form to allow employees to provide their opinions on the expenses policy
• Establish an anonymous system for employees to provide feedback
• Set up a secure method of collecting and storing employee feedback
• Encourage employees to provide feedback on a regular basis
• Set up a system to review the feedback and make necessary changes
• Track progress of the feedback system and make sure it is up to date

Once these steps are complete, you can move on to the next step of describing the process for collecting feedback from employees on the expenses policy.

Describe the process for collecting feedback from employees on the expenses policy.

• Create a survey or questionnaire to collect feedback on the expenses policy
• Send the survey to all employees and make it available online
• Provide an option for employees to submit anonymous feedback
• Remind employees to complete the survey if necessary
• Give employees a deadline for submitting their feedback
• Collect and review the survey responses
• When all responses have been collected and reviewed, you can move on to the next step.

Explain the steps for evaluating and responding to employee feedback.

• Assign a dedicated team to review and evaluate employee feedback on the expenses policy.
• Ensure all feedback is recorded and organized for easy reference.
• Analyze employee feedback and identify any areas where the policy could be improved.
• Discuss any changes or improvements with relevant stakeholders and get approval.
• Implement any necessary changes to the policy.
• Develop a communication plan to inform employees of any changes to the policy.
• Track the effectiveness of the policy and the impact of any changes.

When you have completed all the steps above, you know you have evaluated and responded to employee feedback and can move on to developing reporting procedures.

Developing Reporting Procedures

• Consult with business stakeholders to determine what expense categories are needed for reporting purposes.
• Develop an expense report template that captures information such as date of expenses, category, amount, and notes.
• Create an expense policy that outlines acceptable and non-acceptable business expenses.
• Set up a system for tracking expenses, such as an online expense report form.
• Train employees on how to use the system and how to properly categorize expenses.
• Develop a procedure for verifying and approving expenses.
• Establish a timeline for collecting and submitting expense reports.
• Create a procedure for reviewing and auditing expense reports for accuracy.

When you have developed the reporting procedures, you can move on to the next step.

Detail the necessary processes for collecting, analyzing, and reporting on employee expenses.

• Create a template system for employees to submit their expenses, outlining the types of expenses that are eligible and the information they need to provide
• Set out a timeline for when expenses must be submitted by and when they will be paid by
• Create a process for reviewing expenses submitted by employees to ensure accuracy and adherence to the policy
• Set up a system for tracking expenses, such as a spreadsheet or accounting software
• Analyse the expenses data on a regular basis to identify any discrepancies or areas where savings can be made
• Develop a reporting system to provide regular updates on employee expenses to relevant stakeholders
• When all of these processes are in place, you can move on to creating an appeals process for employees who wish to dispute their expenses.

Creating an Appeals Process

• Create an appeals process for employees to follow if their expenses are denied.
• Outline the criteria for determining whether an expense is approved or denied.
• Document the process for appealing a denied expense and provide it to employees in written form.
• Create a designated appeals panel to review employee appeals.
• Outline the process for the appeals panel to make a decision on the appeal.
• Provide employees with a written response to their appeal outlining the decision and the rationale behind it.

Once you have outlined the criteria for determining whether an expense is approved or denied, documented the process for appealing a denied expense, created a designated appeals panel to review employee appeals, and outlined the process for the appeals panel to make a decision on the appeal, you can check this step off your list and move on to the next step.

Explain the process for employees to appeal denied expenses.

• Create an Appeals Process in your Expenses Policy that outlines the process for employees to appeal denied expenses.
• Make sure the Appeals Process is clear, concise, and easy to understand.
• Ensure that employees know where to submit their appeals and who will review them.
• Make sure the Appeals Process outlines how long the appeals process should take.
• Make sure the Appeals Process outlines what type of evidence is needed to appeal a denied expense.
• When the Appeals Process has been created, make sure it is communicated to all employees.

Once these steps have been completed, you can check this off your list and move on to the next step in your Expenses Policy: Evaluating the Expenses Policy.

Evaluating the Expenses Policy

• Establish a process for regularly evaluating the expenses policy to ensure it is up-to-date with current regulations and any changes in the business environment
• Set up a committee, comprised of both management and employees, to review the expenses policy and make recommendations
• Schedule regular meetings to review and discuss the policy
• Discuss any changes or updates to the policy, based on feedback from employees and the committee
• Document any changes in the policy and make sure they are communicated to employees
• Once the review and update process is complete, check off this step and move on to outlining the steps for regularly reviewing and updating the expenses policy.

Outline the steps for regularly reviewing and updating the expenses policy.

• Schedule a review of the expenses policy at least once a year.
• Gather feedback from employees and other stakeholders on the current policy.
• Analyze the data and feedback collected.
• Identify areas where changes to the policy should be made.
• Make the necessary changes to the policy.
• Notify employees and stakeholders of the changes.
• Put the new policy into effect.

You will know you can move on to the next step when you have successfully completed all of the steps outlined above.

FAQ:

Q: How does this policy comply with UK employment law?

Asked by Christopher on 15th August 2022.
A: This policy is written to be compliant with UK employment law. It covers the areas of income and expenses, as well as outlining the rules for employee expense reports. The policy outlines the criteria for approving employee expenses, details the process for submitting and approving expense reports, and outlines any relevant penalties for not following the policy. It is important to note that while this policy covers the UK, it may not be applicable to other jurisdictions such as the USA or EU.

Q: What is the best way to manage employee expenses?

Asked by Sarah on 27th December 2022.
A: The best way to manage employee expenses is to have a clear and concise expenses policy in place. This should cover all aspects of employee expenses including what is and isn’t allowed, how to submit and approve expense reports, and any relevant penalties for not following the policy. It should also be clearly communicated to all employees so they understand their individual responsibilities and obligations when it comes to expenses.

Q: What are the differences between UK and US laws when it comes to employee expenses?

Asked by Matthew on 3rd April 2022.
A: The main difference between UK and US laws when it comes to employee expenses is the scope of what can be covered by an employer’s expense reimbursement policy. In the US, employers may be able to reimburse employees for a wider range of expenses such as travel costs, meals, entertainment, and any other costs associated with doing business. In the UK, employers are only able to reimburse for specific items such as travel costs or business-related meals.

Q: What are the legal implications of not having an expense policy in place?

Asked by Elizabeth on 5th June 2022.
A: Not having an expense policy in place can have serious legal implications. Without a clear set of rules governing employee expenses, companies may be liable for any improper or fraudulent use of company funds by employees. Additionally, without an expense policy in place, companies may find themselves in breach of relevant statutory regulations or even facing legal action from employees or other parties if they are found to have not provided a fair reimbursement process for legitimate business expenses.

Q: What happens if an employee does not follow the expense policy?

Asked by John on 20th November 2022.
A: If an employee does not follow the expense policy then they may face disciplinary action from their employer. Depending on the severity of the breach, this could include anything from a verbal warning to dismissal from their position. It is important that all employees understand their responsibilities when it comes to managing their own expenses so they are aware of any potential consequences if they do not follow company policies and procedures.

Example dispute

Lawsuits referencing Expenses Policy

• A plaintiff may raise a lawsuit referencing an expenses policy if they believe the policy was applied unfairly or inconsistently.
• A lawsuit could also be raised if the plaintiff believes the employer failed to follow the policy as outlined, resulting in the plaintiff suffering a financial loss.
• The plaintiff must show that the employer violated the terms of the policy, such as denying a legitimate expense claim or failing to provide reimbursement for an approved expense.
• The plaintiff could also seek damages if they can demonstrate that the employer’s violation of the policy caused them a financial loss.
• The plaintiff must also be able to prove that the policy was in place and that the employer was aware of its contents.
• The plaintiff can win the lawsuit if they can show that the employer violated the policy and that the violation resulted in a financial loss.

Templates available (free to use)

Expenses Policy Including Travel And Hospitality

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