Creating an Easy to Follow Expense Policy

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

Creating an effective expense policy is essential for any business. It not only helps to protect a company from financial risks, but also enables businesses to track spending and make sure funds are being used efficiently. Moreover, having a clear and well-defined expense policy helps to ensure employees are treated fairly when it comes to spending decisions, which can have a positive impact on morale and productivity.

The Genie AI team understand the importance of having such an effective policy in place. With millions of datapoints teaching Genie’s AI what market-standard expense policies look like and with access to our community template library, anyone can draft and customize high quality legal documents without paying a lawyer. Our step-by-step guidance makes creating an easy-to-follow expense policy simple - you don’t even need to be an expert or have a Genie AI account!

An effective expense policy enables businesses to set clear expectations and guidelines around how employees should use company funds while preventing fraudulence or corruption. Additionally, it allows businesses to identify areas where cost savings can be made - providing a win/win situation for both employers and their staff alike.

At Genie AI we strive to provide the best possible legal templates that fit everyone’s needs today - so why not take advantage of our library today? Read on below for our step-by-step guide as well as information on how you can access our template library right away!

Definitions (feel free to skip)

Establishing: To create or put into place.
Scope: The range of a plan, policy, or set of activities.
Reimbursement: The act of giving money back to someone for an expense they have incurred.
Review: An examination or evaluation of something.
Approval: A formal agreement or acceptance of something.
Enforcement: The act of making sure something (like a policy) is being followed.
Communicating: Making something known or understood.
Tools: Resources used to accomplish a task.
Auditing: Examining something carefully to see if it is correct.
Updating: Making changes to keep something current.

Contents

• Establishing a clear policy
• Outline what expenses are allowed and what types of expenses should be avoided
• Establishing the scope of the policy
• Define who the policy applies to, what types of expenses are covered, and how long the policy will last
• Setting reimbursement levels
• Decide whether expenses will be reimbursed in full or partially, and what documentation is needed for reimbursement
• Defining the review and approval process
• Outline the process for reviewing and approving expense claims, including who is responsible for reviewing and approving claims
• Setting limits and restrictions on expenses
• Establish limits on how much can be spent on specific items and limit the types of items that can be purchased
• Establishing an enforcement process
• Outline the consequences for failing to follow the policy, including warning letters, suspension, and termination
• Communicating the policy
• Make sure the policy is communicated to all staff and that they understand its requirements, including providing training on how to use the policy
• Developing tools to help with the process
• Develop tools to help staff track their expenses, including spreadsheets, forms, and other software solutions
• Auditing the policy
• Regularly audit the policy to ensure that it is being followed correctly
• Updating the policy
• Update the policy as needed to reflect changes in the organization or external factors

Get started

Establishing a clear policy

• Involve key stakeholders in the creation of the policy.
• Determine who is responsible for approving expenses.
• Begin with a clear definition of what constitutes an expense.
• Outline any limits or restrictions on expenses.
• Establish a consistent way for tracking and recording expenses.
• Make sure that the policy is communicated clearly to all employees.
• Ensure that the policy is reviewed and updated regularly.

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

Outline what expenses are allowed and what types of expenses should be avoided

• Identify exactly what types of expenses are acceptable and which are not.
• Identify any exceptions to the accepted expense types.
• Create clear guidelines for when an expense requires pre-approval.
• Provide examples of what is and is not an acceptable expense.
• Create a list of items that are not eligible for reimbursement.
• Decide how to handle employee reimbursements.

When this step is complete, you should have a comprehensive list of acceptable and unacceptable expenses, as well as any exceptions to the rule. You should also have clear guidelines on when expenses need to be pre-approved.

Establishing the scope of the policy

• Decide who needs to be involved in the creation of the policy
• Clarify the boundaries of the policy, such as what types of expenses are allowed and which are not
• Identify who the policy applies to (e.g. employees, contractors, etc.)
• Define the time period that the policy will cover (e.g. yearly, monthly, etc.)
• Outline the types of expenses the policy applies to (e.g. travel, meals, etc.)
• Create a clear process for submitting and approving expenses

Once you have established the scope of the policy, you can move on to the next step.

Define who the policy applies to, what types of expenses are covered, and how long the policy will last

• Identify who the expense policy applies to (e.g., all employees, certain departments, etc.)
• Define the types of expenses that are covered, such as travel and meals
• Decide on how long the policy will last (e.g., indefinitely, until a certain date, etc.)

You can check this step off your list when you have defined who the policy applies to, what types of expenses are covered and how long the policy will last.

Setting reimbursement levels

• Consider creating tiers of expenses, such as essential, essential but optional, and non-essential
• Identify the maximum reimbursement levels for each category
• Establish a clear criteria for each category, such as a list of items that fall under the essential category
• Decide if there is a maximum limit for each category, or for the entire policy
• Make sure to include any taxes that may be applicable to the reimbursement
• When setting reimbursement levels, consider what will be fair to employees and what is fiscally responsible for the organization
• Once you have set the reimbursement levels, you can check this off your list and move on to the next step.

Decide whether expenses will be reimbursed in full or partially, and what documentation is needed for reimbursement

• Develop a policy that outlines reimbursement levels for different types of expenses
• Determine if partial or full reimbursement is allowed
• Set a maximum reimbursement amount
• Identify what types of documentation will be required to process a reimbursement
• Make sure that all staff members are aware of the reimbursement policy and documentation requirements

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

• When you have determined the reimbursement levels, maximum reimbursement amount, and documentation requirements for the policy.

Defining the review and approval process

• Establish who will review and approve expense claims
• Outline the criteria for approving claims
• Set up a timeline for when claims must be reviewed and approved
• Create a system for tracking which claims have been approved and which are still pending
• Establish a procedure for resolving any disputes or discrepancies
• Determine if any other sign-off is needed within the organization before claims can be approved

Once you have established the review and approval process, you can move on to the next step.

Outline the process for reviewing and approving expense claims, including who is responsible for reviewing and approving claims

• Establish a clear policy for submitting and approving expense claims
• Determine who is responsible for reviewing and approving expense claims
• Define the levels of approval for different types of expenses
• Create a timeline for reviewing and approving claims
• Determine the process for resolving discrepancies in expense claims
• Develop a process for reimbursing expenses

Once you have outlined the process for reviewing and approving expense claims, including who is responsible for reviewing and approving claims, you can move on to setting limits and restrictions on expenses.

Setting limits and restrictions on expenses

• Determine what types of expenses should be allowed
• Establish maximum amounts for each expense category
• Set limits on how much can be spent on each type of expense
• Consider creating a list of approved vendors for each expense category
• Outline any restrictions on where and when expenses can be made
• Make sure that the policy is compliant with federal, state, and local laws
• Document all limits and restrictions in the expense policy

Once you have determined the limits and restrictions on expenses and documented them in the expense policy, you can check this step off your list and move on to the next step.

Establish limits on how much can be spent on specific items and limit the types of items that can be purchased

• Establish limits on how much employees can spend on specific items, such as office supplies, meals, and travel expenses.
• Set limits on the types of items that can be purchased, such as only purchasing items from approved vendors.
• Create a list of approved vendors and the limits of how much can be spent on each item.
• Ensure that all limits are clearly stated and that all employees are aware of them.
• When all limits and restrictions are set, you can move on to the next step.

Establishing an enforcement process

• Determine the necessary steps for effectively enforcing the expense policy.
• Decide who will be responsible for enforcing the policy and how the enforcement process will be documented.
• Consider what the appropriate response should be for failing to follow the policy, such as warning letters, suspensions, and termination.
• Develop a timeline for when each step of the enforcement process should be taken.

Once the enforcement process has been established and documented, you can check this off your list and move on to the next step.

Outline the consequences for failing to follow the policy, including warning letters, suspension, and termination

• Create a written list of the consequences for failing to follow the policy
• Include warning letters, suspension, and termination as possible outcomes
• Specify the duration of any suspensions or terminations
• Create a timeline for when disciplinary action should be taken
• Ensure the consequences are consistent with other policies in the organization
• When complete, make sure the consequences are clearly outlined in the Expense Policy
• Check off this step when the list of consequences is finalized in the Expense Policy

Communicating the policy

• Provide staff with a policy document or summary outlining the expenses policy
• Ensure all staff understand the policy and their responsibilities in terms of adhering to the policy
• Hold a staff meeting or training session to discuss the policy and answer any questions
• Make the policy easily accessible to staff, such as by making a digital copy available to all staff
• Keep records of all staff members who have received and read the policy
• Consider setting up a system for staff to ask questions and get clarification if necessary
• When you have successfully communicated the policy to all staff and are confident they understand it, check this off your list and move on to the next step.

Make sure the policy is communicated to all staff and that they understand its requirements, including providing training on how to use the policy

• Create a training session to ensure that staff understand the requirements of the policy
• Send out an email or other communication to staff with the policy and instructions on how to use it
• Provide staff with a detailed list of the policy’s requirements, such as the acceptable types of expenses
• Make sure all staff have access to the policy document
• Ask staff to sign and return a document confirming that they have read and understand the policy
• Assign a staff member to be the point of contact for questions related to the policy
• When all staff have signed off on understanding the policy, and have been trained in using it, mark this step as complete.

Developing tools to help with the process

• Identify which tools need to be developed to assist with tracking expenses and filing expense reports
• Research existing software solutions that may be able to help with the process
• Create any customized spreadsheets, forms, and other tools that may be needed for tracking expenses
• Make sure that any tools are easy to use and understand
• Test the tools to make sure they are working correctly
• Make sure that any tools are securely stored
• When all tools are created and tested, you have completed this step and can move on to the next step.

Develop tools to help staff track their expenses, including spreadsheets, forms, and other software solutions

• Determine the best software to create the necessary spreadsheets and forms
• Design the spreadsheets and forms to be user friendly, allowing staff to easily track their expenses
• Make sure that the forms are compliant with the expense policy
• Test the spreadsheets and forms to ensure they are working properly
• Train staff members on how to use the spreadsheets and forms
• Ensure that the spreadsheets and forms are accessible to all staff members
• When the spreadsheets, forms, and software solutions are up and running, the step is complete and you can move on to the next step.

Auditing the policy

• Establish a regular audit schedule to check that the expense policy is being followed correctly
• Gather expense reports from staff and review them against the policy guidelines
• Make sure that all expenses are valid and approved
• Identify any discrepancies and discuss them with the staff member
• Make necessary changes to the policy or training documents if needed
• Ensure that the policy is being adhered to
• Check off this step when all audits have been completed and any necessary changes have been made.

Regularly audit the policy to ensure that it is being followed correctly

• Schedule regular audits of the policy, such as monthly or quarterly.
• Have the audit team review all expenses made by employees to ensure they are in line with the policy.
• Prepare any necessary reports or summaries based on the audit and share it with relevant stakeholders.
• Monitor any changes in spending and take appropriate action if needed.
• Keep track of all audit results and document any necessary follow-up actions.
• Once the audit is complete and all follow-up actions have been taken, you can move on to the next step.

Updating the policy

• Review any changes in the organization or external factors that could affect your expense policy
• Identify any areas of the policy that need updating to reflect those changes
• Update the policy as needed and make sure it is easily accessible to all employees
• Have a designated individual to approve any changes to the policy
• Once the policy has been updated, notify all employees of the changes
• Check off this step when the policy has been updated and communicated to all employees.

Update the policy as needed to reflect changes in the organization or external factors

• Monitor changes in the organization, such as changes to the structure, budget, or personnel
• Pay attention to external factors that may require changes to the policy, such as changes in tax laws, regulations, or industry standards
• Review the policy on a regular basis to ensure it is up-to-date
• Make decisions that are in the best interest of the company and employees
• Make changes to the policy as needed and communicate them to all relevant parties
• Ensure that all changes are documented and filed
• When all necessary changes have been implemented and communicated, the step is complete.

FAQ:

Q: What is the legal difference between an expense policy and an expense reimbursement policy?

Asked by Abigail on 17th April 2022.
A: An expense policy is the set of rules around what business expenses you will allow your employees to incur, what needs to be documented, how it gets approved and whether there are any limits on spending. An expense reimbursement policy is the process by which you will reimburse employees for expenses they have already incurred in accordance with the expense policy. It outlines who is eligible for reimbursement, what documentation and approvals are needed, how quickly they should be reimbursed, and any limits on reimbursements.

Q: Are there any particular laws or regulations that I need to consider when creating an expense policy in the UK?

Asked by Matthew on 10th December 2022.
A: Yes, UK employers have a responsibility to ensure that they comply with relevant laws and regulations when creating an expense policy. This includes the Working Time Regulations 1998, which sets out certain rights employers must provide in terms of rest breaks and holidays. Additionally, the Employment Rights Act 1996 states that employers must not make deductions from wages (including expenses) without written consent from the employee. Furthermore, employers must adhere to HM Revenue & Customs (HMRC) guidelines on allowable expenses for employees and ensure that any reimbursements are reported as taxable income.

Q: How can I ensure my expense policy is fair for all employees?

Asked by Logan on 5th August 2022.
A: It’s important to ensure that your expense policy is fair for all employees, regardless of their role or seniority within the organisation. When creating your policy, consider what is necessary for different roles and duties within the organisation, as well as any unique circumstances that may apply to individual employees. Additionally, it’s important to keep up with any changes in legislation and regulations so that your policy remains compliant with current laws. Finally, consider conducting regular reviews of your policy to ensure it remains fair and up-to-date over time.

Q: What types of expenses should I include in my policy?

Asked by Scarlett on 25th July 2022.
A: This will depend on the specific needs of your organisation and industry. Generally speaking though, you should consider including items such as travel expenses (e.g. flights or hotel stays), meals, entertainment costs (e.g. business lunches or client gifts), professional development costs (e.g. conferences or course fees) and any other costs related to running a business such as office supplies or software subscriptions. Additionally, you might also want to consider including a section on personal expenses (e.g. mobile phone bills or commuting costs).

Q: How can I make sure my employees stick to my policy?

Asked by Noah on 20th May 2022.
A: The best way to make sure your employees stick to your policy is to ensure that they fully understand it before they begin incurring expenses on behalf of the business. Take time to explain the details of the policy clearly so that everyone knows exactly what’s expected of them when it comes to managing expenses. You should also ensure that you have a system in place for monitoring employee spending and that there are appropriate consequences for those who break the rules (such as disciplinary action or a deduction from wages).

Q: What are some ways I can save money by having an expense policy?

Asked by Emma on 12th January 2022.
A: A good expense policy can help you save money in several ways. Firstly, it will help you keep track of spending across different departments which can help you identify areas where budget cuts can be made more easily. Additionally, having clear rules around what can be spent helps reduce unnecessary expenditure and encourages employees to stay within budget limits which could lead to further cost savings over time. Finally, having an effective system in place for monitoring employee expenses can help reduce instances of fraud or misuse of company funds which could have a significant financial impact if left unchecked.

Example dispute

Possible Lawsuits Regarding Expense Policies

• Breach of Contract: A plaintiff may sue for breach of contract if the employer has not followed the terms and conditions of the expense policy.
• Negligence: The plaintiff may sue for negligence if the employer has failed to exercise due care in establishing and following the expense policy.
• Unfair Dismissal: The plaintiff may sue for unfair dismissal if the employer has terminated the employee for not following the expense policy.
• Unjust Dismissal: The plaintiff may sue for unjust dismissal if the employer has dismissed the employee without following proper procedures.
• Breach of Trust and Confidence: The plaintiff may sue for breach of trust and confidence if the employer has breached the trust and confidence of the employee by unfairly enforcing the expense policy.
• Unlawful Deduction: The plaintiff may sue for unlawful deduction if the employer has deducted money from their wages due to not following the expense policy.
• Misrepresentation: The plaintiff may sue for misrepresentation if the employer has made a false statement in order to induce the employee to follow the expense policy.
• Defamation: The plaintiff may sue for defamation if the employer has made false statements about the employee in order to enforce the expense policy.

If the plaintiff is successful, they may be awarded damages for the losses incurred as a result of the employer’s actions. These may include lost wages, compensation for the distress caused, and punitive damages. The court may also order the employer to pay the plaintiff’s legal costs.

Templates available (free to use)

Expense Policy

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