From anniversary gifts to trade fair visits and office supplies: employees incur expenses for the benefit of your company. Handy? Yes! Error-prone? Yes, unfortunately, that too. That is why every organization needs an expense reimbursement policy.
Situations differ, preferences change, guidelines and (unwritten) rules are not always well known to everyone.
As a result, one person will pay for their expenses out of the petty cash box, the next person will use a corporate credit card and other employees will advance the cash out of their own pocket. With the latter wanting to see their money back at some point.
Plenty of reasons to set up an expense reimbursement policy, explaining what type of business expenses employees are allowed to incur, advance cash for or purchase in name of the company.
That way, employees who advance cash for business expenses will know exactly what will or will not be reimbursed. And your finance team will not have to struggle with ambiguous or (too) high-cost claims. Transparency for all parties involved.
In this article, we will explain how to set up such a policy for expense justifications.
Feel free to use it as a template for your expense justification process, or download our template.
Expense reimbursement policy: keeping your expenses under control
If, upfront, everybody knows exactly what expenses can be claimed back and under what conditions, you will avoid a lot of hassle.
Clear-cut rules provide guidance to your colleagues and reduce the chance of discussions afterwards. An unambiguous claims process can also prevent mistakes and allows your finance team to work more efficiently.
With it, the monthly reports will run a lot smoother and you will get a better grip on business expenses. Which will save you a lot of headaches.
This is how you set up an expense reimbursement policy
Successful expense reimbursement policies often share the same elements. The most important one: be clear and detailed in your definitions. This way, you reduce the ‘grey area’ in which employees follow their own interpretation of the rules and guidelines.
Would you like to reduce potential frustration? Explain to your employees in very clear terms:
❯ Which expense claims you will approve (or not);
❯ How much budget is available per expense type;
❯ How employees are expected to pay for these expenses;
❯ The process through which they should submit their expense claims;
❯ The time frame in which they can expect to be reimbursed.
1. Explain which claims you will (not) approve
A rental car, baby shower gifts or treating clients to dinner: communicate clearly upfront which type of expenses employees can claim back and under what conditions.
You will make life easier for yourself and your employees by categorizing different types of expenses in clusters. Group different types of expenses under f.e. ‘travel’, ‘meals’, ‘software’ and ‘office supplies’.
It can also be useful to mention the exceptions: the expenses that employees cannot claim back. Such as movies on short flights, or the use of the hotel gym.
2. Be clear on how much budget is available
You probably don’t want employees choosing five-course meals during a team outing. So be transparent upfront about how much money can be spent per cost type. That way, everyone in your company knows the limits of their expense budgets.
Set realistic budget limits so that employees can stick to them. Use your spending patterns and financial resources as guidance.
Take into account the different needs per team. A sales manager, who has frequent lunches with clients, might need a different budget than maybe the receptionist or a project manager.
By being transparent about budgets, everyone will know exactly what the maximum reimbursement per cost type will be.
3. Decide how employees should pay
Do you want to streamline the process for expense claims? Then you should also have a look at the payment options available to your employees.
Colleagues must be able to pay for their expenses safely and efficiently. So they need suitable payment methods.
❯ Sometimes, employees advance cash out of their own pocket to pay for expenses – such as lunch and drinks – incurred on a business trip. The money is then refunded later.
This has the advantage of employees being more aware of how much money they spend on business expenses: it is coming out of their own pockets. Moreover, it is good for the cash flow of your organization.
But there are also disadvantages. When employees are asked to advance payments using their own money, eventually that could become annoying.
Another disadvantage: your finance team has less control over the expenses. They won’t have insight into what has been spent until after the expense claims come in.
As a business, you can also advance cash to your employees. But that requires cash registers and ledgers. And that is the last thing your finance team needs!
When working with money advances for your employees, it is very important that you communicate your policy clearly. This way, employees know exactly what they can and cannot claim back, and you will avoid administrative chaos.
❯ Many companies ask their employees to book travel and hotels via approved platforms. The costs are then invoiced directly to the company. Employees then only need to provide an explanation or description of their expense claim.
The downside of this option is that, often, such platforms only offer one type of service or product. You will then still need other payment methods for other types of expenses. And that, in turn, generates more administration.
❯ Prepaid payment cards are very handy. They provide the option of automatic ‘top-ups’ with fixed amounts. This way you can be sure that employees never spend more than is allowed. In addition, the cards can be used for online payments. This payment option also ensures that your colleagues no longer have to walk around with cash. Providing safety.
You can easily integrate prepaid cards into your existing accounting system. This way, you have continuous insight into the company’s business expenses.
4. Explain your expense claims and justification procedures
Tell employees how they can claim and justify their business expenses. At many companies claiming business expenses is done manually. Employees submit cash register receipts to the finance department, which then approves or rejects them. But often, those receipts are not sufficient.
Employees often need to add additional information. Why they made the purchase, for example. So explain clearly upfront what other information is required to complete the expense claims.
Make sure you explain your claim procedure in detail. At a minimum, describe:
❯ the steps they claim procedure consists of. In what way your colleagues are expected to provide receipts and invoices, which form(s) they need to fill in, etc.
❯ which expense categories are used, and which additional steps may be required.
❯ where employees can find answers to frequently asked questions. This section grows as you go along and encounter different situations.
5. Explain how reimbursement is done
For your employees, the most important thing is that they are reimbursed for their business expenses. So explain how your company does this.
The approval process. Be clear about the steps employees need to go through in order to have their application approved. You can work with different levels of approval. Based on the amount of the expense, for example.
An example:
❯ Expenses under €50 could be immediately ‘approved’ in your claims and justification process. Under the condition that the submitted claim is complete.
❯ Expenses between €50 and €500 could be approved by a manager or treasurer.
❯ And amounts above €500 must be approved by the managing director. Or even the VP, if unforeseen amounts are involved.
Deadlines. Determine the time frame within which a claim must be submitted, and communicate how long it will take the company to reimburse the spent amounts. This way employees know when to expect the refunds in their bank account.
Lost receipt? What if someone can no longer find their receipt? In that case, many companies allow their employees to create a receipt themselves, based on a certain template. If you also want this for your company, be sure to set clear rules for this process. And decide ahead of time who signs for approval.
An expense reimbursement policy: best practices
When setting up your expense reimbursement policy, a number of basic principles apply. We have listed them below.
Be fair
Different employees should not be treated differently. Especially if they work at the same salary level. So be consistent in the application of your policy.
Keep it simple
Creating a ‘policy’ does not mean that all of a sudden you need to get into complicated legal stuff. Keep the policy understandable and concise.
Stay up-to-date
Times change, and so does your business. Your expense reimbursement policy must evolve with it. Policies and budgets that aren’t updated regularly are useless in day-to-day practice. To renew your policy in time and adjust your budgets frequently to accommodate for inflation.
Keep track of what is valid until when, and make sure that all your colleagues have easy (online) access to the latest procedures and rules. For example, via a fixed place on the intranet.
A better spending policy with SimpledCard
With SimpledCard you can provide employees with corporate Mastercard and Maestro cards, that are not linked to a bank. After using the card, employees can immediately scan the receipt with the SimpledCard app. And submit their expense claim.
You can easily adapt the SimpledCard system to your existing policy. Establish which employees are allocated which budgets. And what type of business expenses they are allowed to incur. This will be visible directly in the app so everyone knows exactly which costs will be authorized – and which won’t.
Define roles to allocate the different responsibilities within the expense justification process. For example, appoint an administrator who distributes the SimpledCard cards. A cash manager, who determines the budgets. And an accountant, who approves the submitted claims. Thereby working according to the four-eyes principle without your finance team gaining extra administrative tasks.
Our experts have worked for a wide variety of organizations. This all-around experience allows us to help you better draw up an expense reimbursement policy that fits your company. And we can advise on how to implement the policy. This way you keep things simple, and you get more control over your expenses.
Contact us about your expense claims and justification policy
Are you wondering about how you can easily implement SimpledCard within your organization so that your employees can organize their expense justifications more easily and your finance team can quickly get a grip on spend management?
Our financial experts are happy to discuss with you which solutions best suit your organization, wishes and ambitions.
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