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Employee travel and expenses form the second largest controllable expense for any company. At this scale, every business needs to setup certain guidelines and criteria to manage and process business expenses. This guide will help you understand everything about these travel and expense policies and help you build, automate and optimise the expense management process in your organisation.
Travel and expense policy defines how an organisation will reimburse employees for all expenses necessary, reasonable and actually incurred when traveling on company business or executing business transactions. Travel and expense policies sit at the core of enterprise expense management to directly impact
How do business currently implement reimbursement policies?
The Global Business Travel Association (GBTA) published a survey result conducted on business travellers in 2016. The results show that fewer than half of respondents (44%) had to follow a policy, while a further 21% of travellers stated that they don’t have any restrictions on their policies.
This state of expense management is cheerful for the business traveller - they can choose the hotels and flights of their own preference and make unchecked spends that the company will bear cost of. For an employer, however, this is a precursor to a disastrous bottomline. With no check in place,
An attempt to understand why a business would not implement policies brings us to a few possible answers,
Objective of employee expenses and travel policies
A clear, unambiguous expense policy helps prevent frustration, mistakes, and even the risk of expenses fiddling or fraud. The key objectives of policies (at a very broad level) are,
Benefits of enforcing travel and expense policies
SUGGESTED RESOURCEExpense Management - Policy automation software
A typical travel and expense policy spans -
Let’s take a while to dive deeper into these three aspects of a typical policy.
Expense reporting and reimbursement process
The first step to creating policies around expenses is defining the process. From how and expense is reported to how the reimbursement will be processed, this is typically referred to as the expense reporting/accounting workflow. In it’s most simple state, this is what a workflow should look like -
Let’s break this process down by stages and understand what will define a healthy process -
Please note that you can replace “expenses” from he above process with cash advances or business trips. Travel, advance and expense policies are adjacent to each other in the typical back office structure and need more or less similar treatments in terms of a structured operational process.
Expenses - Receipts, Mileage, Advances and Per Diems
The next component of a healthy travel and expense policy defines what are the kinds of expenses an employee is allowed to make in their capacity. In a typical structure, every expense claimed by an employee has at least the amount, category and date of expense attached to it. The permissibility of employee expenses is hence defined majorly by these criteria -
Business Travel - Mileage, Trips and Lodging
Thanks to the evaporating boundaries of geographical distance between businesses and opportunities, business travel is the single biggest component of employee expenses. Here are the most common elements around business travel that an ideal expense policy should cover -
SUGGESTED RESOURCEDrafting the perfect expense policy
Considerations around expense categories
These are some common expense categories that you must account for
SUGGESTED RESOURCEDoes your expense management need a breathalyzer?
Considerations around Travel
Not so common considerations around expense policies
There are certain conditions which mandate a reimbursement policy but organisations don’t come across them very often. It’s easy to miss these conditions and it’s a great idea to be prepared for them.
SUGGESTED RESOURCETransparent & Secure Expense Management with Access Delegation for Executives
Examples of comprehensive expense policies
It might be a good idea to look at how other enterprises manage employee expenses when trying to create one for yourself. Following are some publicly available expense policies for your reference. Please note that unthoughtful replication from another enterprise is often a bad idea and we discourage it.
SUGGESTED RESOURCESample policies on common HR TopicsSHRM on Expense Policy
There are tonnes of sample and real expense policies available across the web, however, one size absolutely does not fit all in this case.
Every business has its own unique context and needs to design policies around it. With employee empathy being the directive principle, here are a few things you should keep in mind when designing policies
An approach to implementation
A typical implementation of expense policies accounts for the two major questions for any expense claim -
This is NOT the ideal implementation strategy, but the possible permutations and combinations from this will guide you in making the first steps and picturing the scope of policy. Based on the above two aspects, you can create a grid which looks like this -
Best practices to consider
It’s 21st century for your business, business tools and employees - There is absolutely no case that stands for manual expense management today. Expense management software market is booming and it’s time your company jumped in on the digital wave. Some of the common features available these days can make implementation of expense policies very easy -
SUGGESTED RESOURCEFuture of Automated Expense Management SHRM on Expense Policy
If you're looking to implement a travel and expense policy in your organization, you can reach out to us at [email protected]