Expense policy best practices & FAQs

To help you create an effective expense policy, we’ve answered the most common questions people ask.

How long should my expense policy be?

Technically, your expense policy can be as long as you want. You can even be creative with it. For example, Netflix’s policy is famous for having only five words. Their policy is “act in Netflix’s best interests.”

But most companies take a more traditional approach, creating a policy that is generally between five and fifteen pages long.

Ideally, you should try to cover all the bases for your business and be as concise as possible while you do it. So, your policy will be as long as it needs, without any lengthy preludes or unnecessary text.

What should I include in my policy?

Most traditional expense policies include some of the following sections:

• purpose and scope of the policy
• key principles
• expense management
• reimbursements
• travel expenses, accommodation
• meals and subsistence
• business hospitality
• incidental expenses and non-reimbursable expenses

It sounds like a lot, but each section can be as short as a single paragraph.

How detailed does it need to be?

Your policy needs to be detailed enough so that your employees understand what is covered and what isn’t. But you don’t need to map out every possible expense in minute detail.

Your staff will probably skim read your expense policy remembering only a few key points. So make sure to only cover the most common expenses without getting bogged down.

Do I actually need an expense policy?

In all honesty, you don’t need an expense policy. Some companies run just fine without them.

But it is a good idea to proactively manage employee spending to avoid inappropriate and excessive expenses. Even a basic policy can influence employee spending in a positive way, so writing one is worthwhile.

What information do I need upfront to write my policy?

Before you put pen to paper, you need to understand what your team is buying at work. Consult with your employees to find out what they’re buying, what they need for their job, and how much it costs.

Look at the market and see how much different tools and services cost on average. Partly to see if you can cut costs.

You also need a clear understanding of the expense and reimbursement processes in your company. If you’re using traditional expense management, including a time frame for expenses will motivate employees to file their claims.

How do I write an effective expense policy?

An effective policy is one that is easy to understand and remember.

We have a separate article on expense policy writing tips. The main thing is that it’s accessible, fair, consistent, and regularly updated.

What do I do with my expense policy once it's written?

Beyond giving copies to your employees, you’ll want to add it to your company intranet or SharePoint they can access it whenever they need it.

Sometimes you can also upload your policy direct to your expense management solution, depending on the platform you’re using.

What’s the difference between a travel policy and an expense policy?

They’re essentially the same but focus on different things. A travel policy is simply an expense policy that only deals with travel expenses.

Should I have a separate travel policy and expense policy?

Most companies have a travel and expense policy covering both. But if travel is a major component of your business operations, then you might want to create a separate policy.

How do I make sure staff follow the policy?

Firstly, write one that’s easy to understand and remember. It’s a good idea to speak to different staff members when you’re writing your policy and get their feedback.

You’ll also want to consider what happens if staff fail to follow the policy in a major way and include it in your document. Inappropriate spending is unfair on fellow employees and hurts your company’s bottom line, so you’ll need a process in place to deal with it if it happens.

One great way to increase policy compliance is to couple it with expense management software. Using an expense management system like Expensemate you get approval workflows, as well as proactive limits and restrictions, so employees are limited in what they can do, stopping rule breaking before it happens.

Do I still need an expense policy if I have an expense management system?

It’s up to you, but it’s a good idea to have both.

Spend limits and category restrictions need to be configured for each user, so it helps to have an expense policy to guide whoever is setting up the accounts.

Having an expense policy is also useful if staff are unable to use your expense management system for whatever reason.

How often should I update my expense policy?

It’s best to update your policy at least once a year. Regularly updating your expense policy ensures that it meets the needs of your business.

Plus, it can reduce the amount you spend overall. Updating your policy is an opportunity to find new suppliers and negotiate deals for regular custom.

It will also help you stay on top of any relevant HMRC changes.

What UK laws and regulations relate to expenses?

You must report and pay national insurance for some types of expenses, including business entertainment, travel, accommodation, and meals and subsistence. Plus, you’ll need to document your expenses properly so that you can reclaim VAT.

It’s crucial that you check the government website and run through the exact details.