Why You Need an Expense Policy

Whether you’ve got a team on-site, traveling employees, or remote workers, everyone being on the same page with expense policies and procedures helps business operate more efficiently. Having expense policies in place help you control costs, optimize cash flow, plan accurate budgets, and stay in compliance with industry standards and tax regulations.

If you’re unfamiliar with what an expense policy is and how to implement it, we have some guidance to share from our financial team. Whether you are writing this policy yourself or using an expense policy template, always ensure that it mentions crucial key components.

Expense Policy Components:

1. Purpose and Scope: The policy introduction that outlines the grounds and terms that apply to specific departments and employees.

2. Expense Categories: Represents the types of expenses that are deemed acceptable to be categorized as a business expense, with defined expectations and spending budgets.

3. Reporting and Approvals: Confirm your employees know how to submit their expense reports and reimbursement requests, when to submit them, and who they should be submitted to.

4. Valid Documentation: In order to accurately approve these expenses, confirmation is required to verify they were legitimate business purchases. Itemized receipts, invoices, or statements might suffice in most scenarios. Organize your documents to have handy if you plan on writing off your business expenses and ensure your documentation policy reflect IRS requirements.

5. Excluded Expenses: Your business expense policy should list details about charges you will not reimburse. Clearly define these expenses that are not covered so there is no room for misinterpretation.

6. Eligible Expenses: Educate employees about what expenses can be reimbursed, how they will be reimbursed, and what the expected timeline for reimbursement is.

Business Quote

“A budget is telling your money where to go, instead of wondering where it went.” - John C. Maxwell  

This quote reinforces that implementation of budget spending practices helps you manage expenses and comply to budget goals.

Business News

1. Expense Report Template | QuickBooks Online

2. Guide to business expense resources | Internal Revenue Service

3. How to Create a Business Budget: 6 Simple Steps - NerdWallet

Business Lesson

Your company expense policy is imperative for budgeting expenses and employee related spending. By having these policies in place and well-known will increase compliance and ensure the logic behind these policies is understood.

Book Recommendation

If you are an aspiring business owner or an overwhelmed business owner with piles of paperwork and tax implications, this book will give you a streamlined, step-by-step guide that defines every procedural hurdle you will encounter, including your expense policy.

LLC Beginner’s Playbook: Simplify the Process, Dodge Costly Errors, and Secure Your Business Without the Hassle by Gene Bott