CREATING YOUR CORPORATE EXPENSE POLICY
Creating a corporate expense policy is an important step to take as a business owner, especially when you want your business to grow. A corporate expense policy ensures that you and your employees are on the same page regarding finances. Everyone can have the same financial expectations, while also saving time, money, and effort. When starting out, businesses often ignore an expense policy. The team is small and so expenses are easier to review. However, with growth, it can quickly cause friction. Precious time that should be spent focusing on business growth is diverted towards chasing down employees for receipts and manually compiling expense reports. Having a corporate expense policy can help you automate most of the process and save time, money, and effort.
Generally, you should consult a professional while drafting your corporate expense policy. However, some things you should keep in mind include:
- Determine your corporate finance account’s scope
You should outline the scope and purpose of your corporate finance accounts. This should include bank accounts, credit cards, and systems you have in place for reimbursements. You should also outline approval and spend controls. Outlining your finance account’s scope is a great opportunity to determine who will be responsible for creating, authorizing, and enforcing your expense policy. If some of your employees can spend from a corporate account, you can also outline the review process for corporate spending. It is important to address corporate spending for personal, departmental, and corporate account uses.
- Define employee responsibilities
After determining the purpose and scope of your corporate finance account, you should define employee responsibilities and roles. Doing this would give your employees a clear idea on how to use finance accounts. You can determine the spending authority each individual has. Some employees may be able to spend without prior approval, while others may need to get prior approval for each transaction. There should be individuals tasked with drafting budgets, issuing new cards or finance accounts, making reimbursements, and setting spending limits.
- Create a guideline for company spending
The guideline for company spending is an important aspect of your corporate expense policy. Getting this wrong can ruin the effort put into creating the policy, as the guideline is what determines the expectations employees have for company spending. Guidelines can be very flexible, depending on your business operations and how you choose to run it. The important part is that the guideline should ease how money moves through your money, not create bottlenecks. In drafting your guideline, you will define the conditions under which employees can spend on the business’s account. Whatever guidelines you choose to set, it is important for the guidelines to be clear. Vague guidelines can create misunderstanding or in worse case scenarios, lead to improper spending.
- Regularly check employee compliance with your policy
The only way to ensure that your corporate expense policy is working as you want is to regularly check the compliance rate. A good timing for this is at the end of every month, although you could adjust this based on what works best for your business needs. You should check that employees are using business accounts for the outlined purpose. You should also check for compliance with your guideline for company spending. A corporate expense policy should include penalties for employee default, ranging from reimbursement to employment termination. When an out-of-policy transaction occurs, the employee that is the custodian of the payment account should receive a notification. The corporate expense policy should provide a timeline for responding to such notifications before disciplinary actions are taken.
- Incorporate an expense management software into your finance ecosystem
An expense management software can help you save time, money, and effort on your corporate expense policy, especially on spending and compliance. Allawee lets you assign spending limits to members of your team and monitor the transactions on each account. You can also set the account limits to single use, daily, weekly, or monthly renewals.