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Creating a Company Travel and Expense Policy

11/01/2019 | By: Brink's Money

Travel and expenses can be a real headache for business owners and finance team members. Collecting and checking receipts, approving purchases, monitoring for fraud—these things take time and effort. And that time and effort is only expanded in organizations that lack clarity around what is or isn’t okay regarding employee spending.

Two things can help alleviate and prevent wasted hours and reduce processing costs associated with travel and expense management: tools and policy. In this article, we will discuss the latter, specifically how to create and roll out a corporate travel and expense policy that paves the way for lower costs, better compliance, and more empowered employees.

 

Defining your objectives

Before you can define your company’s travel and expense policy, you need to write down clear objectives for the policy. These objectives should be straightforward enough to communicate to management and employees—when you roll the policy out, getting buy-in will help to foster compliance. 

If you’re not sure where to begin, start with the sample objectives below:

  1. Communicate the responsibilities that all employees, managers, and executives have when it comes to expenses and travel
  2. Communicate the federal legal requirements for business expenses to ensure company-wide compliance.
  3. Define and document the processes for travel and expense approval and reimbursements, including reporting, timing, and rates.

Your objectives are not the rules themselves. They serve as a guide when creating the actual policy and assist you in communicating the plan to the company. Ensure that employees understand and recognize the policy and its objectives to reduce errant behavior.

 

Why create a corporate policy for travel and expenses?

If you are reading this article, it’s likely that you have already decided to draft an expense policy. Maybe your company tracked down an embezzler and needs to tighten up processes. Or maybe you are looking to clarify and streamline approvals and accounting. A well-defined policy can certainly help in these situations and has numerous benefits.

 

Reduce expenses and processing costs

The primary (and most obvious) benefit companies get from a clear travel and expense policy is reduction in costs. Policies help improve budgeting, forecasting, and overall expense management. Streamlined policies create less confusion and, at scale, reduce the time required for reimbursement processes. A policy that limits purchases to approved vendors can ensure consistent expenditures and give your company the ability to negotiate prices—as you continually purchase from specific vendors, you gain more leverage as a customer.

 

Improve productivity

Without procedural clarity in your organization, administrators and accountants may spend hours and hours on calls and in meetings with employees to answer questions on expenses, approvals, and reimbursements. A standardized policy dictates what employees can and cannot do and thus cuts down on unproductive conversations.

 

Prevent fraud

Policy and process create transparency. A strong travel and expense policy helps to create paper (or digital) trails for business purchases, which makes it easier for companies to track trends and identify abuse. Policy alone cannot stop fraud entirely, but the visibility it creates makes it harder for would-be fraudsters to hide their tracks.

 

Define organizational culture

You may not consider your policies as contributors to company culture, but they are. A well-defined policy sets standards for employees and reduces confusion, which fosters employee autonomy and responsibility.

 

What goes into a business travel and expense policy?

 

Every corporate travel and expense policy should include standard components:

  1. Expense categories
  2. Purchase methods
  3. Guidelines for reimbursable and non-reimbursable expenses
  4. Reporting and reimbursement procedures
  5. Travel-specific policies

We will review these components at a high level, but it is up to you to determine your organization’s specific needs and craft a policy that suits them.

 

Expense categories

Defining categories for company expenses gives employees high-level guidance on what is and is not covered under your policy. Categories are a useful heuristic when employees are making purchases—if an expense doesn’t fit an approved category, it won’t comply with policy.

 

Some typical business expense categories include: 

  • Office supplies
  • Meals and entertainment (for clients or work-sponsored events)
  • Travel
  • Employee training and education

 

Business expense cards like Brink’s Business Expense allow you to define purchase categories and set specific limits within them, which can bolster your policy and boost compliance.

 

Purchase methods

How should your employees actually go about making purchases? First, you should outline a chain of command and approval process. Document who signs off on purchases and how employees should request approvals, e.g. an online form or an email. 

You may consider setting thresholds for purchase approvals. For instance, a manager might have the authority to make business-related purchases under $100, but anything over that amount requires documented approval. 

Your policy should also dictate whether employees can use personal funds for expenses (and file for reimbursement) or whether purchases can only be made with company-issued cards. 

In most cases, company cards are the preferred option. Business expense debit cards, for example, give your organization total visibility into expenses and help you avoid the pitfalls of lengthy reimbursement procedures.

 

Guidelines for reimbursable and non-reimbursable expenses

The IRS dictates that, regarding tax deductions, valid expenses must have a clear business purpose and relate to normal business operations. Accordingly, its tax guidelines commonly form the foundation of a company’s reimbursement policy, which defines what will and will not be reimbursed. 

When documenting your company’s non-reimbursable expenses, you can categorize them in a similar fashion to your reimbursable expense categories outlined earlier in your plan. These might include things like:

  • Airfare upgrades or other travel upgrades
  • Parking tickets
  • Dry cleaning
  • Hotel cleaning fees or other overages

 

Reporting and reimbursement procedures

If you are using tools to manage expenses (like a business expense card and associated software), then reporting is simple, and reimbursements are infrequent. Even so, having a clear procedure is key and prevents bottlenecks in the event that an employee can’t access a company card.

Your policy should define how and when to report expenses and what to provide when reconciling at the end of the month. That may include requirements for physical or digital receipts for sound record keeping. The policy should also document how long it takes for expenses to be approved and paid back, as well as how the reimbursement is paid when needed, e.g. cash, check, direct deposit, etc.

 

Travel-specific policies

Travel is an ordinary part of most businesses. Employees travel for client meetings, conferences, training, or any other number of reasons. A clear-cut policy is critical to ensuring expenses incurred while employees are away from the home office are related to routine operations and don’t blow your budget.

Here are some items your travel and expense policy should cover:

  • How to book travel

This may be online, through a preferred agent, or via a company help desk or administrator. The listed method can be whatever is right for your business, but your policy should specify how to document any travel booked.

Large companies may also list preferred airlines, rental companies, and hotel chains in their travel policy. High annual spends often lead to contracts with specific brands. If you have a contract, rewards program, or miles program set up with a travel or lodging company, make sure to include that information in your policy.

  • Amenities and upgrades

When someone else is footing the bill, it can be tempting to go for a nicer seat on the plane or a cushier hotel room. Your travel expense policy should inform employees of what is acceptable when booking travel and accommodations. Should they book a standard room, or will the company spring for a suite? Can they enjoy a bit more leg room in business class, or is that reserved for long flights (or even certain job titles)?

 

Travel and expense policy best practices

 

You have finished drafting your policy. It has leadership approval, and you’re ready to roll it out company-wide. To do so effectively, follow the suggestions below.

 

Top-down adoption

If you’re going to get the broader company on board with the new policy, you’ll need executive support. That means even the organization’s highest-ranking officers heed the policy. If possible, a senior executive should lead communication on policy changes, showing employees that the policy is being taken seriously at every level.

 

Dedicated policy stewardship

Someone in the organization should own the policy and be accountable for answering questions, fostering adoption, gathering feedback, and guiding changes over time. Generally, these responsibilities will fall on an accounting, finance, or procurement role or team.

 

Identify champions

Before you communicate policy updates to the entire organization, consider identifying individuals who will champion the new policy and inform them first. These influential employees aren’t just your executives and managers—they include well-respected employees in various roles who can help improve overall adoption as the policy rolls out. This strategy can be helpful when seeking buy-in for any organizational change, not just expense policy.

 

Prepare for reactions

Your communication plan should include your estimations of individual employees’ reactions to the policy change. One helpful exercise is to write down how you think each employee will react to the changes and think through how you should respond. In a large organization, doing so for every employee would be unproductive, if not impossible, so instead think through potential reactions ranging from delight and adoption to outright fury and how the company should respond in each scenario.

 

Solutions for managing business travel and expenses

A corporate travel and expense policy is only the foundation of sound expense management. Effective management requires daily diligence, including accurate reporting, auditing, and analysis.

 

For ongoing business expense management, Brink’s Money has your company covered. With the Brink’s Business Expense card, you get full control over corporate spending. You can assign debit cards to specific employees or departments, set spending limits, deposit funds, and turn cards on or off all from the convenience of your computer or smartphone. Plus, real-time reporting and custom alerts mean you can ensure policy compliance with ease.

 

To learn more, contact us or sign up for a free 60-day trial today.