As a small business owner, managing expenses can be daunting, especially without an expense policy. But by creating clear guidelines, tracking expenses, and establishing best practices, it becomes easier to ensure compliance and control costs.
In this article, Navan expense experts share their knowledge about company expense policies and workflows to help guide founders, owners, and finance teams through the process of building an expense policy. After all, taking control of employee expenses is a powerful way to achieve cost savings.
An expense policy is a set of guidelines that define how a business manages expenses. It outlines the rules for allowable reimbursable expenditures, who can approve them, and how they are reimbursed.
For small businesses, an expense policy is crucial; it helps leaders control costs, ensure compliance with tax laws and regulations, and streamline the reimbursement process.
A business expense policy also helps to prevent fraudulent or unauthorized expenses and reduces the chances of errors and inaccuracies. Establishing expense policy best practices and general rules helps finance teams ensure that the business operates efficiently and effectively..
Several elements of an expense policy help to make it effective. These elements include:
Define the expenses that are reimbursable and set limits for each category. A wide variety of costs are tied to business purposes, such as office supplies and subscriptions, travel expenses, event fees, and more.
Once you’ve established the categories, define the pricing limits for each. For example, a human resources employee traveling on a business trip could incur multiple work-related expenses, including airfare, per diems for meals, rental cars, accommodations, public transportation, Uber rides, and mileage reimbursement. It’s necessary to set a specific limit for each expense category.
While time-consuming at first, the process of setting expense categories and policy limits is crucial for curbing costs and ensuring compliance.
In building an expense policy, leaders must define how employees and non-employees should pay for items they expense. Are team members expected to pay their own expenses on a personal credit card and submit the expenditures for reimbursement? Is there a company card that team members can use when purchasing for business expenses? Is there a virtual card number that managers can share with approved vendors who will be purchasing on behalf of the company?
We recommend that all businesses, even those starting out, provide all employees with company cards tied to an expense management solution.
Define who can approve expenses — managers, accounting personnel, a designated approver? — and what the approval process looks like. Also consider what disciplinary actions to establish for repeat offenders.
Outline the process for submitting expenses for reimbursement, including required documentation and reimbursement timelines.
Leveraging technology will simplify the approval process, spot errant personal expenses accidentally submitted, and decline out-of-policy costs in real time.
Here are the steps to follow when building an expense policy:
To ensure that any expense policy is effective, consider these tips for implementation and enforcement:
As a business grows, it can be challenging to manage expenses in-house: That’s where a modern expense management partner can help. Spend management software can automate many aspects of the expense reporting process, from capturing receipts to submitting expense reports and approving reimbursements. This streamlining can save time, reduce the risk of errors and fraud, and shift resources toward more strategic initiatives.
A modern expense management partner can also provide insights into spending patterns, helping finance teams make informed cost control and budgeting decisions.
When choosing an expense management partner, look for the following features:
We also recommend looking for an all-in-one solution that integrates expense management and travel management in one tool. A holistic approach to travel and expense management with a single tool streamlines processes, provides greater visibility into expense tracking, improves compliance through proactive enforcement, increases savings, and enhances the overall user experience.
If you’re a business owner looking for comprehensive software that manages every aspect of corporate travel and expenses, look no further than Navan.
As the only integrated business travel, corporate card, and expense management solution, Navan allows employees to book and manage travel — and process all their travel expenses — in a single app, streamlining everything from booking to reconciliation. And with Navan corporate cards, finance teams can equip employees to pay for anything anywhere and enjoy end-to-end automation — from swipe to reconciliation.
And, because even the best-intentioned policies are meaningless without adoption, Navan Expense puts policies directly into the purchase process by applying flexible, code-based limits at the moment of transaction so that out-of-policy charges won’t even go through
This business software designed for people works for small startups, global enterprises, and everyone in between when it comes to travel booking, customizable policies, and real-time visibility.