6 Expense Reimbursement Policy Best Practices and Why You Need Them

Strong expense reimbursement policies are critical to overall organizational success, especially when you have employees who travel for business purposes. However, if you're not following expense reimbursement policy best practices, you might inadvertently create higher risks for the company and employees when you do reimburse people.

Why Do You Need a Strong Expense Reimbursement Policy?

A strong policy that governs expense reimbursements protects employees as well as the company. It communicates specifics about what can and can't be reimbursed and how to seek reimbursement. When your policy is detailed and clearly worded, it can reduce the risk of noncompliant spend. Other benefits of effective expense reimbursement policies include:

• Helping to define the culture of your organization
• Supporting trust so employees can travel for business with confidence
• Increasing the efficiency of reimbursements, reducing the time employees may float their own expenses
• Setting parameters for control of travel and other business expenses to help maintain the budget

Initial Steps for Designing an Employee Expense Reimbursement Policy

Before you sit down to write an employee expense reimbursement policy, take some time to gather the necessary information and make sure you’re creating a policy that works well for your organization.

Start by considering specific business needs. What type of budget are you working with, and do you have software solutions to help manage your expense request and reimbursement processes? You may also want to consider how investing in efficient expense management can help you save time and money in the long term.

Next, consider the company's mission and values and how expense reimbursement policies can support them. For example, if sustainability is important to your business, you may want to include parameters in your policy (this travel sustainability guide can help) that support making a sustainable choice when possible for travel arrangements and other expenses. Finally, consider the needs and desires of your employees. Flexibility in the workplace is a global trend and preference for many people, for example. While flexibility often relates specifically to scheduling and where and how people do work, it could also relate to how travel expenses are handled. If that's important to your employees, can you build some flexibility into your expense reimbursement policy?

As you work to answer these questions and set the stage for policy creation, collaborate with stakeholders and subject-matter experts in your organization. That might include getting feedback from employees who travel frequently and are familiar with your current expense reimbursement practices.

6 Expense Reimbursement Policy Best Practices

Once you set the foundation for your employee expense reimbursement policy, you can put these best practices into action when creating it.

1. Define Qualifying Reimbursements

One of the most important purposes of your expense reimbursement policy is to set parameters on allowed spending. Your policy should define what makes an expense business-related and also provide boundaries, such as maximum allowable amounts or types of allowed purchases.

For example, it's common to set a per diem for meals for each day an employee travels. Perhaps you allow up to $55 per day for meals. As long as the employee has the receipts to back up their meal expenses, you would automatically approve up to that amount.

But you can also set parameters for other types of spending. Perhaps employees are only allowed to book certain types of hotel rooms with properties you have negotiated business rates with or economy or business class flights.

2. Require Receipts

Ensure that your expense reimbursement policy is clear about the need for receipts. Describe the types of receipts that are acceptable. That might include:

• Traditional register receipts
• Email receipts
• Printed purchase confirmation from online booking sites

Detail how receipts should be prepared for submission—digital processes may require the employee to take pictures of receipts or scan them in for adding to expense reporting software.

3. Reduce Paperwork in Your Expense Report and Reimbursement Process

Ensure your policy details the types of templates and workflows people should use to submit reimbursement requests, approve those requests, and, ultimately, fund them. When possible, remove actual hard-copy paper from the process. Digital forms support higher levels of streamlining and automation and they also reduce risks associated with paper, including the loss of paperwork and data breaches. 

4. Define Expense Submission Deadlines

You might think that employees will rush to complete expense reports so they can be reimbursed. Surprisingly, however, the paperwork can get shuffled to the back burner when people are busy with other work. This can lead to employees submitting expense requests months after the expenditure occurred.

Slow expense reporting can put a burden on your accounting processes and even cause you to miss some tax opportunities. You can help speed up expense reporting processes by setting deadlines in your policy.

5. Create an Approval Workflow

Define the workflow for expense report approvals in your policy. If you're taking part in digital transformation and automating some of the expense process, define what types of expenses or dollar thresholds are eligible for auto-approval.

Ensure the policy covers who must approve expenses and avoid creating policies that would allow someone (a manager, for example) to approve their own expense report.

6. Include Quality and Compliance Audits

Consider adding quality and compliance audit procedures to your expense reimbursement policy. Define who conducts the audit and how they do so. It's also important to set the parameters for auditing so that no one perceives audits as being directed to certain individuals.

You might write a policy that requires auditing of every third expense reported submitted by any given employee, for example. Or, you might set up the process so audits are triggered when expense reimbursement requests surpass a dollar threshold or include certain types of expenses.