Templates

Free Expenses Policy Template for Your Business

January 20, 2025
Read Time: 6 minutes

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What is an Expense Policy?

An expense policy is a set of guidelines that outlines what costs are reimbursable when employees spend money on behalf of the company. It helps ensure that all business-related expenses are handled consistently and within company budgets. The policy typically covers which expenses are allowed, the process for submitting claims, and any limits or restrictions on spending.

Having a clear expense policy in place ensures transparency, control, and compliance across the business, making it easier to track and manage spending.

What to Include in an Expense Policy

A well-defined expense policy ensures clarity and helps employees understand what is expected when they incur business-related expenses. Here’s what to include to create an effective policy:

1. Eligibility for Reimbursement

  • Who can claim expenses: Specify which employees or departments qualify for reimbursement (e.g., full-time employees, part-time employees, contractors).
  • Special circumstances: Outline any exceptions, such as eligibility for part-time workers or consultants.

2. Qualifying Expenses

Clearly list the types of expenses that will be reimbursed:

  • Travel: Airfare, hotel stays, car rentals, taxis, and other travel-related expenses.
  • Meals: Meals during business trips or client meetings.
  • Office Supplies: Necessary supplies or equipment required for work.
  • Client Entertainment: Meals, beverages, and entertainment during client meetings.
  • Conference Fees: Registration costs for business-related events or seminars.

3. Non-Qualifying Expenses

Identify expenses that will not be reimbursed:

  • Personal Expenses: Anything unrelated to work, like personal phone bills, gifts, or personal entertainment.
  • Upgrades: Unapproved upgrades for travel or accommodations (e.g., first-class flights).
  • Late Fees: Charges from missed payments or overdraft fees.
  • Alcohol/Entertainment: Excessive entertainment expenses not tied to business needs.

4. Submission Guidelines

  • Receipts: Employees must submit itemized receipts for all expenses.
  • Expense Categories: Expenses should be classified (e.g., travel, meals, office supplies) when submitted.
  • Approval Process: Define the process for getting approval from managers or department heads before making the purchase.
  • Timeline: Set deadlines for submitting expenses (e.g., within 30 days of incurring the cost).

5. Reimbursement Procedures

  • How to Submit: Specify the method for submitting expense claims (e.g., through an online expense management tool, email).
  • Approval Workflow: Outline who needs to approve the expenses (e.g., manager, finance department).
  • Payment Process: Detail how reimbursements will be processed (e.g., through payroll, bank transfer).
  • Reimbursement Timelines: State how quickly employees can expect to be reimbursed (e.g., within 7-10 business days).

6. Spending Limits

  • Daily/Monthly Limits: Set limits for specific types of expenses (e.g., daily meal allowance, travel budget).
  • Pre-Approval for Larger Expenses: Outline the process for obtaining approval before making larger purchases (e.g., high-cost travel or client entertainment).

7. Consequences of Non-Compliance

  • Failure to Follow Policy: Explain the consequences for employees who do not adhere to the policy, such as delayed reimbursement or disqualification from receiving reimbursement.
  • Audit Rights: Include the company’s right to audit expenses if necessary to ensure compliance.

8. Travel & Expense Guidelines

If applicable, provide details on specific travel policies:

  • Booking Travel: Guidelines for booking flights, accommodations, and car rentals.
  • Per Diem Rates: If applicable, set per diem allowances for meals and incidentals during travel.
  • Preferred Vendors: List any preferred travel agencies or vendors employees should use for booking.

9. Expense Reporting Software

  • Tools to Use: Mention any software or platforms employees should use to track and submit expenses (e.g., expense management software like Pluto).
  • Integration with Payroll: Indicate if the expense tool integrates with the company’s payroll system for seamless reimbursement.

10. Policy Updates and Revisions

  • Regular Updates: Specify how often the expense policy will be reviewed and updated to stay relevant with company needs or changing laws.
  • Employee Acknowledgement: Require employees to acknowledge understanding of the policy, typically through a signature or digital confirmation.

How to Create an Expense Policy

Creating an effective expense policy is essential to managing company spending, ensuring transparency, and maintaining financial control. Follow these steps to create a clear, comprehensive expense policy:

1. Understand Your Company’s Needs

  • Assess Business Activities: Consider the types of expenses your employees incur regularly, such as travel, meals, office supplies, or client entertainment.
  • Consult Key Stakeholders: Talk to departments like finance, HR, and management to understand the specific needs and expectations for expense reimbursements.

2. Define Clear Guidelines

  • Eligibility for Reimbursement: Identify which employees or departments are eligible for reimbursement (e.g., full-time staff, contractors).
  • Qualifying and Non-Qualifying Expenses: List the types of expenses that will be reimbursed and those that will not (e.g., travel vs. personal items).
  • Spending Limits: Set budget limits for various expenses (e.g., meal allowances, travel budgets).

3. Set Up a Simple Submission Process

  • Expense Submission Platform: Choose an easy-to-use platform or tool (e.g., Pluto, Expensify) for employees to submit their expenses. This could be a digital form or an expense management software.
  • Documentation Requirements: Ensure employees know they must submit itemized receipts and any necessary supporting documents (e.g., flight tickets, hotel invoices).
  • Timeline for Submission: Set a clear deadline for expense submissions, such as within 30 days of incurring the expense.

4. Establish Approval Workflows

  • Define the Approval Chain: Identify who will approve expenses at each stage (e.g., direct managers, department heads, finance team).
  • Approval Guidelines: Set rules for approval, including limits for various expenses and any additional permissions required for larger amounts or non-standard purchases.

5. Specify Reimbursement Process

  • Payment Method: Decide how reimbursements will be issued (e.g., via payroll, direct bank transfers).
  • Reimbursement Timeframe: Set expectations for when employees will receive reimbursement (e.g., within 7 business days of approval).
  • Tax Considerations: Ensure employees know how expenses are treated for tax purposes and whether any amounts are taxable.

6. Communicate Policy to Employees

  • Easy Access: Make the policy easily accessible to all employees, either through an employee handbook or a dedicated section on your company intranet.
  • Training and Guidance: Provide training or resources to ensure that employees understand the policy and how to submit expenses correctly.
  • Clarify Expectations: Highlight key points, such as spending limits, documentation requirements, and the approval process, so there’s no confusion.

7. Monitor and Enforce the Policy

  • Track Submissions: Regularly review expense claims to ensure compliance with the policy. Set up checks for common mistakes or fraudulent claims.
  • Audit Rights: Retain the right to audit expenses as necessary to ensure that employees are following the policy and adhering to spending guidelines.
  • Enforce Consequences: Make sure employees are aware of consequences for non-compliance, such as delayed reimbursements or disqualification from reimbursement.

8. Review and Update Regularly

  • Stay Current: As your business grows and regulations change, periodically review the expense policy to ensure it aligns with the company’s evolving needs and legal requirements.
  • Feedback Loop: Gather feedback from employees and management to improve the policy and make adjustments as needed.

Expense Policy Examples

Here are two example expense policies that can be used as a template for your business. These examples outline clear guidelines for eligible expenses, approval processes, and submission procedures. You can modify them to suit your company’s needs.

Example 1: Basic Expense Policy

Objective:
This policy provides a clear set of guidelines for handling business-related expenses at [Business Name], ensuring transparency and compliance with company standards.

Eligibility for Reimbursement

Reimbursement is available to the following employees:

  • Full-time employees
  • Part-time employees working at least 20 hours per week
  • Contractors with prior approval from their supervisor

Qualifying Expenses

[Business Name] will reimburse employees for the following business-related expenses:

  • Travel: Airfare, hotel, taxis, and car rentals for business-related trips.
  • Meals: Reasonable meal expenses during travel or client meetings.
  • Office Supplies: Items necessary for work, such as computers, software, or stationery.
  • Client Entertainment: Meals, beverages, and activities for client meetings.
  • Training/Conferences: Registration fees for professional development events or conferences directly related to the job.

Non-Qualifying Expenses

The following expenses are not reimbursable:

  • Personal expenses, including personal phone bills, gifts, or personal entertainment.
  • Travel upgrades such as first-class tickets or luxury accommodations without prior approval.
  • Alcohol and entertainment expenses not related to business.
  • Late fees or charges related to overdue payments.

Submission Process

  1. Receipts Required: All expenses must be documented with itemized receipts.
  2. Submission Deadline: Expense claims must be submitted within 30 days of the expense.
  3. Submission Method: Submit claims via the [Expense Management Tool] with the required receipts and descriptions.
  4. Approval: All expense claims must be approved by the employee’s direct manager before processing.

Reimbursement Procedures

  1. Approval Process: Once submitted, claims will be reviewed and approved by the employee’s manager and then processed by the finance team.
  2. Payment Timeline: Reimbursements will be processed within 7 business days after approval.
  3. Payment Method: Reimbursement will be issued via payroll or direct bank transfer.

Consequences of Non-Compliance

Failure to adhere to this policy may result in delayed reimbursement, disqualification from reimbursement, or disciplinary action.

Example 2: Detailed Expense Policy for Larger Organizations

Objective:
To define the expense guidelines for [Business Name] employees, ensuring that all business-related expenditures are properly managed and reimbursed.

Eligibility for Reimbursement

Employees who are eligible for reimbursement include:

  • Full-time employees with approval from their supervisor
  • Consultants, contractors, and part-time employees with prior approval for specific projects or tasks
  • Any employee working directly on behalf of the company for business-related purposes

Qualifying Expenses

The following expenses are eligible for reimbursement:

  • Travel: Airfare (economy class), hotel, taxis, and car rentals for business travel.
  • Meals: Meals during travel, client meetings, or events. Please ensure expenses are reasonable.
  • Office Supplies: Necessary office materials such as software, tools, or equipment.
  • Client and Business Entertainment: Costs incurred while hosting clients, including meals, events, and entertainment.
  • Training and Conferences: Costs related to professional development, certifications, seminars, and conferences.

Non-Qualifying Expenses

Expenses that will not be reimbursed include:

  • Personal expenses unrelated to work (e.g., personal cell phone bills, family meals, non-business entertainment).
  • Upgrades to accommodations or transportation that exceed the company's set limits without approval.
  • Expenses related to activities not directly associated with company business.
  • Fines or penalties, including parking tickets and late fees.

Submission Process

  1. Documentation: All expenses must be supported by itemized receipts or invoices. For meals or client entertainment, include a brief description of the purpose of the meeting and the names of attendees.
  2. Expense Categories: When submitting claims, categorize each expense (e.g., travel, meals, supplies).
  3. Submission Timeline: Claims must be submitted within 30 days from the date the expense was incurred. Claims submitted after 30 days may not be eligible for reimbursement.
  4. Approval Process: Submit your expense claims to your direct supervisor for initial approval. Expenses exceeding [specific dollar amount] require additional approval from [Finance Department or Manager].

Reimbursement Procedures

  1. Approval Workflow: Upon submission, the claims will be reviewed by the employee’s manager, then sent to the finance team for final approval.
  2. Payment Timeline: After approval, reimbursement will be processed within 5-7 business days.
  3. Reimbursement Method: Payments will be made via direct bank transfer or through payroll, depending on the employee’s preference.

Spending Limits

  • Meals: A maximum of [$ amount] per person per meal, excluding alcohol.
  • Travel: Airfare is limited to economy class; accommodation should be booked at reasonable hotels or Airbnb options within the company’s guidelines.
  • Client Entertainment: Entertainment expenses should not exceed [$ amount] per meeting or event.

Consequences of Non-Compliance

Failure to comply with this policy will result in:

  • Delayed or denied reimbursement.
  • Disciplinary action for repeated non-compliance, up to and including termination.

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