Sunil Nigam

How To Create A Simple Expense Policy in 2023: The Complete Guide

The result is that many businesses and organisations have clearly defined their expense policies regarding when, where, and how they will reimburse their employees for travel expenses and company expenses.

Unfortunately, this is not the case with all, because many businesses and organisations do not have a formal business expense policy.

In today's climate, when many employees work from home, a clear and concise company expense policy is extremely important to your business success.

Therefore, your employees need to know what they can claim. The business may also save money on unnecessary expenses this way.

We've put together a nifty sample template for you to use along with this article. To get the most out of it, you should open them side by side.

We will also explain how you can use ExpenseOnDemand to drive efficiencies to your team and eliminate manual work, which create errors and additional work, and how & why you should embrace automation to increase productivity and value add.

Let’s see how your business can implement an expense policy with ease.

Level up with your expense policies with these help guides

What is an Expense Policy?

An expense policy is a set of rules that define what an employee can and cannot claim as a business expense. For example, expenses made for leisure are not acceptable to claim as work related expenses. Whereas, if you require an Uber from the office to a clients office, employee claim this as a travel expense.

An expense policy is a guideline for employees which states what they can and cannot claim. A policy outlines the process that an employee should follow when filing work/business expenses.

Depending on how you communicate with your teams, the policy can be either formal or informal. It should clearly state the parameters within which an employee can make business-related purchases.

For example, if your company has a limit on how much you can spend on travel per trip or per year, this should be stated in your expense policy to avoid confusion when it comes to time of expenses being claimed.

An effective company policy will cover all aspects of your company's budget:

  1. Expenditures for office supplies
  2. Utilities
  3. Phone lines
  4. Business travel expenses like flights and taxi fares
  5. Entertainment costs like tickets to movies or sporting events
  6. Gifts (like flowers) given by employees during client visits
  7. Phone bills and meals purchased with colleagues after work hours outside the office.
  8. Online payments and purchases

There are better ways of managing your team(s). It's not enough to send reminders on Microsoft Teams, Slack or even WhatsApp to clarify work related expenses.

In order for HR and finance to productive with their time, a well-created business expense management system can save a lot of time with managing

You can't change people, but you can change the situation.

A system increases employee morale by showing them how much their efforts are appreciated by their employers and that their expenses are reimbursed fairly.

If you're starting out and learning about how to implement a company expense policy, setting up a Microsoft Excel or Google Sheet for this would be a great step in the right direction.

It's important to note that using a spreadsheet to manage employee spend can become distracting, repetitive and unclear.

In other words, there is room for duplicate expenses to be submitted to the company.

If you'd like to see how we help thousands of businesses create and monitor an spend policy, you can book a demo with our team.

expense policy best practices - expense report made on a spreadsheet
Screen 1

Importance of an Expense Policy During Expense Management

When employees incur and request reimbursements for work related expenses, a policy provides guidelines and structure which they should follow to manage expenses effectively.

That apart, a well-articulated spending policy prevents misunderstandings and disputes between employees and management regarding expenses.

It also helps organisations maintain control over their business expenses and promote fiscal responsibility within the organisation.

In addition to helping reduce the risk of fraud, it can also ensure compliance with local laws and regulations.

As a result, a good policy ensures that the expense management processes are efficient, transparent, and fair for all employees.

Finally, to ensure the success of the organisation, it is important for expenses to be:

  1. necessary
  2. appropriate
  3. documented
  4. account for promptly.

Let's deep dive into how you can create your policies.

How To Create A Simple Expense Policy in 2023

To get started with creating your employee spending policy, there are a few steps worth considering before rushing off to it. Take a moment to understand the contents of a reimbursement policy and how to create a robust policy for your business.

To follow along, you can download a sample expense policy we’ve created for you here.

Begin with an overview

  1. Start your expenses policy with an overview of your company's standards and the reasons why the policy document has been created. List which types of purchases are eligible for reimbursement and explain why the business may not reimburse employees for certain expenses. Reviewing these concepts at the beginning of your document can help employees understand the expenses policy clearly.

    For example: all must have receipts, no personal expenses can be charged to the business.

    A classic case would be where an employee has gone to New York for work, and they take their spouse with them. The difference in the room charges for single and double occupancy, a percentage of meals / room service, etc should be subtracted from the expenses booked to the employer.
  2. Expenses should be reasonable, keep in mind the nature of the business

    Example 1: For example some businesses add a point, which says, “spend the company’s money, as if you were spending your own money”. Essentially, this forces the employee to think twice before they splurge on expenses.

    Example 2: Another example would be, if you are a middle level executive, would you fly First Class for business (Screen 2), but only Economy for personal travel. This ensures that money is not wasted.
expense policy best practices - expense report 2
Screen 2

In the above example, the employee is not entitled to travel First Class (Screen 2), but chooses to travel First Class, because there is no policy.  The employee can only travel Business Class, and the ticket limit is GBP 3000. 

In ExpenseOnDemand the limit would have been set in the background for a Grade 6 employee, and they could not spend more than GBP 3,000, without a pre-approval and proper justification.  Even so, if they provided a justification, the expense would have been logged on the Expense Policy Dashboard, and perhaps would have also gone for Counter Approval (if this function was turned ON).  

List who can receive reimbursement for travel and expenses

After introducing your standards and company motivations, list any employee groups, for example, Vice Presidents and above may be entitled for Business Class (Screen 3) travel and other employees can only travel business class if the travel is more than 5 hours. 

From your list, choose which groups qualify for reimbursement, this helps staff to understand their roles in the policy more effectively. List employee groups and their general responsibilities in these policies can also help create an introduction to the concepts in the next sections. 

Normally, in a manual system the process is to set limits in a document (Screen 3), which probably sits with one person or maybe more than one person, by is seldom accessed. As a result, the policy is rarely complied.

expense policy - expense reimbursements
Screen 3

In ExpenseOnDemand, you can setup the limit against each Grade. In the undermentioned example below (Screen 4), we have set a limit against Grade 6 of GBP 2,000 for flights which are less than 5 hours (Screen 5)

expense policy best practices - limiting expenses to grades
Screen 4

Screen 5

As you saw above, the application automatically flags expenses at the point of entry, if they breach the limit set, and require the Claimant to either provide a justification or reduce the amount.

Define Qualifying Requirements

Defining your requirements for your expense policy can help structure and facilitate it towards the right employee groups. Here's how to it.

  1. Clearly list expenses or categories that qualify for company reimbursement. Include exceptions to the general qualifying rules to help clarify and answer potential questions.

    For example, companies can set limit on breakfast, lunch and dinner as per the tax rules. They can also set limits for entertainment, where staff is entertained and where customers are entertained. In the case of staff the limit is usually lower (guidance provided by the Tax authorities), whereas when it relates to customers, the limit is usually higher.
  2. Similarly, guidance rates are also documented for reimbursing mileage. Companies usually use those that are provided by the Revenue.  For ease of understanding, I have appended an expense policy which we helped create for one of our customers. This can be used as a guidance and amended to suit your requirements.  
  3. Instead of using sheets of paper as shown in Screen 3, ExpenseOnDemand allows you to set a limit against each policy for each grade. In Screen 6 below you can see how these limits can be set, with an effective date and a note explaining to the Claimant the objective of the policy.
Graphical user interface, applicationDescription automatically generated
Screen 6

Expense Categories and Templates - Applying the Policy

  1. The claim procedure for particular expense categories can either be listed as part of your company's policies or as a separate part of the template, depending on your company's policy.
  2. Reimbursement and advance payments for business-related expenses should be explained in this section (procedure steps). Care must be taken to document which categories will be reimbursed and the amounts. You should also create a negative list, which should clearly state what will NOT be reimbursed. An expense policy document is a “living document”, and needs to be reviewed at least once every 6 months, to reflect the changing environment.
  3. To help police policy compliance, the Expense Policy Dashboard (Screen 7) shows which categories have the maximum breaches. This should help in reviewing the policy, i.e., is it too stringent or too lax. That apart, ExpenseOnDemand also displays the names of the top 10 Claimants who breach policies continually; including the names of the top 10 approvers/line managers who continually approve breached expenses. This can help counsel each participant.
  4. Additionally, this section should detail how employees may contest expenses that are not covered by the company or adjust current arrangements to resolve any issues that may arise.

expense policy best practices - policies should be compliant
Screen 7

Non-reimbursable expenses

  1. In this section, you can list any non-refundable expenses. If possible, consider explaining the reasoning for these decisions. Explaining the rationale for not paying such expenses, such as excess baggage or airline upgrades, will help your team better understand the policies.
  2. In addition, listing any expenses which are not reimbursable will encourage employee adherence to company policies. This will also help them make informed decisions when traveling or making purchases on the company's behalf.

Pro Tips About Expense Policies For Your Teams

Listed below are ideas which you can use to maximise the success of your expenses policy:

  1. Educate employees on proper procedures

    a. If employees don’t understand the objective of the expenses policy, they will not follow procedures successfully, which will then result in its failure.

    b. If you use online tools, train employees on how to use those tools or software offerings.

    c. Encourage them to keep the proper documentation and follow correct procedures so you can remain in compliance and employees can receive reimbursements promptly and accurately.
  2. Keep documentation consistent

    a. To make it easy for employees to follow procedures, keep the requirements specific, simple, and consistent. For example, if you require itemised receipts for purchases, provide examples and ensure that employee documentation matches the requirements. Doing so can help make your policy more successful.

    b. Take your time to detail your business, the current items you’re spending money on, future things to come. This will start to shape your policy much better and accurately.

    c. The one thing that becomes exceptionally tricky is when you have rushed making your policy and it's covered with loopholes or areas that can exploited.
  3. How to define expense categories and monthly/annual budgets

    a. Expense categories make up of those items on which the employees incur expenses for the business.  For example, mileage, accommodation, parking, train tickets, etc.

    b. Many customers setup per day or per month or per year limits against each category, and in some instances against each employee (Screen 8).  ExpenseOnDemand allows businesses to setup all of these or their combinations, i.e., per day and /or per month and / or per year limits.

    c. Here is an example of how yearly caps (Screen 9) can be set in ExpenseOnDemand against expense categories for a particular grade (group of claimants).  You can set a limit for each expense category, together with an effective date, i.e., the date the policy will come into effect. That said, the policy can be amended at any time too.

    d. ExpenseOnDemand will automatically monitors this and alerts the employee when they breach any of these limits. Similarly, the Line manager and the Finance Manager are also alerted if an expense which has been submitted breaches the limit.

    e. Remedial action can be taken instantly by either the Claimant (by deleting the item or providing a justification). The Line Manager/Approver can accept the justification and approve the expense or reject it. The Finance Approver can also do the same. And as explained earlier, all violations are recorded on the Expense Policy Dashboard for review and analysis.

    f. Unfortunately, in a manual system, the paper Claim goes to the Approver, who make reject it. It then goes back to the Claimant, and in many cases receipts which are attached to the paper Claim get lost. The process is cumbersome. Our experience dealing with customers who move from paper to a solution like ExpenseOnDemand, is that instead of returning the document to the Claimant, the Approver or Finance amend the original document. And all this is discussed on the phone!

    g. In ExpenseOnDemand, the process more secure and robust.  The Claimant “owns” the expense, and they have to make any changes, if required.  The whole submission and rejection is documented in a workflow, where all parties involved in the process can view all comments in the status of an expense in real-time.
Screen 9

Implementing this practically

You should identify the types of expenses your business incurs. These may include travel expenses, marketing expenses, office supplies, and employee training.

Grouping similar expense types together can make tracking them and managing them easier. For example, you may wish to create a category for travel expenses that includes airfare, hotel, and rental vehicle expenses.

Consider your company's needs: 

  1. Make sure to consider your company's specific needs and the types of expenses that are most relevant to your company. 
  2. This will help you determine how to budget. 
  3. In order to manage expenses effectively, it is important to create categories that are tailored to the needs of your business.

The first step in determining which categories have the most importance for your business is to review your budget. This will allow you to determine which categories may need more resources and which may not. ExpenseOnDemand allows you to download the list of categories (Screen 10) available by default.  

Expense policy best practices - implementing expense categories
Screen 10

Make your labels clear and concise (Screen 11) in order to simplify the process of identifying which expenses belong in which category and facilitate employee comprehension.

expense policy best practices - expense category cost codes
Screen 11

The categories should be reviewed and updated periodically as your business evolves. The categories should be reviewed and updated to ensure that they remain relevant and useful for managing expenses.

Employee claims: how to define them?

This section is very exciting. It’s no secret that in every organisation that does not run an expense policy - things are just wild there. It can be overwhelming too when employees claim expenses made on behalf of the company where the amounts are out of control.  Here are two examples, where there was no expense policy and Claimants decided on their own what they could spend on and how much:

  1. Claimants were claiming anything and everything they wanted. For example, an employee has gone to Russia, and they claimed £400 for a haircut. There explanation was that they needed to look smart before meeting the client for dinner.
  2. Similarly, one employee claimed £350,000 for an urgent customer meeting, where they took a helicopter for a 3-hour flight. The helicopter waited for one day, and the Claimant flew back the next day.

ALL policies that have been setup must clearly explain and document which items require pre-approval (irrespective of amount) and values in excess of a certain amounts (irrespective of expense categories) also require pre-approval.

In our two examples above, had there been a policy, the two expenses would never have been incurred on the company credit cards. Hence, it is important that expenses that have no relation to the business or have not been pre-approved, and are documented in the expense policy could never be claimed.

This is exactly what an expense policy enforces. It defines with the utmost clarity what can and cannot be claimed (Screen 12).

expense policy best practices - expense capping
Screen 12

In ExpenseOnDemand, you can set the limit and briefly enter guidance notes (Screen 12) against each category to explain to the Claimant what can and cannot be claimed. 

Once the policy is set in ExpenseOnDemand, and the amount claimed is in excess of the limit, ExpenseOnDemand will alert the Claimant that the expense is above the limit set in the policy. 

The Claimant can either reduce the amount or provide a justification why the expense is above the limit and should be reimbursed.  

As a manager or the head of your finance department, you can set categories and rules for your teams to follow. This ensures that there are no surprises, errors or over interpretations about who can claim what.

To speed up the process, you can use ExpenseOnDemand’s extensive “Expense Policy” functionality module, where businesses can define various expense policies which will help a business to ensure that it complies with tax legislations and employees are fairly paid for the expenses they incur. 

For example: Businesses can establish a deadline for team members to submit expenses (e.g. the 20th of every month). This ensures that the business can close their books on time and report the correct profits or losses.

Similarly, businesses can setup per diem (per day) limits on hotels/accommodation when travelling, and where required similar limits for breakfast, lunch, and dinner.

Another point an expense policy should look at is how it can save time for senior managers who approve expenses. Some businesses apply the Auto Approval policy. An ‘Auto Approval’ is where expenses below a specific amount do not need to go to the Approver, instead go to finance for checking. For example, parking or mileage where Google Mapping service is used.

In a manual or a paper-based system, it is next to impossible to capture duplicate expenses. The only way to do this is to go through each item and do a 100% check of each expense item.

  1. This would be counter-productive and very tedious.
  2. Our experience has been that customers using a manual system are only able to capture 8% of the duplicates that go through the expense process.
  3. In ExpenseOnDemand, 100% of such expenses are flagged at the point of entry when the Duplicate Checker (Screen 14) is turned on.
  4. That apart, our Expense Policy Dashboard also show the number of attempts made to claim duplicate expenses (Screen 13). Granted that some of these may be genuine mistakes, but even so, these are flagged to the Finance Manager.
expense policy best practices - duplicate expenses
Screen 13

expense policy best practices - expense policy tools
Screen 14

Over the years, in a manual paper-based system Claimants have also become quite savvy. Instead making duplicate expenses of high value items, they push through several low value items, which tend to miss scrutiny.

ExpenseOnDemand, at the point of entry by the claimant alerts them that an expense is duplicate. This reduces options for the Claimant to claim such items. Genuine “duplicate” items can still be submitted with a justification.

In many businesses Entertainment / Travel and mileage make up close to 80% of all expenses incurred. And these require strict scrutiny. In ExpenseOnDemand a business can setup limits on entertainment (Screen 15), and also require the Claimant to provide names of attendees, including the companies they work for. The screen below displays how an entertainment expense is handled, and how a Claimant can comply with the Anti-Money Laundering legislation.

expense policy - creating an expense
Screen 15

Furthermore there are other checks also, which help our customers comply with the Anti Money Laundering legislations.

Preventing the great escape: Setting mileage claims in your policies

In a manual system mileage tracking has been quite the hurdle. Business owners rely on the trust from their drivers and riders, thereby giving them every opportunity to over claim on mileage expenses! Especially when Claimants provide an estimate for the miles they have travelled. 

Our data suggests that there is a potential saving of 27.8% if customers use the Google mapping service to get the exact mileage travelled between two points.

  1. Typically, in a manual system, a 23.3 miles journey becomes 25 miles. This is because it is easy to remember 25 miles!
  2. However, when the Google Mapping service is used, it will display not only a map, but also the exact miles travelled, i.e., 23.3 miles.  
  3. In the UK, for every journey, the claimant could add 1.5 miles for convenience, so each trip could have 3 extra miles. It would cost about £1.50 in the UK.

    For example, if a claimant claims 30 journeys each month, that's £45 per claimant, and if there are 100 claimants, the excess payment would be £4500! Compared to Google Mapping, a journey costs £0.016. It is a no-brainer! You pay less than HALF A PERCENT to save 99.5% of your costs.

A manual system (Screen 16) will never allow the Claimant to provide an exact number of miles travelled, until the Claimant goes to the web and checks every journey on the Google website. Imagine the time wasted!

In ExpenseOnDemand all this is integrated into the mobile application (Screen 17).

Not only that, the driver or rider needs to get their vehicle approved before they can claim mileage. This is a 10 second check, this ensures the correct rate is claimed.

When the Claimant enters the mileage expense, this data will show them, their Line Manager/Approver, and the Finance Manager/Approver the precise locations where the driver or rider has been, giving you the peace of mind that they’re only claiming for work and not personal uses.

Attempting to manually verify all this and ensuring that the mileage has been correctly measured is very time-consuming and never 100% accurate.

We have collected evidence over the last 20 years, which shows that businesses who pay employees mileage manually, pay on average, 27.8% more v/s automated expense management.

expense policy best practices - setting mileage claims in your policy
Screen 16
expense policy best practices - using google maps integration for mileage tracking
Screen 17

Setting Mileage Claims Using The Template

Whilst un-restricted ability to claim is a recipe for disaster, there are steps you can take to add mileage claims to your expense policy.

  1. Ensure that your mileage payment capability has all the relevant ownership types set (Private/Company/Motorcycle, including the fuel types) or the vehicle type (4-Wheeler & 2-Wheeler).  
  2. Determine a mileage rate at which employees will be reimbursed for their driving expenses, including fuel, maintenance, and other costs. In most instances the tax authorities recommend these rates.
  3. Determine how many of your employees are office based or home based. This will then trigger the need to have the triangulation feature.  If you turn the feature ON, triangulation will apply to the Office based employees, and not the home-based employees. As a result, when an office-based employee travels to visit a customer, where they have to travel from Home to the Customer, the Home to Office distance is reduced as per the Tax guidelines.  
  4. It is also advisable to turn ON the Business Purpose functionality, to ensure that you capture the reason for each expense, such as, Client meeting, Training, Team Meeting, etc.  
  5. Provide a clear description of what documentation is required for mileage claims, such as a record of the dates, locations, and purposes of the trips. Once again, technology helps here, because when a claimant claims mileage using Google Mapping service, a map of the journey is also provided, which provides all the locations visited by the Claimant. 
  6. Establish clear procedures for submitting mileage claims: Outline the processes for employees to submit mileage claims, including deadlines for submissions and approval processes.
  7. You may need to update the mileage claims policy every now and then as the business changes and evolves to ensure that it continues to meet the needs of the employees and the company.

As a result, it is essential to have a comprehensive and clear mileage policy to ensure proper documentation and accounting of mileage claims, as well as to avoid misunderstandings and disputes.

Whilst all of the above methods are great to implement, how will you keep on track of all of them.

ExpenseOnDemand offers the flexibility to setup current policies or future dated policies (rates). Future dated policies come into play automatically on the date you specify (Screen 17) for this policy to become active. That apart, all expired policies are also visible. This ensure that the Claimant can only claim the amount which was set in the policy for that particular date/period. 

For example: 

ExpenseOnDemand offers the flexibility to setup current policies or future dated policies (rates). Future dated policies come into play automatically on the date you specify (Screen 17) for this policy to become active. That apart, all expired policies are also visible. This ensure that the Claimant can only claim the amount which was set in the policy for that particular date/period. 

For example: 

  1. On 1st January 2023, the mileage rate for Leased Cars is reviewed and increased from £0.20 to £0.25. 
expense policy best practices - tax rates / hmrc mileage
Screen 18
  1. On January 15th the Claimant makes a claim for 20th December. 
  2. The application is intelligent to ensure that the Claimant is paid a rate that was applicable on 20th December, i.e., £0.20, and not £0.25, which is the current dates rate.  
  3. Hence, ExpenseOnDemand has taken care that the Claimant is only paid the rate that was applicable of the “date of the expense” and not on the “date of the entry”.

In a manual system this is just NOT possible, because all entries are made manually.

For the Claimant to claim their expenses each month, they have a very small window at the end of the month – sometimes as short as 7 days.

If rates change, and they remember after a month that a mileage expense was not claimed, then the employer may not allow them to claim, because it will have to be claimed at a different rate.

This causes unnecessary pressure. In ExpenseOnDemand all this is automated, expenses for any date can be claimed even 90 or 120 days later.

Mileage Claims: Extended

Tax relief/Deductible:

  1. There is confusion that amongst businesses whether they can claim back the VAT on the mileage expenses claimed by Claimants. And most importantly – How can they claim this?
  2. In ExpenseOnDemand, we have provided a very elegant mechanism which requires the claimant to upload a fuel receipt, BEFORE they claim mileage. 
  3. After that they have to enter the amount paid for the fuel.
  4. In the background, the Finance Manager/Administrator has already entered the “cost of fuel” for each mileage, as recommended by the Revenue (Tax) Authorities, and the VAT on the “cost of fuel”. 
  5. Based on the Amount entered by the Claimant, the app removes the VAT, and works out how many miles the Claimant can travel. 
  6. When the Claimant enter their mileage, ExpenseOnDemand automatically works out the VAT that can be claimed on each journey. The mileage is linked to each fuel receipt and is un-disputable. 
  7. The Claimant is informed as they approach “miles to empty,” that they must upload a fuel receipt, BEFORE the start a journey. 
  8. The function is very elegant, because it gives the Claimant the option to save for later, if the fuel receipt is not available.  Once the receipt is uploaded, the mileage can be submitted. There is also provision where the claimant can submit without a receipt, but the business will not be able to claim back VAT on those journeys. Hence, the business can be sure that each journey is backed by a receipt, and each journey displays the correct VAT. 
  9. The bottom line is that the guess work is removed, and 100% compliance offered.

Approved Mileage Rates

  1. This point was covered earlier too, but let me enunciate this in more detail. 
  2. The tax authorities in many countries update the rates for each quarter. 
  3. These are available on their portal at least 30/45 days in advance. 
  4. The existing rates in ExpenseOnDemand can be exported, and replaced by the new rates, together with the date range, and imported into ExpenseOnDemand. 
  5. The whole exercise takes less than a minute, but ensures that you are always current with the latest approved rates. 

Mileage Allowance

  1. Many companies pay their employees extra monies for carrying additional passengers when they share a ride. 
  2. This works very well for the environment, and encourages car sharing, and saves the company money too. 
  3. In ExpenseOnDemand you can setup Passenger Allowance against one, some or all Ownership types, which will allow the Claimant to claim this allowance when they carry passengers for the whole journey or one or more legs (in a multiple leg journey).
Screen 19

Organise your business expenses with a policy for every expense category

In ExpenseOnDemand, you only need to display those expense categories, for which the Claimants can claim against. This reduces doubts and questions.

You can link an expense category to each expense policy if you so choose.

In addition, you can also have different reimbursement amounts for the same expense category for different groups (Grades). For example, for Air Travel, you can have a different reimbursement limit for Vice Presidents v/s other employees.

Side Note: What is a GRADE or its equivalent ? 

A Grade or a Level is a group of employees who have same ( expense entitlement.  For example, as a simple example, an organisation can divide its people into three grades.  

  1. Grade 1 would be Senior Management
  2. Grade 2 would be Managers.
  3. Grade 3 would be ALL Others.

While this sounds exciting, it may lead to confusion in a manual system (and we will explain this via a case study discussed later), but not in ExpenseOnDemand.

ExpenseOnDemand automates this process, thus ensuring that senior employees vs junior employees are paid appropriately. And the beauty of an automated system like ExpenseOnDemand v/s a manual system, that this requires minimal checking and is self-policing.

Using my Air Travel example again, the travel entitlement could be set in ExpenseOnDemand as:

  1. Grade 1 would be Senior Management – Business Class Travel
  2. Grade 2 would be Managers – Business Class on for journeys exceeding 5 hours or more, with a Pre-Approval.
  3. Grade 3 would be ALL Others – Only Economy class, with a Pre-Approval.

Hence, here are some categories that you may want to consider including in your policy:

  1. Travel expenses: This can include flights, hotels, ground transportation, meals, and other expenses related to business travel.
  2. Professional development: If your company encourages employees to pursue professional development opportunities, you may want to include a category for reimbursing expenses related to training, conferences, and other educational events.
  3. Equipment and supplies: This category could include expenses related to purchasing and maintaining equipment and supplies needed for work, such as computers, software, and office supplies.
  4. Marketing and advertising: If your business is responsible for promoting its products or services, you may want to include a category for marketing and advertising expenses, such as fees for design work, printing, and advertising in various media.
  5. Mileage/Conveyance: For people to claim when they drive their 4-wheeler or 2-wheeler. 
  6. Entertainment: How much they can claim to entertain only office colleague’s v/s customers, with their office colleagues.
  7. Rent and utilities: If your business has a physical location, you may want to include categories for rent, utilities, and other expenses related to maintaining the space.
  8. Miscellaneous expenses: This category could include any expenses that don't fit into the other categories, such as subscriptions, memberships, or other miscellaneous expenses that are necessary for the operation of the business.

Easily refer to your expense policy to see what your staff can and cannot claim before purchases are made

Remember, the expense policy created for your business is a guide. Putting in the rules for expense claims. You can refer to the policy easily if you’ve documented and stored it in a convenient place to access. Whether it be locally on your devices or using cloud services like Microsoft OneDrive or Google Drive, Dropbox and more.

If you’re using the ExpenseOnDemand tool with the expense policy module, it’s exceptionally simple to access your policy at any time from the dashboard.

ExpenseOnDemand provides a mechanism for the Finance Manager to enter the key elements of the policy against each expense category

For example, they can enter what is not allowed when entertaining colleagues. Here they could limit the alcohol to one glass. Whereas when entertaining customers, this limit could be different. 

Hence, ExpenseOnDemand offers immense flexibility and is able to help customers address a vast range of situations which impact their business.

Compliance and Regulations

The Government and the Revenue (Tax) authorities in each country have rules, which require compliance, when reimbursing employees their business expenses.

At a minimum, expense reimbursement cannot be for personal expenses, nor can it be used be reimburse expenses to employees which are “in lieu” of salary, and used as a mechanism circumvent the payment of tax on salary.  

There are several legislations which now require particular attention. These are:

  1. Duty of Care (in the UK): When an employee drives a vehicle for the business of the employer, then the employer has, especially in the UK, a “Duty of Care” under the Corporate Manslaughter Act, to ensure that the driver has a valid license, business insurance, valid MOT certificate, and the car is taxed and belongs to the claimant. Else, if there is an accident and the Claimant is found to be at fault, and the employer has not complied with the Duty of Care guidelines, then the owners/CEO/Board of Directors may be personally liable for the insurance liability and may also face a potential prison sentence.
  2. Anti-Money Laundering Legislation, which is now prevalent in many countries.  This requires businesses to ensure that when Claimants give gifts to customers, vendors, officials, etc., they are of a reasonable value. A policy is required and it must to adhered to, with clear evidence that there is no violation, and if there is any violation, then it is documented properly. 
  3. Entertainment, when holding team meetings: The amount per person has to be reasonable.  Else, it may be added to the employee’s salary.  Each employee who participated must be named when the expense is saved.
  4. Christmas lunches/dinners. Again there is a limit to what the company can spend per head here.
  5. Entertaining Customers & Clients: Once again a limit has to be proscribed for per head spend. In certain businesses, such as banking, finance, government contracts, police engagement, some businesses require that the Claimant gets a Compliance number from the Compliance department before entertaining clients / officials from any of the above businesses. The Claimant is required to provide the names of the guests and their employer (Screen 19).
Graphical user interface, applicationDescription automatically generated
Screen 19


Receipts are unavoidable and necessary to validate and verify the veracity of an expense. In ExpenseOnDemand, we provide a rule (Screen 19) which ensures that employees attach a receipt to each expense. Else, provide a justification why the receipt is not there. Apart from validating the veracity of the expense, receipts are necessary if you wish to re-claim VAT.

Graphical user interface, applicationDescription automatically generated
Screen 20


An expense must be equal to or less than the amount on the receipt. To avoid mistakes, VAT/Tax calculations happen in the background. The app is very simple to use. Hence, we have seen when people make errors, which are few and far between, these are intentional, or people don’t care.  Typical errors would be entering the wrong date or the wrong amount, with a view to claim an expense twice!

Compliance at Point of Entry

Where any compliance rules are turned on, such as an expense policy, then the expense is evaluated for this and other policies that are relevant to this expense at the point of entry by the Claimant. This ensures that checking later is reduced substantially, and also ensures that the expense complies with the company’s policy.


Fraud manifests in multiple ways. Most are captured in ExpenseOnDemand, such as claimant trying to submit the same expense more than once (duplicate) or the same expense is submitted by multiple Claimants on different dates (Screen 20).

expense policy best practice - anti-fraud module with expenseondemand
Screen 21

Maintaining and refreshing your policy

Time to time, your business expense policy may need updating, this is because the business environment changes and the business needs to respond to it, and make changes accordingly. In order to manage a good finance system, it’s important to review and update your policies every once in a while.

With ExpenseOnDemand, we make it very simple for the Finance Manager to update expense policies and notify the team that there have been changes too. This way, there’s no need to send out reworked PDFs for signatures. Everyone is on the same page right across.

Approvals and pre-approvals outside of your expense policy

If there is a situation where there is no policy for a particular type of expense, then the Claimant can seek a pre-approval (Screen 21) through ExpenseOnDemand from their manager for that expense.

All expenses made against this pre-approval are tracked within the application, including the fact that did the Claimant.

Graphical user interface, applicationDescription automatically generated
Screen 22

Creating a staff expenses policy whilst they are working from home

The argument is that Claimants are saving a large amount of money on travel when employees work from home.

It is still a hot topic as to whether the company/business should pay for the items employees need when they work from home.

Therefore, a portion of these savings should be used to cover the cost of their broadband, furniture, and other incidental expenses.

To avoid confusion the business should have a clear policy on what they will and what they will not pay.

For example:

  1. No reimbursement
  2. Partial reimbursement
  3. Full reimbursement

Hence, the policy should clearly state if receipts are required for partial or full reimbursement. They should clearly list our items that they will or will not reimburse.

For example: Will they reimburse for a coffee machine an employee buys, versus contribute to a fixed amount towards a morning drink?

As this is a very new area for all of us, trends are emerging. Large companies, such as Facebook, Google, Microsoft, etc were very liberal in their policy, but with the impending recession, have pulled back 100%, and in some ways become “super miserly”.

A simple lesson from this is that any policy should be practical – nor overboard (in terms of no limit & ostentatious) or miserly. It should follow the middle ground, so as not to be a burden on any of the stakeholders.

Manual Expense vs Expense Policy Automation

What is expense policy automation, when compared to paper-based processes?

Expense policy automation refers to using software or technology to automate the process of tracking, approving, and reimbursing employee expenses. This can include using an expense management system, such as mobile phones or a web-based software, to submit and approve expenses digitally, as well as integrating with accounting software to automatically process reimbursements.

A manual paper-based process, on the other hand, involves employees submitting physical receipts and expense reports, which are then reviewed and approved by a manager or accountant before reimbursement is processed.

Expense policy automation offers several benefits over manual paper-based processes, including increased efficiency, accuracy, and cost savings.

Automation can reduce the time and resources required for manual data entry and approval, and can also help to ensure compliance with company policies and regulations.

Additionally, automation can also help to reduce errors and increase the visibility of expenses across the organisation.

How does ExpenseOnDemand help?

It is our business to help businesses where the expense management process is manual and paper based to digitise their process by automating it, so that they can become more productive, and the finance team adds value to the business.

ExpenseOnDemand offers both the mobile phone and a web interface/software for claimants to submit their expense, together with photos of their receipts, where approvers can approve this either on their phones or web-based software on the go, and finance can check the digital documents, integrate the entries into their accounting system and reimburse employees.  

We follow a 4-step process in introducing our customers, who are moving away from paper to automation.

  1. Step 1 starts with a 30-day Free Trial. In week 1, the customer sets up a few employees and test the basic flow of Claim ➔ Approve ➔ Pay.

    This allows them to experience the ease and speed of the entire process where they use their mobile or the web client to submit and approve expenses. 95% of the customers are pleasantly surprised with the impact of the change. One of our customers said, “what took 5 days, now takes less than 58 seconds”.

    The Claimants are able to photograph receipts on their phone and submit them instantly. Approvers can view these on their phones & approve on the go. The sheafs of paper are no more required, because everything is digitised & in the cloud – accessible 24/7 from anywhere.
  2. Step 2 is in week 2, where we turn on some rules, which add another layer of compliance, by introducing the Finance Approval.

    Then the process becomes Claim ➔ Approve ➔ Finance Approval ➔ Pay.

    We add to this the “duplicate checker,” which then checks for duplicate items at the point of entry. Again this surprises them, because despite their effort in  a manual process to check these, empirical evidence has shown that 80% duplicate expense get paid! In ExpenseOnDemand 100% are flagged at source. 

    We then show them how easy it is to configure expense categories, which have their accounting/cost codes, including tax rates.
  3. Step 3 is in week 3, where we introduce them to various expense policies, such as:

    - Submission time limits; 
    - Automatic checking for receipt, 
    - Per diem policies; 
    - Entertainment policy with attendee type policy, 
    - And various other policies which help reduce fraud. For example, there is a function which allows the Approver to view for each expense type, what they approved during the last 180 days, filtered by 30/60/90 days. This is a very powerful function which allows the Approver to view trends in real time.
  4. Step 4 is in week 4, by then the customer has had 3 weeks of using ExpenseOnDemand, and has experienced the ease and benefits of digitising & automation, we discuss the various pain points which were at the start of the trial, i.e., have these been addressed. In most cases, all pain points are addressed through either setting up policies or a change in the process.

In 20% of the cases, we get questions for functions/processes, which the customer had thought were not possible, but technology makes them both possible and easy. For example, setting up multiple levels of approvers (Counter Approvers) without any documents getting lost or setting up delegates who will complete expenses for senior management seamlessly or enabling multiple countries in a single subscription, etc. 

Typically, we meet the customer once every month for the subsequent 3 months, to guide them through the process, and by the end of this period our experience has been that where they were spending between 4 and 5 man-days a month, this is reduced to under 1 day. For Claimants it is reduced to under 60 minutes, and for the Approver, less than 30 minutes.

  1. This is also a time when we explain to the Finance Team how easy it is to setup a future dated policy, where amended limits can be set based on data, and not assumptions.
  2. In ExpenseOnDemand, the customer always has a policy, which determines what Claimants can spend. This can be changed, where you can setup a future date policy, which will automatically replace the current policy on a certain date. The “expired policy” is also visible to the Finance team. However, the most important function here is that if a Claimant makes a claim for a date in the past, the policy applicable then, not today, will automatically apply. As a result, technology enforces adherence and reduces unnecessary checking.
  3. Customers realise that they can setup a policy for any expense category/type, at an individual’s level or for a group (by grade). This means is that for the same expense category, there could be multiple policies based on grade. For example, a junior employee may only be allowed to travel economy class. Whereas a Vice President is allowed to travel by Business class. This demarcation is easy to setup, and driven objectively. There is no subjectivity.

Advantages of expense policy automation

Expense policy automation reduces workload by at least by 90%, and ensures that approval or rejection is not subjective, but objective.

One of our Customers has 12,000 employees, out of which 7,000 travel regularly. 

  1. They had 40 grades. Each grade had different limits. 
  2. To manage this, they had a team of 21 people. 
  3. Despite that there was a backlog of 11 months. 
  4. Frontline employee attrition was around 27%, because one of the main reasons was that it took the company 7 to 8 months to reimburse their expenses. 
  5. This expense management team occupied a basement of 2000 sq. ft, where the sitting facility was only 200 odd sq. ft. The rest was occupied by paper-based claims.

We took 60 days to roll-out ExpenseOnDemand.

  1. 80% of the time was taken in rationalising grades. These were reduced to 5. 
  2. The number of claims went up by 60%, not the value. 
  3. Approvals by managers reduced to 5 v/s 45 days. After 90 days of usage this further reduced to 2 days. 
  4. Finance was able to pay the first reimbursement after ExpenseOnDemand was implemented within 45 days v/s 240 days. The 45 days further came down to 30 days after 3 months of usage. Today it is 15 days. 
  5. Of the 21 staff in the employee expense management function, 14 were re-deployed elsewhere. The 7 have now stabilised to 3 people. 
  6. This team now sits on the 3rd floor, with other people, and only occupy 120 sq. ft.  Most importantly, they are a happier lot, because no one shouts at them for delayed payments, and they only engage with 3% of the claimant’s v/s 80% earlier.  
  7. And the expenses sit in the cloud. Available 24/7/365

Automation reduced Claimant/Approver angst significantly. Staff turnover, because of non-payment of expenses, reduced to zero. Duplicate claims came to zero after 3 months, despite the number of claims increasing.

Earlier the senior management was spending close to 12% of their combined time addressing expense issues in strategy meeting. Today it is 0%.

Even though the number of claims went up, overall payment to Claimants reduced by 23.25%. The pay-back to the customer was approximately 6 months

Lessons learnt from this customer were as follows:

  1. Expense Policy violation reduced to less than 2%. And these expenses are approved because of genuine reasons.
  2. The application ensured that managers looked at expense violations and actively said “yes or no” to approval, and justified their actions. Earlier, managers had a rubber stamp made, which said, “Pay as per expense policy.” They would stamp this on each paper claim, and shift responsibility on to finance. 
  3. Because of expense policy automation, violations reduced at the point of entry. There was no hiding for both Claimants or Managers because the whole approval process was very transparent and objective. 
  4. Employee could look at the workflow, and did not need to call their managers or finance about the status of their expense, because each step was visible in real time. 
  5. Because multiple policies had been setup, and each policy was checked at the point of entry, which then ensured that Claimants submitted, in the main, only those items which did not breach policy. Approval and payment thus became easy. 
  6. Pre-approvals ensured that if anything could have been out of policy, it was agreed in advance between the manager and the claimant. All expenses were tracked against the pre-approved amount. And if there was a policy breach, there was a justification provided. Every policy breach is also recorded on the Expense Policy Dashboard. As a result, managers had to have strong commercial reason to allow expenses which breached expense policy. 

Migrating your expense policy from PDF to a synchronised universal system

The policy document, which usually runs between 8 to 15 pages can be uploaded on the Compliance page. The expense limits are set in the policy and the essence of the policy can be entered against each category (Screen 22) and will appear for the Claimant to see on the phone or the web.

Picture 3
Screen 23


Expense policies can help drive efficiencies to your organisation. Whilst setting up an expense policy may sound like a daunting task or that you have to involve your lawyers and accountants, it's much simpler than you may think. The guide above demonstrates how you can set up a policy if you're just starting out or if you're looking for a way to systematise your processes, then ExpenseOnDemand has all the bells and whistles you'd want to create an effective and successful expense policy.

In addition, if you run one or more companies, with ExpenseOnDemand, you only need a single subscription to manage multiple business entities.