Chief Financial Officer at Caxton, Trevor Price, explains how to set parameters for a successful expense management policy that safeguard business funds and provides clear guidance to employees.
Manual systems and a weak or absent expenses policy lie at the heart of friction related to business expenses, which you can read about here. A lack of policy and lengthy manual processes also provide the perfect breeding ground for both accidental and deliberate abuse.
When business leaders are entrusting hundreds of thousands of pounds worth of company money to employees, you’d think they would want some rules around how the money should be spent. But what does a good expenses policy look like? Here are a few simple tips to building a best practice policy.
Expenses have long been a source of friction between finance teams and their commercial colleagues. Over-complicated rules on how expenses should be recorded, categorised and reimbursed quickly lead to inefficiency and a breakdown in trust between two critical business functions: those that make money and those who protect it.
Ideally, no employee should be asked to spend their own money on the business. The people team can help determine which job function, level of seniority or department are most likely to need one. Most modern expense management platforms can automatically assign cards based on these criteria.
Every company has a set of stated values and most have them codified. Is your business frugal or spendthrift? Keep-costs-down or win-at-all-cost? Explain how your values pertain to company spending.
Under no circumstances should a company card be used for personal spending. And it’s only to be used in a way that’s directly relevant to the bearer’s job function. An automated system can help here too, restricting use to certain types of purchase.
These should be matched against need. For example, the employee’s frequency of travel and the value of a particular type of spend to the business. Again, modern expense platforms can restrict spending on individual cards within preassigned limits.
Set out circumstances in which larger expenses such as long-distance flights must be validated in advance. Describe who needs to provide approval and on what basis it’s likely to be granted.
What reporting is needed? How should expenses be categorised and what additional information is required? One of the key advantages of platform-based management is that employees can use an intuitive app to record, categorise and store purchases. No more hunting for receipts at the end of the month and trying to remember what they were for!
Explain in plain English how laws and regulations (for example, anti-bribery and corruption legislation in key markets) affect expenses incurred by your company.
What steps should employees take to keep cards secure? Describe how the theft or loss of a card should be reported, and in what timescale.
You don’t need to be an HR expert to write employee guidelines, but it does help to understand the key factors informing them.
If your business doesn’t have an expenses policy, or if it doesn’t cover the issues outlined above, then every accountancy body has a version they can share. Even the Bank of England, which promotes monetary and financial stability for the good of everyone in the UK, has published theirs’s on its website, as does the BBC.
A large number of companies will be planning for 2022 new financial year right now. Make a new expenses policy and improved system a key item on the agenda. Your exec management, shareholders and employees will all thank you for it.
Once it’s written make sure:
Trevor is a strategically focussed CFO with an innovative approach to adding value. Backed by a track record of driving growth in fast paced international business, his focus is driving the future of payments and improving the speed and efficiency of clients’ financial processes.