Travel and expense policy of a company is created to limit the expenditure of an employee while on a business trip. But, many employees take advantage of this and charge additional expenses to fill their own pockets. Making an effective expense policy is a time consuming process and producing a fraud proof one is even harder. Proper guidelines are crucial to control the outflow of money.
Here are 5 tips that can enhance your travel and expense policy:
1) Make It Simple And Flexible
A good knowledge of the company’s expense policy is necessary for its employees. if they don’t know the rules, they’ll not follow them. An expense policy should be simple and easy to understand for everyone. It should clearly explain what employees can and can’t claim in their expense reports. With simplicity in the language of the policy, it should also provide certain flexibility to the employees. For instance, there should not be any hard limit on the employee regarding the hotel rent. Though there should be a maximum budget for the hotel stay, but it should also give certain flexibility to the employee so that he won’t spend hours in looking for a stay that falls under his strict budget. Providing flexibility in such business expenses goes a long way in having happy and productive employees.
2) Update It Periodically
In this rising economy, everything is becoming costlier. Inflation must be taken into consideration while defining an appropriate expense policy. Cost of food, beverages, hotel rents, etc., change frequently and same is required for a company’s expense policy. This policy needs to be updated frequently, or at least periodically, so that the employees won’t feel themselves under a tight budget and can work willfully for the company. Also, the company needs to communicate the policy to the employees so as to orient them to follow the same. They need to make every employee understand that there is a good and a strong reason behind the existence of these rules, which is why they should follow it.
3) Include Pre-Approvals
Usually when an employee submits his expense report, he has already spent the money and now he was submitting a claim for reimbursement. At this stage, if something irrelevant comes up in his report, then there is nothing much that can be done in favor of it. To reduce such cases, one should implement a pre-approval process in which the employee will present an estimated expense report of his certain business trip. Once the report of actual expenses are submitted, they should be compared with the estimate and should be properly examined to ensure the honesty and legitimacy of the report.
4) Design Fraud Proof Policies
It has been observed that many employees of the company cheat in their expense reports. Some said that the reason behind their cheating is because they think travelling for business should have additional compensation for them, while others claim that they forgot to enter certain expenses on a prior report and that’s why they added extra expenses. Such fraudulent expenses can immensely reduce the company’s profit. To overcome this problem one should issue corporate cards to frequent travelers. It will make it easier to monitor the details of every transaction and will disallow the future dated travels in expense reports.
5) Automate The Approval Process
There are many service firms that have two to three separately dedicated employees that audit all the expenses manually and see if they comply to the company policies or not. Business owners should take the thought of automating the approval process into consideration since it won’t only maintain their expense policy, but will also relieve those two or three employees who can then add more value to the company in other ways. With an automated process, whenever an employee enters an expense that that is not included in the policy, it will immediately be marked flag. For such a flagged expense, the employee may further be asked for the reason of that expense. Depending upon the legitimacy of that reason, the expense may then either be approved or removed by the approver.
Adopting best practices for an expense process can save a lot of time and money of the company to a great extent. Using an efficient expense policy allows better handling of the business finances, properly. It enables to review and analyse the expenditure, that can be helpful in highlighting the cost saving opportunities.