Expense policies should be designed for the employee to manage their spending and take back control of their expense procedure. Remember, the expense policy shouldn’t be written like small print or in an attempt to ‘catch out’ employees. Steer away from overcomplicating or patronising staff, as they are likely to disregard something seen to trip up or confuse them. Poor user adoption is quite often the downfall of new initiatives and systems, so keeping the policy easy to abide by improves staff opt in and overall policy success. 

This article details what NOT to do when writing an expense policy, the common mistakes to avoid and how to keep your staff on board with your guidelines for ultimate policy success. 

Don’t patronise employees 

Don’t be negative in your tone. A common mistake is to focus on what the employee is not permitted to do, instead of what they are entitled to. Most policies are written for fear of the few abusing the system, rather than the majority being reimbursed efficiently. Avoid sounding cynical, or making the employee feel patronised through strict guidelines and scrutiny.  

Our experience tells us that if staff feel penalised by regulations, they are more likely to exploit your claims process and think negatively about the business. Ang given employee expense fraud is estimated to cost Australian businesses about $18 billion each year (source), that’s not a risk you should be willing to take.  

The key is to maximise employee engagement. Making your employees wait for their out-of-pocket expenses to be reimbursed, or making the claim process difficult, can impact your employee engagement levels. While this list is by no means exhaustive, the examples below show how easy it is to slip into negativity when setting out reimbursable expenses and limits.  

Don’t be ambiguous  

Businesses often make the common mistake of using a broad or vague term to ‘cleverly’ cover every eventuality. What this actually does is leave the guidance open to interpretation and creates confusion as to what is and isn’t acceptable to claim for.  

Misinterpretation of terminology will, more often than not, lead to delays or possible rejection of the claim, leaving employees disgruntled as well as out-of-pocket. Plus, if your business expense policy is vague, it’s easier to misuse. 

Stop setting date limits for expenses to be claimed by  

Setting arbitrary date limits for submitting expenses and then rejecting claims because of them will only cause unnecessary employee friction and delay.  

Remember: 

• Employees will likely only falsify the date if they have missed the deadline anyway.  
• Even if you set a long date, it will only encourage employees to wait until the last minute, wasting a lot of time they could be using to better effect, putting pressure on their approvers and on accounts to pay them.  
• Ask yourself, ‘what’s the company benefit of a date limit other than employees not being able to submit them and so lowering costs?’  
• You risk antagonising an employee who has presumably only incurred an expense because they have been working hard for the company.  

Setting date limits for claims is not best practice for an expense policy and should be avoided where possible. By doing this, you are depriving staff of what would normally be a reimbursable expense. 

Avoid setting unreasonable spending limits  

Do not set unreasonable spending limits for your employees. This will only cause interruption to workflow, difficulty with the claims process and more work for the approver. 

Stop being too rigid with exceptional circumstances

For example, an employee has missed the last train home as they were closing an important deal. This results in a last-minute overnight stay, with little choice of accommodation. The only available hotel room totals $200 but the limit for hotel spending is $150 per night. An outdated policy would dictate that you simply reject the claim, despite the expense occurring in the best interests of the company. In such instances, your business would either lose a potentially profitable deal (as the employee would refuse to stay for the meeting) or upset the employee by failing to reimburse them for going out of their way for the business.  

Do not restrict your employee from doing their job effectively

If your corporate expense policy is outdated, the limits may be too low or stop job functionality. For example, if your policy states plane travel up to $300 is reimbursable’, then your consultant needing to travel interstate for a meeting may not be able to. Missed meetings can of course lead to financial loss for the company.  

Avoid making restrictions unfair

If employees feel the limits are unjust, they are more likely to fraudulently submit claims. A simple test is to think ‘would it be enough for me to be satisfied?’ By making limits unreasonably strict, you’re likely to give the employee the notion that the company only cares about costs and doesn’t really care about its staff. With this impression, employees are less likely to go above and beyond for the business – including refusal to incur expenses at all. Avoid making the limits unreasonable at all costs. 

Don’t allow complacency with errors  

Stop being lenient by allowing errors in submitted claims. Administrators will often edit an expense claim themselves if they see a simple mistake that would otherwise result in it being rejected, thinking this to be helpful. However, this can take up a considerable amount of the approver’s/administrator’s valuable time. Not to mention, there will be no feedback to discourage the claimant from making the mistake again.  

Editing in this way could also easily change the nature of the claim, perhaps causing approval issues further down the process. For example: if you were to edit a claim on behalf of an employee, and that change then took it over a spend limit, or altered the nature of the claim, it may need to go down a different approval route. This may not be possible when it is already half way through the approval process, resulting in delays and possible missed payments. 

Don’t set total expense limits  

Many expense processes will have a policy that limits the total value of a claim. At first this seems to make sense and provide a level of control. However, what it actually does is mask overspending and, in doing so, reduces control. Additionally, if the claim is not itemised and has been submitted as a lump sum instead, it makes financial reporting much more complex.  

This leaves the reasons behind claims ambiguous and will inevitably require a member of the finance department to waste their time to go through each receipt individually. 

Make it easy! 

Poor expense management pains everyone in your organisation. There’s no excuse for leaving your workforce burdened by poor expense management. Not when taking action to relieve the pain is quick and easy. By ditching the paper forms and spreadsheets you’ll not only see great cost savings, but also a happier, more efficient workforce. A business savvy move that will please your people. 

Moving from spreadsheets and email approvals to integrated expense management software will automate your expense process and climate errors from manual processes.

The hazards of total expense value limits and approval

Employees, knowing that their expense will be subject to additional approval (and so, delay) if they go over the total claim limit, will often submit multiple claims that fall under the set limit instead. This creates extra work for the approver and for those who reimburse. It might also result in the second claim being rejected as it does not have a receipt (the one receipt the employee has being attached to the first claim, of course). Or, the claimant will have attached the same receipt to both claims, meaning further investigation and delay.  

If your policy dictates that when an expense claim is over limit it must go to a second level approver, that process is much more labour-intensive if they receive the entire claim, rather than a single over-the-limit line: 

• The second level approver, who is usually more senior (and so even more time-poor), will have to check the entire claim when it might only have been a single element of it that caused the first approver to send it on.  
• The extra expense approval (delay) may even result in a missed payment to the employee. This will be particularly frustrating as the claim, by definition, would have been for a larger amount and so they are even more out of pocket.  
• The claimant might already be aware of this escalation procedure and so be encouraged to fraudulently complete the claim to avoid it in the first instance.  
• The second level approver may not know the claimant as well as the first (normally their line manager) and so not know why they have claimed for certain things. For example, if the claimant is claiming for private car use even though they have a company car because that happens to be off the road at present.  
• Assuming the entire claim has been checked previously anyway, and not wanting to spend more valuable time trying to find the one reason it has been sent to them; the second level approver may simply approve blindly. Therefore rendering the entire process a farce. 
• It’s likely that this will then require an ad hoc payment to be made - taking further valuable time from the finance team.  

Bear in mind that despite a claim being ‘over the limit’ it is still more than likely a valid claim. Using total expense value limits prevents you from closely managing spend and only serves to complicate processes 

To stand a better chance of your Expense Policy being adopted quickly by your employees we suggest that you also create an ‘Expense limits quick reference guide’ to sit alongside the more detailed policy. This allows your employees, who have read the full document when it was first published, to quickly remind themselves of the limits you have set. 

Download our Expense Management Challenges eBook to find out why expense management automation could be the welcome relief your line managers, employees and Finance team need.