It is that time again. Snow is in the air, lights drape city trees, cafes highlight chili and mulled wine on their menus. It’s also the time of year where employees pile on the expenses from extra holiday parties, taxis, client gifts and travel expenditures.
But expenses don’t just need to be dealt with once per year. Employees spend money on their company’s dime all the time and their expenses can significantly tack on to the employer’s costs and eat away at profits.
Expenses are fundamentally a good thing. Employees need the financial freedom to get themselves to important places, the ability to wine and dine lucrative clients, and to purchase much needed materials. It is not right for them to have to pay necessary funds out of their own pockets. But if you don't keep tight control over employees, they may abuse your bank account and it can lead to wasteful spending that needs to be curbed.
To avoid getting yourself in the situation where you are questioning employee spending or paying funds that you cannot afford, it is best to establish clear guidelines from the get go. Determine which expenses are (and are not) acceptable, as well as the appropriate way to submit and retrieve the reports.
Every manager will have different views on their expense policy, but you can use the following questions and tips to start creating your own guidelines.
What expenses are acceptable?
Make a list of the items and services you think are appropriate for employees to spend money on. They can include traveling, internal and external entertaining, supplies, technology, training and more. Narrow down your list as much as possible. For example, you may feel employees should spend company money on subway tickets but not on taxis. Or that buying drinks for a staff party is okay, while paying for dinner is not. The more specific details you can include, the easier it will be for your employees to follow your procedures.
What is the expense budget?
You should allocate a set amount of monthly budget to go towards expenses. This number can be a company-wide objective, or individual employees can have personal targets. It is helpful to not only create a total spending amount, but to also set limits on what can be spent on each item (i.e. a maximum of $200 can be spent on hotel rooms). Remember, budgets are useless unless employees stick to them! Check up on your staff often.
How should employees submit expenses?
Do you want to approve staff expenditures before they spend the money or do you want a receipt after the fact? Who should sign off on expenses and how often? Be careful to consider how your procedures will affect your staff's daily routine (if you require each five dollar expense to be approved ahead of time, it might slow down business).
Who is allowed to submit expenses?
While some companies only allow senior managers to submit expenses, others allow junior employees to spend what they need as well. If you limit expenses to the upper echelon, make sure there are procedures by which other staff can get what they need.
How will you enforce these guidelines?
Appoint someone to spearhead the events process. This may be anyone from a hands-on CEO to a trustworthy administrative assistant. Create procedures for informing current and new staff about the guidelines and a way to ensure they are being met. The key is to communicate effectively and then follow-up diligently.