Your Ultimate Guide to Creating an Effective Expense Policy

What is a business expense policy?

A business expense policy is a formal document listing the do's and don'ts regarding work-related expenses, including which expenses are permitted and maximum amounts by category.

Employee expenses — business lunches, trips, home office equipment — can represent up to 10% of a company's turnover. As your company grows, so does the need for control. A strong policy provides that control, while supporting fairness and transparency.

But control only works if employees understand, trust, and follow the rules.

Key elements for effective (and adopted) expense policies

1. Create clear categories and budgets
   Spell out how much is allowed for each expense type: meals, hotels, rideshare, etc. Be specific and, if possible, provide examples.
   
2. Be reasonable and consistent
   Rules should be fair across departments and levels. Avoid exceptions unless absolutely necessary.
3. Keep it simple — really simple
   If it's longer than 3-4 pages, most employees won’t read it. Bullet points and infographics can help simplify understanding.
4. Communicate often and clearly
   Host a short launch session, create a 2-minute explainer video, or embed FAQs into your expense management tool.
5. Review and refresh regularly
   Assign an owner responsible for updating the policy annually and re-communicating any changes.
6. Align with legal regulations
   Always ensure your policy complies with local tax and labour laws.
7. Build trust with transparency
   Explain why rules exist (e.g., VAT recovery deadlines, cost control) to win employee buy-in.

What your expense policy should cover 

(Expense policy template to copy)

General principles:

• Expenses must be for business purposes.
• Submissions must include receipts.
• Expenses should be submitted within X days to ensure VAT reclaim.

Category budgets and rules:

• Home office: Up to €500/year for equipment; small claims (≤ €50) auto-approved.
• Transport: Max €35 per rideshare; mileage capped at €100/month.
• Overnight stays: Max limits per city/country; no room service unless mandatory quarantine.
• Meals: Set per diem by city; surplus non-reimbursable.

Appeals and exceptions: Outline a simple process for exceptional cases (e.g., lost receipts).

How to drive adoption and usage

1. Launch it right
   Run a 15-minute session, send an internal announcement, and post a quick guide on your intranet.
2. Keep it accessible
   Link the policy inside your expense reporting app and on your HR portal.
3. Use champions
   Nominate a champion in each team to answer questions and model good behaviour.
4. Gather feedback
   Run a short survey 1 month after launch. Ask: "What’s unclear? What’s working?"
5. Recognise and reward
   Highlight departments with 100% timely, compliant submissions. Small prizes or recognition can go a long way.
6. Measure adoption
   Track key KPIs: % of expenses submitted on time, % missing receipts, % employees reading the policy.

Conclusion

Every organisation is different. Your expense policy should reflect your unique culture but it should also be simple, accessible, and consistently reinforced.

Taking time to not just write, but actively promote and refresh your policy will save your finance team significant time and costs down the line. And remember: the more employees understand and trust the process, the more likely they are to use it correctly.