How to Create a Company Reimbursement Policy

A company reimbursement policy contains guidelines to manage purchases made by the employees on behalf of the company. These guidelines will include what purchases are valid for reimbursement, as well as how and when the employee will be paid back.

A well-executed reimbursement policy will ensure that both the company and the employees are protected from the mishandling of money. It will also help keep the accounts in check, without surprise costs and budget problems coming in at the end of the month.

Let’s go through the steps you need to take to create a successful reimbursement policy.

Identify which expenses should be reimbursed

The first step would be to come up with all the possible expenses that are acceptable to be reimbursed. This is not going to be an easy task as this will require you to painstakingly make sure that all possible expenses are covered so that there are no conflicts in the future.

When setting the expenses, make sure to filter out those that can be easily paid for by the company credit card. For example, let’s take a traveling sales agent. For trips, they need to make, to far destinations, the company card can be used to pay for the flights, transfers, and hotels. However, other expenses that the employee incurs while at the destination cannot be paid for in advance, such as food and other miscellaneous purchases.

As such, in the reimbursement plan, flights and hotel expenses should not be reimbursable but all the other expenses should be. A good idea is to ask your sales agents or any other employees who travel around what their normal expenses are.

Create a full list of all the expenses

Once you have identified all the potential expenses, it is time to review them and make sure that all the expenses are covered. You can involve employees from multiple departments to ensure that all possible expenses are covered. Each department will have its own expenses that you may not have thought of, so this is a great way to avoid missing any expenses from the list.

Here are some expense examples that could be reimbursements:

Office party supplies
Emergency expenses during visits to client meetings
Fuel costs for company events/meetings
Taking clients out to lunch

Set up the approval process

Taking approval for every expense would not be the most efficient way to set up the reimbursement policy. There are emergency expenses sometimes that don’t have the necessary time to go through an approval process.

Therefore, you need to decide:

Which expenses require approval
Under which circumstances can approval be foregone
Who is responsible for handling approvals?
Is there an expense approval threshold?
Do you need the approval in writing?

You need to ensure that this process does not cause damage to your workflow. You don’t want to lose clients simply because the employee wasn’t able to get approval on time for an emergency expense.

Set up the expense reporting process

In order to receive their reimbursements, a proper expense recording process should be in place to protect both parties from losses. In order to create this process, you will need to decide:

How is the employee going to make these records?
Do they need to keep the receipts or is a soft copy enough?
A time range to submit the expenses
Who is going to manage the expense proceedings?

Simply requesting the amount spent and deciding on the amount to reimburse is not going to work out. You need to have details about each transaction which is why proof and signatures are important to ensure that the company cash is not being misused.

Decide on the reimbursement reports proceedings

Once all the reimbursement requests are made for the month, these will need to be analyzed and the go-ahead must be given to finalize the payback. For this, you will need to involve the accounting department who can take over and finish the payments for the month. As such, you need to decide:

The dates on which the reimbursements will go out
Who will give the final go-ahead?
The maximum time to complete a reimbursement request
How the payments will be made to the employees
Where the reports will finally end up

Enforce the reimbursement policy

Once the policy for reimbursements is complete, it is now a case of introducing it to the employees. You will first need to educate them on the structure and also keep a couple of employees ready to answer any follow-up questions.

You should also note that these policies tend to bring up disputes with employees. You will also need to make a plan for these disputes to be settled peacefully once they are brought up.

FAQs

Why is a reimbursement policy important for a company?

A reimbursement policy is important for managing and controlling expenses, ensuring consistency and fairness, protecting both the company and employees, preventing surprise costs, and promoting transparency.

How can a company identify reimbursable expenses?

Identify reimbursable expenses by assessing operations, considering input from employees, distinguishing between company card and reimbursement expenses, and creating a comprehensive list.

What steps should be taken to create a full list of reimbursable expenses?

Review identified expenses, involve employees from different departments, collaborate, and gather input to create a comprehensive list covering various expense categories.

How should the approval process be set up in a reimbursement policy?

Determine which expenses require approval, when it can be foregone, responsible parties, and the need for written approval, finding a balance between efficiency and accountability.

What factors should be considered when setting up the expense reporting process?

Consider expense record methods, receipt requirements, submission timelines, and responsible parties, ensuring transparency, prevention of misuse, and documentation for reimbursement.

What should be decided regarding reimbursement report proceedings in a reimbursement policy?

Determine processing dates, final approval, time limits for reimbursement requests, payment methods, routing of reimbursement reports, involving the accounting department in analysis and payments.

Why is it important to enforce the reimbursement policy in a company?

Enforcing the policy ensures compliance, clarity, and fairness. It addresses disputes, promotes transparency and trust, and maintains fairness, accountability, and financial control within the organization.