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How to Increase Expense Policy Compliance in Four Steps

SAP Concur Team |

Do your employees look forward to filling out their expense reports each month? We already know the answer, of course. It’s rare to find someone who enjoys sifting through crumpled business receipts and manually entering expense claim details into an Excel spreadsheet, only to print out the expense report so the paper receipts can be stapled to it.

As for expense policy compliance, that’s more often a ‘cross your fingers’ afterthought.

Even without bad intent, expense reimbursement policies have a way of stretching and bending when undefined circumstances arise. Complicating matters even further are the sweeping changes to employee spending patterns, how and where employees get their work done, and the rapidly evolving expectations around employee health and safety over the past few years.

In fact, policy violations for excessive personal expenses were up a staggering 21.8% from 2020 to 2021 alone.

If that all sounds too familiar, here are four steps you can start taking today to increase your business expense policy compliance.

Step One: Review and refine your current business expense categories

Like ‘em or not (and let’s be honest, who actually likes them?), employee expenses are a necessary part of running a business. How you categorize those expenses, however, is what will lay the foundation for how efficiently you can capture, validate, approve, reimburse, and audit business expenses initiated by employees.

Granted, you likely have your business expense categories already defined, and if so, that’s great news. The less great news is that many businesses have seen the use of the “Other” or “Miscellaneous” expense categories increase significantly over the past few years. In fact, those two expense types ballooned to more than 60% of spending from 2019 through 2021.

If your “Other” expense category is similarly as high, it’s time to dig a bit deeper to assess whether your business expense categories need to be updated and/or if your employees need additional education around how to properly categorize new expense types, such as meal delivery services, rideshares, and AirBnB-style lodgings.

Step Two: Write a more effective expense reimbursement policy

Chances are that most, if not all, of your employees will be happy to follow your lead when it comes to why, when, and how to spend company dollars. If you’re noticing a high rate of expense policy non-compliance, however, it could be that your spending rules are too vague, too complicated, or both. The result? Out-of-policy claims, unexpected costs, budget overspending, and even misuse of company funds and outright fraud.

That’s right, a flat screen TV probably doesn’t qualify as a home office expense for your company.

To create a more effective employee expense policy, start by looking at when yours was last updated. If it was prior to 2020, your company policy and business expense categories are definitely overdue for review.

When you start the revision process, keep in mind these expense policy best practices:

  1. Use simple, clear language.
  2. Be succinct (fewer than 10 pages).
  3. Explain the “why” behind the policy.
  4. Be consistent in tone.
  5. Regularly update with new types of spend.
  6. Consider global legal requirements.
  7. Review your training practices.
  8. Keep in mind your industry and corporate culture, as well as your employee headcount and generational makeup.

Worried that it’ll take too much time and effort to revise your existing policy? Fear not. We have an employee business expense policy template that can help you update your company policy in no time.

And yes, if you’re running a smaller business, an employee expense policy is still a great idea. No matter what the size of your growing business, we have a small business expense policy guide that will suit your needs, too.

Step Three: Automate expense reports and employee reimbursements

If you look at how today’s best run businesses control cashflow, you’ll find that AI-powered automation technologies now play an essential role. These solutions can simplify, streamline, and accelerate how you capture, validate, approve, track, and reimburse employee expenses. With automation, your business will also be able to reduce costs, free up employee time for more revenue-producing activities and enjoy a positive return on investment.

But don’t take our word for it. After automating, our SAP Concur customers reported:

  • 43% less time to fill out and submit expense reports
  • 65% more compliant business expense claims submitted
  • 50% less time to reimburse employees for business expenses
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