How to create an expense reimbursement policy for your company

All may be fair in love and war — but what about expense reimbursement?

When workers spend their own money on your business, those expenses are, by extension, your business expenses. In fact, in several states, it’s illegal not to reimburse employees for business expenses.

To treat your employees fairly and respect the effort they put into their work, you need to have a fair, effective expense reimbursement policy. A good policy not only repays employees for out-of-pocket expenses, it also accurately measures how much money the company is investing in business operations.

Here’s a step-by-step guide to creating an expense reimbursement policy.

Create expense categories

Tracking expenses gets messy when you’re not organized. Funneling your expenses into categories allows you to clearly see where you’re overspending or underspending.

Here are some common expense categories that businesses consider reimbursable. The most common are those related to travel and meals.

  • Travel: conference registration fees, hotel rates, airfare, transportation costs, off-site meetings
  • Entertainment: gifts for clients, business lunches
  • Relocation: moving fees, transportation, and lodging for new employees moving to your company’s area
  • Tuition: certifications, continuing education, advanced academic degrees
  • Childcare: daycare fees, after-care programs

After determining which categories to use, refer to the IRS rules on reimbursable expenses to ensure you’re correctly claiming both reimbursable and nonreimbursable expenses. Make sure employees aren’t paying taxes on money they receive in addition to their wages.

One way to do this is to use an accountable plan, which doesn’t include reimbursements as income on employees’ W-2 forms. It’s especially important to follow the IRS’s rules for accountable plans as employees can no longer deduct unreimbursed expenses from their taxes, thanks to the Tax Cuts and Jobs Act of 2017.

Ask employees for input

Everyone likes being asked for their thoughts, especially on topics that will affect them. The expense reimbursement policy will affect everyone in your company, so it’s important to get employees’ input on what policies will benefit them.

Survey your employees to find out what reimbursement rules they think would be fair and what they would like to be compensated for. Their feedback can also help you with future planning as your expense needs change. For instance, maybe you don’t have the funds to partly reimburse tuition for employees who are eager to continue their industry education, but you can make it a goal to offer it in the future.

Set the rules

Rules are the crux of your expense reimbursement policy. Look at the rules of other companies in your industry to consider which variations would best fit your brand and company culture. Your rules may not be as strict as those of a long-established culture but more structured than those of a startup.

For example, when you’re starting out, you may only be able to afford to take your clients out to eat once a month. As you become more profitable, maybe you institute a more lenient policy that gives managers more leeway to maintain client relationships.

It’s a good idea to place limits on these policies, whether it’s the number of reimbursements that employees can claim in a month or a spending cap on personal office supplies. Limits make it easy for your employees to make wise spending decisions — as opposed to disrupting your cash flow because, for example, they purchased expensive tickets to a sporting event to impress a client.

You should also set rules that guide how long employees have to submit reimbursements and how soon they will be approved.

Create dynamic forms

From contracts to purchasing requests, forms are practical tools that allow you to achieve your goals, particularly in reimbursement.

Giving your employees an expense reimbursement form that’s flexible enough to handle a variety of financial situations — and easy to fill out — will actually encourage them to use it. And it won’t hurt if the design is attractive.

If you don’t want to waste time making rigid forms in Word or Excel, you can use an online form builder like JotForm that allows you to customize the form and connect it to your accounting programs.

Set up a reimbursement approval process

Your approval process is the workflow that maps out the journey expense forms take in your company. It usually starts when an employee turns in a reimbursement form. The form then goes to a manager for approval. Depending on the request, it may also have to go through another round of approvals with someone in the finance department.

The fastest approval processes are automated by software, which is programmed to flag unusual amounts and instantly notify all stakeholders of approvals or denials. With these tools, approvers review forms in a few clicks, allowing the accounting department to oversee outgoing funds in real time.

Without automation, employees waste time looking for approvers in the office, delaying their reimbursements and frustrating the accounting department.

Teach the policy

One way to introduce your workers to a new or modified expense reimbursement policy is to set up a meeting to go over the entire policy. However you introduce the rules, keep it positive. Emphasize how the policy will help employees and managers work together and avoid frustration.

If applicable, publicly thank employees for their input in the policy-writing process. This gesture will make employees feel appreciated and give them a sense of ownership over the rules, which in turn encourages them to learn the policy — or double-check it when they need to.

Approving reimbursements with JotForm

Nothing makes expenses easier than a unified platform, which is what JotForm offers.

JotForm provides easy-to-use, customizable reimbursement templates. You can add multiple widgets, such as an e-signature widget, to these forms to increase their usability. A wealth of integrations are available to connect your forms to other platforms. Plus, you can build as many kinds of forms as your growing business needs.

Once you’ve built your forms, you can build the perfect expense approval workflow with the drag-and-drop interface on JotForm Approvals. As you build your approval flow, you can add conditions and branches to ensure that every intricacy of your policy is addressed.

Last but not least, both you and your employees can use JotForm Mobile Forms to submit or approve forms on the go.

When your company’s expense reimbursement policy is clear, easy to follow, and automated, it becomes a powerful tool for growth. And it makes the best use of your money.

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