How to create a company expense policy 

As your business grows, having the right structure becomes increasingly important—particularly around how your team uses company resources.

A clear, effective expense policy is one of the smartest financial foundations you can establish. It helps control costs, ensures compliance, and keeps everyone aligned on spending expectations. 

This guide breaks down what an expense policy is, why it matters, and how to create one that works for your team.

From best practices to real-world examples, you’ll get everything you need to craft a practical, scalable policy—whether you’re a small business owner on the rise or part of a finance or HR team supporting a fast-growing company. 

Here’s what we cover:

What is a company expense policy?

A company expense policy is a formal document that outlines the rules, guidelines, and procedures employees must follow when spending company money on business-related activities. It provides a structure for handling expenses and ensures that spending is responsible and aligned with company goals.  

A solid expense policy typically covers: 

• Eligible expenses: what types of costs your company will reimburse (e.g., travel, meals, office supplies). 

• Submission requirements: how employees should document expenses, including receipt requirements, expense forms, and submission deadlines.  

• Approval process: who is authorized to review and approve expenses, and under what circumstances.  

• Reimbursement timelines: when and how employees will be reimbursed once expenses are approved.  

Why your company needs an expense policy

Wondering why it’s essential to develop a clear expense policy? A well-structured policy is crucial for your company’s financial health and day-to-day efficiency. Here’s how it makes a difference: 

• Controls costs and manages budgets: by setting clear spending limits, your policy helps prevent unnecessary or excessive expenses, keeping your budget on track. 

• Ensures compliance: a solid policy aligns with IRS guidelines and other financial regulations, reducing the risk of audits, penalties, and legal complications. 

• Promotes transparency and accountability: clearly outlining what is and isn’t reimbursable eliminates confusion, builds trust, and minimizes disputes between employees and finance teams. 

• Improves operational efficiency: a consistent process for submitting, reviewing, and approving expenses streamlines workflows, saving time for both employees and approvers. 

• Reduces misuse and fraud: clear guidelines and expectations make it easier to identify and prevent inappropriate or unverified spending. 

• Simplifies decision-making: employees don’t have to guess what’s allowed, which reduces mistakes and helps them feel more confident when making purchases. 

• Creates consistency across teams: with one standardized process, all departments are aligned, promoting fairness and accountability company wide. 

Ultimately, an effective expense policy protects both your business and your employees—keeping everyone informed, aligned, and equipped to make smart financial decisions. 

Expense policy best practices

Creating an expense policy goes beyond simply listing rules. It requires thoughtful planning, clear communication, and a smooth process for everyone on your team. Whether you’re scaling up or improving your internal systems, here are a few best practices to keep in mind: 

• Keep it clear: use straightforward, easy-to-understand language. The goal is for every employee, regardless of role or department, to follow the policy without confusion. 

• Make it accessible: store the policy in a central, accessible location like your company’s shared drive, intranet, or HR portal. If employees can’t find it, they can’t follow it. 

• Highlight the benefits: help employees understand that the policy supports smart decision-making, simplifies reimbursements, and protects both the company and its people. 

• Educate on non-compliance: make sure your team members know the consequences of ignoring the policy, such as delayed reimbursements or denied claims. Awareness encourages accountability and reinforces the importance of following the process. 

• Review and update regularly: schedule check-ins at least once a year or during major business changes to ensure the policy remains aligned with your company’s operations. 

• Be consistent: apply the policy fairly across all teams and departments. Consistency builds trust, prevents frustration, and shows employees that the rules apply to everyone. 

Following these best practices will build a smoother, more transparent expense process supporting your growing business. 

How to create an expense policy

Ready to build an expense policy supporting your business goals and aligning your team? Here’s a step-by-step approach: 

1. Define your goals 

Start by outlining what you want your expense policy to achieve. Common goals include controlling costs, improving transparency, ensuring compliance, and streamlining the approval and reimbursement process.  

2. Involve key departments 

Collaborate with finance, HR, operations and leadership to make sure the policy reflects day-to-day needs and strategic objectives. Early input from stakeholders leads to smoother adoption and fewer revisions later. 

3. Assign clear roles 

Establish responsibilities to manage the policy efficiently. Typically, roles include: 

• Cardholders: employees who use corporate cards for business-related purchases. They’re responsible for submitting receipts for expenses above a set threshold. 

• Card Managers: department leads or team managers who approve spending, verify receipts, and monitor their team’s budget to ensure compliance. 

• Admins: oversee the policy, provide training, define roles, and support card managers. They focus on strategic planning and budget oversight. 

4. Define allowable expenses 

Clearly list the types of expenses that are eligible for reimbursement. Common categories include travel (airfare, lodging), meals during business trips, client entertainment, and office supplies. 

5. Set budget thresholds 

Establish spending limits for each expense category. This step helps control costs, reduces overspending, and keeps budgets aligned across departments. 

6. Ensure compliance with local regulations 

Confirm that your policy aligns with applicable tax laws, labor standards, and other regional regulations to avoid compliance issues. 

7. Explain the submission process 

Keep things simple. Provide clear, step-by-step instructions for how employees should document expenses, submit reports, attach receipts, and meet deadlines. 

8. Map out the approval workflow 

Define who reviews and approves expenses and under what conditions. Include escalation paths for high-value or unusual expenses to avoid delays or confusion. 

9. Outline the reimbursement process 

Let employees know when and how they’ll be reimbursed. Include details like timelines, payment methods, and required documentation to set clear expectations. 

10. Share the policy and train your team 

Once finalized, distribute the policy company-wide. Provide short training sessions or easy-to-follow guides to make sure everyone understands and follows the process. 

Expense policy template

Along with following the step-by-step process, using a structured template can simplify the creation of your company’s expense policy. It makes sure you include all the essential components and maintain consistency across departments.  

Here’s a basic template to guide you: 

• Policy overview: a brief introduction outlining the purpose of the expense policy and how it supports company goals. 

• Policy elements: a breakdown of the key components of the policy. 

– Eligibility: define which employees are covered under the policy and under what circumstances they can incur expenses.

– Qualifying expenses: list reimbursable expenses, such as travel, lodging, meals, office supplies, or client entertainment. 

– Non-qualifying expenses: clearly state which expenses will not be reimbursed.  

– Procedures: outline the process for submitting, approving, and reimbursing expenses, including documentation requirements, deadlines, and approval responsibilities. 

Using this template as a starting point will help you build a clear, consistent expense policy that’s easy for your team to understand and follow. 

Company expense policy examples

Need some inspiration to shape your policy? Here are some common expense guidelines many companies follow:  

• Business travel: reimburse economy-class flights and mid-range hotels. Any upgrades, such as business-class airfare or luxury accommodations, should be pre-approved.  For example, suppose an employee needs to book a hotel above the standard rate due to limited availability. In that case, they’ll need the manager’s approval before making the reservation, in line with the policy. 

• Meals during travel: offer a flat daily allowance (per diem) to cover food expenses while on the road. This keeps things simple and reduces the need to track individual meal receipts. For example, a $50 per diem allows employees to freely spend meals during a business trip without submitting individual meal receipts. 

• Office purchases: let employees purchase routine supplies up to a certain amount—say $100—without needing prior approval. Anything above that limit should go through a manager. For example, buying printer paper and pens for $75 is fine without approval, but ordering a new office chair for $250 would require sign-off. 

• Excluded expenses: make it clear that some items are not reimbursable, such as personal entertainment, alcohol (unless part of an approved business event), or any expense without a valid receipt. In that sense, submitting a receipt for movie tickets during a work trip would be denied, unless the expense was part of a pre-approved client entertainment event. 

Common challenges and how to solve them

Rolling out a new expense policy can come with a few bumps in the road. Here are a few common issues and how to overcome them: 

• Employee pushback: some employees may resist the change or question why the policy is necessary. Involve them early in the process and clearly explain how the policy benefits them and the company by providing structure, clarity, and protection. 

• Inconsistent enforcement: when policies aren’t applied evenly across departments, it can lead to confusion and frustration. Make sure managers and finance teams are properly trained and aligned on how to use the policy consistently. 

• Overly complex procedures: if the process for submitting and approving expenses is too complicated, employees may avoid it or make errors. Simplify the steps as much as possible to encourage compliance and reduce administrative headaches. 

Keeping your expense policy up to date

As your business grows, your expense policy should evolve right along with it. To keep it relevant and effective, follow these simple steps: 

• Review annually: set a yearly reminder to assess your policy and make updates based on changing business needs, employee behavior, or new regulatory requirements. 

• Collect employee input: get feedback from the people using the policy most—especially frequent travelers and team members who handle purchases. Their insights can help identify unclear areas or improvement opportunities. 

• Provide refresher training: whenever you update the policy—or just as a regular check-in—offer quick training sessions or reminders to keep everyone informed and aligned. 

Technology and expense management software

Of course, implementing your policy requires efficient tools to manage the process day-to-day. That’s where time and expense management software come in. From tracking hours and submitting receipts to generating real-time reports and syncing with billing systems, find a solution that simplifies every step. 

Whether you’re supporting in-office or remote teams, managing project-based travel, or aiming to accelerate your invoicing cycle, expense management software is designed to help you save time, reduce errors, and stay focused on growth. 

Final thoughts

An effective expense policy lays the foundation for smarter financial management. By clearly defining reimbursable expenses, setting approval workflows, and ensuring compliance with local regulations, you help your team spend responsibly and confidently. This leads to better control over operations, clearer spending visibility, and more reliable financial management across your business. 

Ready to take the next step? Discover how Sage time and expense management software can make policy administration seamless and scalable.