expense policy, spend management
Companies don’t need to go overboard with fancy expense policies that don’t actually serve their employees’ needs. Instead, they should pay attention to millennials’ spending activity and develop policies that will actually be used.
For example, millennials are more likely to use ride-sharing and ride-hailing services—so company expense policies should address ways of handling claims for these types of transportation.
What does the ideal expense policy look like for a modern company? Here we’ll provide a list of best practices about what to do (and what not to do) when creating an expense policy to best support a new generation of tech-savvy employees.
The expense policy is the “Do” and “Don’t” list that tells employees what they can reimburse and how they should file claims. Every business needs a formal expense policy, especially as a company grows larger and larger. Fifty managers asking the boss, “Wait, can my team member even claim for this?” translates into a lot of wasted time for everyone involved.
Rules should be set before anyone begins to spend using company money. The ideal expense policy sets and manages expectations while helping employees feel secure about their spending. It also reduces the risk of company misspending and fraudulent claims. According to American expense management company Abacus, “the most common cause of employee spending violations is a lack of understanding of the policy.”
A company expense policy must be customized to your employees’ spending habits. There is no one-size-fits-all policy that works for all of the organizations in the world. However, not to fear: there are a few guidelines that all CFOs and managers can follow when developing their expense policy:
Everyone knows that expense reports are tedious, and some people may not even bother to claim small expenses if the process is tedious. This is unfair and can reduce morale.
To avoid such issues, you need to be explicit about the expense reporting process. Who is responsible? What is the deadline for submitting a report? What information is absolutely necessary?
An automated expense management tool is crucial for any growing business. This can improve the submission process and be set up to automatically enforce expense policies.
One such tool, Spenmo, provides corporate spending cards that can be topped-up with a limited amount. Additionally, managers will automatically receive notifications whenever a card is used to make a purchase. If the purchase seems suspicious, the card can immediately be locked. As a result, this automated system provides much-needed visibility into company spending.
Some companies allow any payment to be reimbursed; others only accept a specific type of payment. Your expense policy should include complete procedures for reimbursing different types of payment methods, from company cards to online payments to cash. For example: how does your company approach digital wallet payments?
Thanks to stiff competition among e-wallet providers, consumers benefit from major discounts and cashback. However, this cashback isn’t typically reflected on the receipt that employees will submit to you. How can you ensure that employees are claiming for the true_ _amount they paid?
Millennials often get a lot of flak, but it’s important to take note of how they’re spending and what they’re spending on. Millennials tend to be more patient, more prudent about spend management, and more digitally savvy, with less brand loyalty than older employees. Taking note of this will help you develop a comprehensive spending policy that saves you time down the line.
When it comes to transportation, companies may either offer a company car and pay for fuel, cover fuel costs for an employee’s own car, or cover the costs of public transportation and ride-hailing. Ride-hailing has become exceptionally popular in Southeast Asia, and it’s important to include these applications in your company expense policy.
Younger employees have developed a stereotype for being a generation that enjoys luxury food such as fancy bubble tea and avocado toast. According to some studies, they do tend to eat away from home slightly more often than their older counterparts. It’s best to set a limit per month and per meal to ensure that company spending doesn’t get sucked dry from meal reimbursements.
Millennials reportedly spend the lowest out of all age cohorts for health insurance and medical services. Some companies offer healthcare insurance; others don’t. How does your company approach healthcare costs, and what services are covered? It’s important to define how your company handles healthcare costs and what services may be covered.
According to a study by Boston Consulting Group, millennials are 60% more likely to splurge on flight add-ons like extra legroom or in-flight entertainment compared to older generations. However, thanks to their digital savviness, they are able to spend less on travel overall compared to their predecessors. For instance, millennials tend to take more time to compare prices online and discover discounts and promos.
A study from ADARA, a travel data platform, says that millennials across Asia Pacific are more likely to book flights through airline websites (56% in Singapore, 45% in Hong Kong, 44% in Australia vs 34% in the US).
They are more likely to book hotels through general travel websites (67%) vs 19% on hotel sites, and they are not loyal to airlines—in fact, half of those surveyed (43%) do not think it is worthwhile to sign up for loyalty programmes. According to the study, 82% of Singaporean millennials believe that price is the most important differentiator.
Your company will need an expense policy that considers these unique spending tactics. For example, you’ll need to make sure that employees are reporting the actual amount paid after discounts, not the sticker price. Like it or not, claiming for more (even if it’s just a few dollars difference) than what was actually paid is a form of expense fraud.
Okay, so creating an expense policy isn’t exactly a joy-filled activity (unless you’re the CFO and you just love all things money-related). But the process of creating your company’s policy is a valuable one that can help you get closer to your employees. By understanding their approach to expenditures, you can better understand them and build more synergy.
The expense policy is a necessary, living document that will help you avoid major issues and solve disputes. By developing this policy together with your employees, you’ll empower them to do their best—and prevent your company from spending too much.