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Building an Effective Company Spending Policy

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While attending the Global Business Traveler’s Association Expo last summer, we learned from industry experts about a number of best practices for building an effective travel and expense policy. We share these with you here and expand upon them to help you build or refine a company-wide spending policy.

There are a number of considerations to explore before you even begin to write the first “rule.” First and foremost is to understand there isn’t a cut and dry formula for writing a company travel and spending policy. You want your policy to reflect your corporate culture and balance the needs/wants of employees who travel and spend money while effectively managing company spending.

Start by thinking about what type of policy makes the most sense based upon your organizational style. Consider your company objectives, vision and goals.

Market conditions always play a role into the type of policy you will design. If your company is affected by a tighter economy, it is more likely that you will want to tighten policy; if the economy is flowing more freely, you may be more likely to loosen policy.

Next, think about the platform upon which your company operates. How does your company manage spending now? Is this where you want to be, or do you need something with a little more structure and more depth? One expert identified four silos that move from a loosely defined policy through to the most restrictive. You’ll want to decide where on the spectrum you believe your company may be. As a point of reference, most programs fall somewhere in the middle of this chart:

Receipts Guidelines Exception Mandated
Limited guidelines Policy defines spend guidelines Policy w/controls; limited & defined managerial discretion Tight policy w/front-end controls/trip compliancy
Managerial discretion post expense Managerial discretion post expense Pre/post expense management Senior management support
Limited technology without online travel booking; Reimbursement tied to receipts Limited technology with low-level of online booking Integration of travel booking & expense Integration of travel booking & expense
< Least Strict ^
Most programs fall here
Most Strict >

You will also want to think about who in your company should be a part of the policy development process. Who will own the policy and who are key stakeholders? People in your organization who have responsibility for the following areas may offer valuable insights into policy creation and should be invited to participate in the process: human resources, corporate communications, security/risk business continuity, travel, legal, treasury, procurement/supply chain and finance.

Other considerations include:

  • Can your suppliers and/or technology infrastructure support your final policy?
  • How/who will implement policy?
  • How/who will manage compliance?
  • How will enforcement be managed/communicated?

Now it’s time to being mapping out what your policy is going to cover. Keep in mind that traveling is only one portion of a spending policy. You may also want to include how employees buy goods and services within your organization. As an addendum to this article, we’ve provided a list of the areas you may want to consider as you write the specifics of your policies.

There are a few things worth noting that can really help drive the biggest savings. One is to evaluate trip value or the ROI of travel. How much of your travel is generating revenue for your company vs. how much of your travel simply moves employees between offices? Are there other alternatives to inter-office travel?

How much can you leverage technology to manage your compliance. For example, spending management software, like ExpenseWatch.com, lets you building vendor/supplier catalogs into a purchasing system to take advantage of volume pricing discounts. It also allows you to link into travel booking data enabling traveling employees to build expense reports much faster, and company execs to gain better controls over travel and expense spending.

A final note on the travel and entertainment portion of your policy: be sure to review the IRS publication on what needs to happen to ensure your T&E reimbursements are compliant. Go to www.irs.gov and search on “accountable plan” or publication 463. And remember, if you get push back from employees when you build your plan, you can always use the IRS as the “bad guy” and say it’s a requirement so that we as a business can deduct these expenses on our corporate tax returns.

Reference:

  • Albert Taras, Managing Partner, TCG Consulting (http://www.tcgconsulting.net)
  • Mary Schaeffer, Publisher, AP Now & Tomorrow (www.ap-now.com)

Areas to consider including in a spending policy document:

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