Expenses policy + approval workflow (template)
Most small teams run expenses in one of two extremes: either no policy at all (everything is negotiated case-by-case, reimbursements take months), or a heavyweight corporate policy copied from a 500-person company (10 pages nobody reads, forms nobody fills out correctly).
This guide provides a lightweight middle path: a simple policy template and approval workflow that gives you control without creating bureaucracy, speeds up reimbursements, and keeps your records audit-ready.
TL;DR Answer
A simple expenses policy needs two parts: (1) clear rules on what's allowed, what needs receipts, and spending limits, and (2) a lightweight approval workflow so expenses are reviewed quickly and recorded properly. Done well, it reduces reimbursement delays, prevents surprise spend, and keeps records audit-ready — without heavyweight process.
Q: Why do small teams need an expense policy (and what breaks without one)?
A: Without a clear expense policy, teams face predictable problems:
- Unclear rules: "Can I expense this?" becomes a case-by-case negotiation, creating inconsistency and frustration.
- Slow reimbursements: Expenses sit in email threads for weeks, employees chase for payment, trust erodes.
- Surprise spend: Large expenses appear with no warning, blowing budgets and creating cash flow issues.
- Missing receipts: Come tax or audit time, you're scrambling to reconstruct what happened.
- Inconsistent approvals: One manager is strict, another is lenient, creating perceived unfairness.
- Tax/VAT headaches: Mixed personal and business spend, incorrect VAT claims, HMRC challenges.
The fraud and error risk is real. According to the Association of Certified Fraud Examiners (ACFE) 2024 Report to the Nations, "organizations lose 5% of revenue to fraud each year." Expense reimbursement is a common "leak" area when controls are weak — not necessarily malicious fraud, but duplicate claims, out-of-policy spend, and missing approvals add up.
A lightweight policy doesn't eliminate all risk, but it creates clear expectations, consistent approvals, and an audit trail.
Q: What's the simplest structure for an expense policy?
A: A practical expense policy for small teams (under 30 people) should cover these sections:
Minimum policy sections:
- Purpose: Why the policy exists (e.g., "ensure business expenses are legitimate, documented, and reimbursed fairly").
- Scope: Who it applies to (employees, contractors, founders).
- Allowed vs disallowed: What categories are covered, what's never allowed (personal expenses, luxury items, etc.).
- Limits by category: Spending caps (e.g., meals £30/day, travel reasonable cost, software requires pre-approval).
- Receipt rules: Threshold above which receipts are required (e.g., £25 or £50).
- Submission deadline: How long employees have to submit (e.g., 30 days from expense date).
- Approval chain: Who approves what (manager, finance, director for large amounts).
- Reimbursement timing: When employees get paid back (e.g., weekly, biweekly).
- Mileage / travel rules: Rate per mile (HMRC approved rate is 45p per mile for cars), booking rules for hotels/flights.
- Corporate card rules: If you issue cards, when to use them, reconciliation process.
- Exceptions process: How to request approval for something outside policy (e.g., director approval).
- Record retention: How long records are kept (UK: 3-6 years depending on tax/VAT status).
Keep it practical: A 1-2 page policy is sufficient for most small teams. More detail can live in an internal FAQ or wiki. The goal is clarity, not legal perfection.
Q: What should we require for receipts and record retention (UK baseline)?
A: For UK businesses, record-keeping requirements depend on your tax and VAT status:
Employer records (HMRC):
According to GOV.UK employer record-keeping guidance, employers "must keep records for 3 years from the end of the tax year" they relate to.
VAT records:
If you're VAT-registered, VAT Notice 700/21 states you must "keep all your business records for VAT purposes for at least 6 years."
Practical requirements: Keep itemised receipts or invoices showing merchant name, date, amount, VAT (if applicable), and what was purchased. For meals/entertainment, note the business purpose and who attended. Store approval trails (email, system record) alongside receipts.
Audit-ready record checklist:
- Itemised receipt or invoice (not just credit card slip)
- Date of expense
- Merchant name and location
- Amount and currency
- VAT amount (if VAT-registered)
- Business purpose (e.g., "client meeting," "team training")
- Attendees (for meals/entertainment)
- Approval record (who approved, when)
- Payment record (when reimbursed or card reconciled)
- Retention date (know when you can safely delete)
Q: What do the numbers say about expense process waste (errors and admin time)?
A: Manual expense processing is slow and error-prone. Industry research shows the scale:
- According to Global Business Travel Association (GBTA) research, the average cost to process an expense report is $58.
- Concur research found that 19% of expense reports contain errors, and correcting an error costs $52 and takes 18 minutes.
Impact in small teams: If your 10-person team submits 20 expense reports per month, that's 1,140 minutes of admin time annually just processing. If 19% have errors (4 reports/month), you're burning another 864 minutes per year fixing mistakes. That's 33+ hours of overhead.
Beyond admin time: delayed reimbursements cause friction ("I'm still waiting for last month's expenses"), messy bookkeeping makes financial planning guesswork, and missing receipts create tax/VAT exposure.
The fix: A consistent workflow with clear policy, simple submission, fast approval, and regular reimbursement schedule cuts admin time by 50-70% for most small teams.
Q: The lightweight approval workflow (policy → submit → approve → reimburse → record)
A: This workflow is designed for speed + control + clean records. The goal is same-week reimbursement for most expenses, with clear approval stages and an audit trail.
📋 Approval Workflow
- Employee submits expense with category + business purpose + receipt (if required)
Employee provides all required information upfront. Missing fields = automatic rejection. - Auto-checks: duplicates, missing fields, policy limits (manual if needed)
System or manual process flags duplicates (same date/amount/merchant), missing receipts, or out-of-policy amounts. - Manager approval (budget/need)
Line manager reviews for business need and budget availability. Can approve, reject, or request more information. - Finance review (coding/VAT/taxability where relevant)
Finance team reviews for correct account coding, VAT treatment, and tax implications (e.g., is this a taxable benefit?). - Reimbursement schedule (e.g., weekly/biweekly) or card reconciliation
Process approved expenses on a regular schedule (e.g., every Friday) or reconcile corporate card transactions monthly. - Record to accounting (expense account, project/client, tax/VAT treatment)
Post expense to correct GL account, project code, and apply appropriate tax/VAT treatment. - Store documents + audit trail (receipt + approval + notes)
Archive receipt, approval records, and supporting notes in a searchable system for required retention period. - Sample audit / exception review monthly (spot checks)
Conduct monthly spot checks on 10-20% of expense claims to identify patterns, policy breaches, or process improvements.
Optional: Escalation path for exceptions
If an expense is outside policy but has legitimate business reason, employee can request exception approval from director/founder with written justification.
Example approval thresholds:
- Under £50: Auto-approve if policy-compliant (category, receipt if required, business purpose stated)
- £50–£250: Manager approval required
- £250–£1,000: Manager + Finance approval required
- Over £1,000: Director/Founder approval required
Adjust thresholds based on your team size and typical expense patterns. The goal is to catch large/unusual spend without creating approval bottlenecks for routine expenses.
Q: Comparison table — approval models compared
A: Different approval models work at different scales. Here's what breaks where:
| Model | Speed | Control | Best for | Common failure mode |
|---|---|---|---|---|
| Manager-only | Fast (1-2 days) | Medium | Small teams, simple expenses | Inconsistent coding, tax/VAT errors |
| Manager + Finance | Medium (3-5 days) | High | Growing teams, complex expenses | Approval bottleneck if finance is slow |
| Auto-approve under threshold | Very fast (same day) | Low-Medium | High-trust teams, routine expenses | Policy creep, duplicate claims |
| Card-first + audit | Very fast (no reimbursement delay) | Medium (post-spend) | Teams with corporate cards | Personal spend on card, late reconciliation |
Q: Expense categories and simple rules (starter set)
A: Here's a practical starter set of categories with typical limits and rules. Adjust based on your business:
| Category | Examples | Receipt required? | Typical limits | Notes |
|---|---|---|---|---|
| Travel | Train, bus, taxi, parking | Above £25 | Reasonable cost, standard class | Book in advance when possible |
| Meals | Working lunch, dinner while travelling | Above £25 | £30/day typical | Solo meals only, not routine commuting |
| Accommodation | Hotel, Airbnb for business travel | Yes, always | Reasonable for location | Pre-approval for >£150/night |
| Software/SaaS | Tools, subscriptions, licences | Yes, always | Pre-approval required | Check for existing company licence first |
| Home office | Desk, chair, monitor, broadband | Yes, always | £500 setup, £40/month broadband | One-time setup for remote workers |
| Client entertainment | Client meals, drinks, events | Yes, always | Reasonable, with attendee list | Requires client name + attendees + purpose |
| Mileage | Business use of personal car | Log required | 45p/mile (HMRC approved rate) | Exclude routine commuting |
| Training | Courses, conferences, books | Yes, always | Pre-approval required | Relevant to current role |
Q: Failure points & fixes (what breaks first)
A: Here are the common places expense workflows break, and how to fix them this week:
| Failure point | Why it happens | Fix this week |
|---|---|---|
| Missing receipts | No clear threshold, no reminder to submit | Set receipt threshold (£25+), require photo at submission |
| Late submissions (60-90 days) | No deadline policy, no consequence | Set 30-day submission deadline, send monthly reminders |
| Duplicate claims | Manual process, no duplicate detection | Check date/amount/merchant before approving |
| Out-of-policy spend | No written limits, unclear categories | Publish 1-page policy with clear category limits |
| Unclear business purpose | Not required at submission | Make business purpose a mandatory field |
| Slow approvals (weeks) | No approval SLA, manual chasing | Set 48-hour approval SLA, auto-reminder if not actioned |
| Reimbursement delays (30+ days) | Ad-hoc processing, no schedule | Set weekly/biweekly reimbursement run (e.g., every Friday) |
Q: Before vs after — what changes when the policy is consistent?
A: The shift from ad-hoc to structured expense management changes operational outcomes in measurable ways:
| Scenario | Before (ad-hoc) | After (policy + workflow) |
|---|---|---|
| Reimbursement speed | 30-60 days (whenever someone remembers) | 7-14 days (weekly schedule) |
| Disputes | "Why was this rejected?" (no clear rules) | "Per policy section 3, this exceeds meal limit" (clear reference) |
| Bookkeeping | Mixed categories, inconsistent coding, missing receipts | Clean GL codes, receipts attached, audit-ready |
| Spend visibility | Discover spend 30-60 days later when reconciling | Weekly view of pending/approved expenses for cash flow planning |
| Fraud/error risk | No checks, duplicates/mistakes go unnoticed | Duplicate detection, spot audits catch 90%+ of issues |
| Tax/audit readiness | Scramble for receipts, reconstruct from bank statements | All records in one place, HMRC-compliant, VAT-ready |
Bottom line: Teams with a clear policy + consistent workflow report 50-70% reduction in expense admin time, 3-4x faster reimbursements, and significantly fewer disputes and errors.
Q: A data-backed PR angle small teams can use
A: If you want to share improvements in your expense process (team updates, client case studies, internal communications), here are credible stats:
- Fraud risk baseline: Organizations lose 5% of revenue to fraud each year, with expense reimbursement as a common control weakness (ACFE 2024)
- Processing cost: Average cost to process an expense report is $58; correcting errors costs $52 and 18 minutes (GBTA/Concur)
- Error rate: 19% of expense reports contain errors (Concur research)
"Small teams that implement a lightweight expense policy with clear limits and weekly reimbursement schedules typically cut admin time by 50-70% and eliminate most payment delays without adding bureaucracy."
FAQ
What's the simplest expenses policy a small team can use?
A 1-2 page policy covering: allowed categories with limits, receipt threshold (e.g., £25+), submission deadline (e.g., 30 days), approval chain, and reimbursement timing. Add specific rules for mileage, meals, and client entertainment as needed.
Do we need receipts for every expense?
Not always. Most policies set a threshold (e.g., £25 or £50). Below that, a simple claim is sufficient. Above that, require itemised receipts. For VAT-registered businesses, VAT-compliant receipts are needed to reclaim VAT.
Who should approve expenses in a small company?
Simplest model: line manager approves for business need, finance reviews for coding/compliance. For very small teams (under 10), founder or ops lead may approve all. Set thresholds: small expenses auto-approve if policy-compliant, large ones need director sign-off.
How fast should we reimburse employees?
Best practice: weekly or biweekly reimbursement runs. Slower than 30 days damages trust and causes friction. Consistent schedule (e.g., every Friday) works better than ad-hoc processing.
What's a good way to prevent duplicate or out-of-policy claims?
Use a system that flags duplicates (same date/amount/merchant). For out-of-policy claims, have clear written limits and train managers to review before approving. Monthly spot audits catch patterns.
How long should we keep expense records?
UK baseline: 3 years for employer records (HMRC), 6 years for VAT purposes if VAT-registered. Keep receipts, approval trails, and business purpose notes. Store digitally for easier retrieval and audit.
A simple option if you want expenses + approvals + audit trail in one place
If you want expense tracking, invoicing, leave management, and resource allocation in one tool with predictable pricing, Zotrack combines the full workflow — expense submission, approval stages, reimbursement tracking, and audit-ready records. No per-seat fees, no hidden costs.
References
- GOV.UK: Employer reporting of expenses and benefits - record keeping
- GOV.UK: Record keeping for VAT (Notice 700/21)
- ACFE: 2024 Report to the Nations press release
- ACFE: 2024 Report to the Nations (full report)
- GBTA: How Much Do Expense Reports Really Cost a Company?
- Concur: Save Time and Money on Expense Report Processing