The furore over MPs’ allowances for second homes and the rest has no doubt brought it home to many employers the need for clarity and consistency on the issue of expenses.

But how many small businesses will act to put in place a formal expenses policy when there is so much else to do? According to some surveys, less than 50 per cent of SMEs have a clearly defined policy on expenses.

The costs of failure

But that is a mistake. Employees need to know what they can and cannot claim for, when they must claim by, what supporting documentation they need and who signs claims off.

My experience is companies, both large and small, can get into very expensive and time-consuming grievance/disciplinary cases when there is no clear expenses policy in place. A disagreement about what can be claimed can result in a long, drawn-out dispute costing the business in both time and money.

I have seen cases where employees have made commitments using the company name resulting in bills for many thousands of pounds coming to an unsuspecting employer for improper claims for hotel, transport and meals.  The difference between a low-cost economy air ticket to Paris and business class is quite considerable.  Always be clear what class travel is permitted and monitor claims on a regular basis.

Effective monitoring

Employers need to make it clear that breaches of expenses policy can and will be treated seriously. Offences can be viewed as anything from absentmindedness to fraud. It all depends on the situation and how you word your expenses policy.

So treat this seriously and create a workable policy, apply it consistently and monitor it effectively.

Watch out for our factsheet on the subject of company expenses coming soon.

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