Expense and Approval Policy

Expense and Approval Policy

An expense policy that employees ignore is worse than no policy - it creates a false sense of control while spend leaks through exceptions. A good policy is short enough to read, specific enough to apply, and enforced consistently; the costly mistake this skill prevents is the prose-heavy policy nobody can apply at the moment of purchase, which converts every expense into a judgment call and every judgment call into precedent.

Operating procedure

Order matters: limits must be calibrated to the company before the approval matrix is drawn, or the tiers will not match how spend actually flows.

1. Collect the inputs below.
2. Draft the five mandatory sections in order: what is reimbursable, spend limits by category, approval authority by amount, documentation requirements, submission deadlines. Each section is a table or short bulleted list - never prose paragraphs. An employee must be able to scan to any answer in under 30 seconds.
3. Calibrate the default numbers below to the company's size, geography, and travel intensity. Keep the structure even where the numbers move.
4. Add the enforcement section - a policy without stated consequences is a suggestion.
5. Close the catch-all: anything not listed is not reimbursable without explicit pre-approval.
6. Route the draft to finance and legal for sign-off before publication, and pair with the expense-tool configuration so approval tiers are enforced in software, not memory.

Step 1: gather inputs

• Company headcount and typical approver chain (who exists between employee and CFO).
• Travel intensity: domestic vs international mix, typical destinations (sets the hotel cap - default to the median business-hotel rate in each frequent city).
• Existing pain points: which categories currently leak (default guess: meals, software subscriptions, and late submissions - label this a guess until finance confirms).
• Finance system in use and its approval-routing capability.
• Currency (defaults below are USD).

Concrete defaults (adjust with reason, never silently)

• Travel: economy airfare for flights under 6 hours; hotel nightly cap set to the median business-hotel rate in that city.
• Meals: 75 USD per person per day domestic; 100 USD international.
• Client entertainment: separate per-person per-event cap; client names must be documented.
• Software and tools: anything over 500 USD annually requires manager pre-approval.
• Equipment: always pre-approved; becomes company property.
• Approval tiers: up to 1,000 USD - direct manager; 1,000-10,000 USD - department head; over 10,000 USD - CFO or equivalent. Above-threshold purchases require pre-approval before the expense is incurred, not after. Emergency exceptions require CFO notification within 24 hours. No one approves their own expense - no exceptions, including executives.
• Deadlines: submit within 30 days of the transaction; submissions after 90 days may be denied. Late submissions create audit exposure and distort period expenses - this timeline is not negotiable.
• Audit: sample 5% of all expenses monthly at random; report findings to the CFO quarterly.
• Lost receipts: signed attestation allowed, maximum one per quarter per employee before flagging for review.

Worked artifact: policy skeleton

EXPENSE & APPROVAL POLICY - [FILL: company]   Owner: [FILL]   Effective: on publication

1. REIMBURSABLE CATEGORIES & LIMITS
   Airfare        Economy, flights < 6 hrs           No pre-approval
   Hotel          [FILL: nightly cap per city]/night No pre-approval
   Meals (travel) $75/person/day dom, $100 intl      No pre-approval
   Client ent.    [FILL: $/person/event] cap         Client names required
   Software       > $500/yr                          Manager pre-approval
   Equipment      Any amount                         Pre-approval; company property
   Anything else  -                                  NOT reimbursable w/o pre-approval

2. APPROVAL AUTHORITY
   <= $1,000            Direct manager
   $1,000 - $10,000     Department head
   > $10,000            CFO - pre-approval BEFORE spend
   Emergency exception  CFO notified within 24 hours
   Self-approval        Never

3. DOCUMENTATION
   Every expense: itemized receipt (vendor, date, amount).
   Card statements do NOT substitute for receipts.
   Meals/entertainment: business purpose + attendee names.
   Lost receipt: signed attestation, max 1/quarter/employee.

4. DEADLINES
   Submit within 30 days. After 90 days: may be denied.
   Reimbursed on the payroll cycle following approval.

5. ENFORCEMENT
   No receipt -> no reimbursement. Violations -> disciplinary action.
   Patterns of lateness/avoidance -> HR escalation.
   5% random monthly audit; quarterly findings to CFO.

Bad policy line: "Employees should exercise good judgment and keep travel costs reasonable." Good policy line: "Airfare: economy class for flights under 6 hours; anything above requires department-head pre-approval with the fare comparison attached."

Deliverable

Produce a one-to-two page policy document containing the five sections in scannable table form, the approval authority matrix, the enforcement section with named consequences, and a short change-log line for each default the company adjusted away from the baselines above.

Do NOT

• Do not write limits as prose - "reasonable" and "appropriate" are unenforceable and become whatever the loudest employee last got approved.
• Do not allow post-hoc approval for above-threshold spend - pre-approval after the fact is just paperwork on a decision already made.
• Do not let credit-card statements substitute for receipts - statements show amounts, not what was bought.
• Do not omit the catch-all clause - every unlisted category becomes an implicit yes.
• Do not publish without the enforcement section - unenforced policies are read once and ignored permanently.
• Do not copy another company's caps without calibrating - a 75 USD meal cap that works in Austin fails in Zurich and breeds workarounds.

Quality bar

Before the policy ships: every limit is a number, not an adjective; any employee can find the answer to "can I expense this and who approves it" in under 30 seconds; the approval matrix has no gap or overlap between tiers; the self-approval ban is explicit; deadlines, audit sampling rate, and consequences are all stated; and finance confirms the tiers can be enforced in the expense system.

Escalation

This skill drafts internal policy, not tax or employment-law advice. Per-diem treatment, taxable-benefit rules, and multi-jurisdiction reimbursement law vary - have an accountant or employment counsel review before publication, especially for international employees.