Running a small business or managing your finances as a self-employed entrepreneur comes with plenty of responsibilities. Among these, creating a clear and efficient expense reimbursement policy is often overlooked—yet it is critical. Whether you are running a team of five or fifty, having an organized system ensures transparency, simplifies accounting, and builds trust within your team. In this blog, Winslow provides a comprehensive guide on how to create expense reimbursement policy specifically tailored for HR and finance teams within small businesses and self-employed setups.
Why You Need an Expense Reimbursement Policy
Before diving into the "how," let’s understand the "why." When employees or contractors spend their own money on business-related expenses—like client lunches, travel, or office supplies—they expect to be reimbursed fairly and promptly. A structured policy helps:
- Set clear expectations
- Prevent misunderstandings
- Avoid fraudulent claims
- Simplify tax preparation
- Comply with legal requirements
As a small business or self-employed entrepreneur, every dollar counts. Having a policy that outlines what is reimbursable and how reimbursements are processed saves time, reduces conflict, and supports better financial planning.
Key Elements of an Expense Reimbursement Policy
To create an expense reimbursement policy that serves your business well, include the following components:
1. Purpose of the Policy
Start your document by explaining the reason behind it. Make it clear that the policy is in place to reimburse team members for legitimate business expenses and to maintain accurate financial records. This establishes the tone and intention for the rest of the document.
2. Eligible Expenses
Clearly define what qualifies as a reimbursable expense. This may include:
- Travel (airfare, lodging, meals, local transport)
- Office supplies
- Software or digital tools
- Client entertainment
- Continuing education or training
- Mobile and internet usage (if applicable)
Each business is unique, so tailor this list to your operations. Winslow recommends reviewing this section with both HR and finance teams to ensure all relevant expenses are included.
3. Non-Reimbursable Expenses
Just as important is what will not be covered. Common examples include:
- Alcoholic beverages (unless explicitly approved)
- Personal expenses
- Fines or penalties
- Upgrades to flights or hotel rooms
- Non-business meals
Clarifying exclusions upfront helps avoid disputes later.
4. Approval Process
Outline the steps employees or contractors need to follow to get reimbursed:
- Who approves the expenses (e.g., direct supervisor or HR)
- Any pre-approval requirements (especially for large expenses or travel)
- The timeline for submission after the expense is incurred
By defining an approval chain, you ensure consistent handling of all reimbursement requests.
5. Submission Guidelines
Employees need to know how to submit expenses. Include:
- Acceptable formats (scanned receipts, digital forms, email, expense software)
- Required documentation (receipts, business purpose, date, and amount)
- Submission deadlines (e.g., within 30 days of the expense)
Winslow suggests using digital tools like expense management apps or spreadsheets to streamline this process, especially for small teams.
6. Reimbursement Timeline
Explain when the employee can expect to receive the funds. A typical reimbursement window ranges from 7 to 30 days after approval. Consistency in this timeline builds trust and keeps morale high.
7. Policy Updates and Amendments
Your business will evolve, and so should your reimbursement policy. Indicate how often the policy will be reviewed and who is responsible for updating it. Winslow recommends revisiting the policy annually or after any major business changes.
Step-by-Step Guide to Create an Expense Reimbursement Policy
Let’s break down the creation process so it feels manageable, even for solo entrepreneurs or lean HR and finance teams.
Step 1: Assess Your Business Needs
What types of expenses are common in your business? Are most of your transactions digital or cash-based? Who needs reimbursements—employees, contractors, or both? Understanding these factors helps build a relevant policy.
Step 2: Involve HR and Finance Teams
Although your business may be small, collaboration is still key. HR ensures the policy is employee-friendly, while finance focuses on compliance and accounting. Winslow advises creating a simple draft first, then refining it with feedback.
Step 3: Choose a Tracking Method
Decide whether you’ll use manual tracking (like spreadsheets) or dedicated expense software. For many small businesses, platforms like Expensify, QuickBooks, or even Google Forms are more than sufficient.
Step 4: Draft the Policy
Using the key components outlined above, write the first version of your policy. Keep the language straightforward and professional. Avoid jargon unless it is clearly defined.
Step 5: Communicate the Policy
Once finalized, share the policy with your team. Include it in onboarding documents and store it in a location that’s easy to access—such as your company intranet, shared drive, or HR platform.
Step 6: Monitor and Improve
After implementing the policy, pay attention to how it works in practice. Are there any bottlenecks? Are employees submitting expenses late or incorrectly? Use this feedback to improve the policy over time.
Tips for Self-Employed Entrepreneurs
Even if you work alone or with a few freelancers, having an expense reimbursement policy makes a difference. Here's how Winslow tailors the approach for solopreneurs:
- Set personal rules for what counts as a business expense
- Log everything, even small expenses like coffee during client meetings
- Separate business and personal accounts to simplify tracking
- Use Winslow’s expense policy template to save time and stay compliant with tax laws
Having a formal approach protects you during audits and helps when you're scaling up and eventually hiring employees.
Legal Considerations
Although not all businesses are legally required to reimburse employees (this varies by location), it's generally a best practice. Make sure your policy complies with:
- Local labor laws
- Tax regulations (especially IRS guidelines in the U.S.)
- Employment agreements or contracts
Consult with a legal advisor if you're unsure. Winslow also recommends keeping receipts for at least 3 to 5 years for audit purposes.
Final Thoughts
A clear and effective expense reimbursement policy is more than just a document—it’s a reflection of how organized and fair your business is. For small businesses and self-employed entrepreneurs, it minimizes financial confusion and creates a culture of trust.
Winslow supports startups and solopreneurs with practical tools to build a professional foundation. If you’re ready to create an expense reimbursement policy, start with the basics outlined above, keep it simple, and tailor it to your team’s unique needs.