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How to Create an Expense Budget for Your Employees

Learn how to set up an expense budget for your employees, complete with tips on using expense report templates and budget management tools.

Blog Author - Justworks
Justworks
Jan 23, 20255 minutes
Blog Author - Justworks
Justworks

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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Blog - Payroll 2
Table of Contents

Understanding the Importance of an Expense Budget

Steps to Create an Expense Budget

Implementing and Monitoring the Budget

Tips for Effective Budget Management

Common Challenges and Solutions

Putting It Into Action

How Justworks Can Help

As a small business owner, you know what your employees need to get their job done well. And sometimes that includes approved, reimbursable expenses for things like travel, food, office supplies, or even product subscriptions. Of course, this doesn’t necessarily mean you need to give your team a blank check or a no-limit company card. That’s where a smart, sensible expense budget comes in. Creating an effective expense budget for your employees is the best way to keep control of finances and ensure that company resources are used wisely.

An expense budget not only helps with tracking and controlling costs, but it also empowers employees by providing clear guidelines on spending. Here, we’ll guide you through the simple steps of setting up an expense budget for your employees, complete with tips on using expense report templates and budget management tools. Let’s get started!

Understanding the Importance of an Expense Budget

Before writing a budget, think about what you’d like it to accomplish for your business. An expense budget helps set expectations for employees and helps prevent overspending. By outlining what costs are acceptable and giving a framework for reporting, you can lay the groundwork for transparency and accountability in your financial operations.

Benefits of an Expense Budget

  • Cost Control: Prevents overspending by setting limits and identifying appropriate expense categories.

  • Accountability: Encourages employees to be responsible for their spending and empowers them to justify their costs.

  • Transparency: Provides a clear view of where, when, and why money is spent.

  • Financial Planning: Helps in forecasting and preparing for future expenses.

Steps to Create an Expense Budget

Just like any important decision, creating an expense budget requires careful planning and consideration. When you’re ready to write yours, start with these steps:

1. Identify Expense Categories

Do your team members have to pay for plane tickets? Or maybe they work remotely and need high-speed internet? Start your budget by identifying the different types of reimbursable expenses your employees might incur. Common categories include travel, meals, office supplies, and client entertainment. Understanding and labeling these categories will help you allocate funds appropriately.

2. Set Clear Guidelines and Policies

The clearer the rule, the easier it is for employees to follow. Establish specific policies for each expense category. For example, are meals limited to a certain value? Are there certain platforms employees should check when buying supplies? Define what is—and what isn’t—considered a valid expense, and don’t forget to set spending limits. Policies should be detailed in an employee handbook or a dedicated document to ensure everyone is aware of the rules. That way, your team will know exactly where to look when they have questions about expenses or reimbursements.

3. Use Expense Report Templates

The last thing you want is a disorganized folder full of expense statements in different formats. To streamline the reporting process, use standardized expense report templates. These templates should include fields for all necessary information, such as the date of the expense, amount, category, and a description. Providing templates makes it easier for employees to report expenses accurately and consistently, and it’ll save you stress when you want to compile expense data. 

4. Determine the Budget Amount

It’s time to talk dollars. Allocate a specific budget for each category based on past spending patterns and future projections. Be realistic in your estimations and consider the nature of your business when setting these limits. Does it make sense for your team to spend more in some categories than others? Should employees have different limits based on their roles and tasks? Don’t be afraid to include your team in these discussions to get an accurate sense of what they need for their jobs.  

5. Implement Budget Management Tools

Next, break out the toolkit. There’s no need to invent your own expense database or manually log every line item yourself. Instead, leverage budget management software to track expenses in real-time. Tools like Expensify, QuickBooks, or Concur can help automate the tracking and approval processes, ensuring accuracy and efficiency while saving you time and energy.

Implementing and Monitoring the Budget

Ready to put your budget into action? Use these steps to implement it effectively and monitor its performance.

1. Communicate the Budget

Start by spreading the word. Inform all relevant employees about the new expense budget and guidelines and give them access to templates. Ensure they understand how to report expenses and the importance of adhering to the budget.

2. Monitor Spending

Expense reports aren’t just paperwork. They can also be useful sources of data about how your team spends money. Regularly review expense reports and compare them against your budget. Look for patterns that might indicate overspending or misuse of funds. Monitoring helps in making adjustments as needed to stay on track, and catching issues early can avoid bigger problems down the road.

3. Review and Adjust the Budget

Just because you’ve made a budget doesn’t mean you can’t tweak it later on. In fact, you probably should. Review your budget periodically and adjust it based on changes in business needs or financial circumstances. This ensures your budget remains relevant and effective.

Tips for Effective Budget Management

  • Encourage Feedback: Invite team members to share their thoughts on the budget and reporting process. What works? What doesn’t? What changes could make the process easier and more efficient? By drawing on their personal experiences, your employees can help improve the system.

  • Provide Training: Don’t expect teammates to master the system all by themselves. Offer training sessions on how to use budget management tools and report expenses correctly. Make sure employees know how and where to ask any additional questions that come up.

  • Reward Compliance: Recognize employees who consistently adhere to budget guidelines and report expenses accurately. This could be incorporated into a performance review or handled separately in a meeting or one-on-one. 

Common Challenges and Solutions

Even if you plan and implement your budget perfectly, you might still run into a few bumps along the road. Here are a few obstacles to anticipate and tips for staying on track.

Resistance to Change 

No matter how reasonable your budget is, some employees might not want to limit or track their expenses, especially if it creates more work for them. To overcome this, be sure to talk with your team about the benefits of budgeting and give them adequate training to ease the transition.

Inaccurate Reporting

Everyone makes mistakes, so it’s a good idea to plan how you’ll handle them in your expense budgets. Inaccurate reporting can skew your budget and make it hard to understand where money is going. Use templates and tools to simplify the process and reduce errors. Also, be sure to let employees know how they can fix any mistakes that they catch on their own before submitting expenses. 

Budget Overruns

Don’t just assume that spending limits are being observed. Overruns can happen if spending isn’t monitored closely, even when employees aren’t overspending on purpose. Regular reviews and adjustments, along with clear communication of policies, can mitigate this risk.

Putting It Into Action

There’s no way around it—creating an expense budget takes time and planning. But it’s also an essential part of financial management for you and your employees. By setting clear guidelines, using templates and tools, and regularly monitoring and adjusting the budget, you can make sure that your company’s resources are used effectively. This doesn’t just support financial health, it also empowers employees to make informed spending decisions. Implementing these strategies today will help you take control of your expenses as your business continues to grow.

How Justworks Can Help

Looking for the best tools to help you manage your employee expense budget? With Justworks, you can keep payroll and expense data in the same place, eliminate complicated spreadsheets, and simplify the way employees are reimbursed for approved costs. Employees can even submit expense reports—including photos of receipts—from outside the office with our easy-to-use mobile app.  As always, our customer service is here 24/7 to help with any questions about how to get the most out of our expense tools. Get started today to learn more about how Justworks can optimize expense reporting for your business.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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Written By
Blog Author - Justworks
Justworks
Jan 23, 20255 minutes

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

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