As a startup, it’s important to have an expense policy in place from the get-go. An expense policy will help you keep track of spending and ensure that your money is being spent in a way that aligns with your company’s goals. Creating an expense policy may seem daunting, but it doesn’t have to be. Here’s a step-by-step guide to creating an expense policy for your web3 startup.
Define what expenses are eligible for reimbursement
The first step is to decide what types of expenses will be eligible for reimbursement. This will vary depending on your business, but common examples include travel, entertainment, and business meals. Once you’ve decided what types of expenses are eligible, you’ll need to set some guidelines for each category. For example, you may want to limit business travel to domestic flights only or cap the amount that can be spent on entertainment per month.
Set spending limits
In addition to setting guidelines for specific expenses, you’ll also need to set limits on overall spending. This will help you keep track of how much your employees are spending and ensure that your budget isn’t being blown out of the water by excessive spending. To set spending limits, start by determining how much you can afford to spend each month on expenses. Then, divide that number by the number of employees who will be covered by the policy. For example, if you have a monthly budget of $5,000 for expenses and 10 employees, each employee would have a monthly limit of $500. This policy can be applied to fiat, stablecoins or even volatile cryptocurrencies such as ETH.
Require receipts for all expenses
Another important rule to include in your expense policy is a requirement that employees submit receipts for all expenses. This will help you keep track of spending and make sure that only legitimate business expenses are being reimbursed. If an employee doesn’t have a receipt, they shouldn’t expect to be reimbursed.
Implement an approval process
Last but not least, you’ll need to put an approval process in place for all expense reports. This approval process should involve someone in a position of authority (such as a manager or CEO) who can sign off on all expenditures. By requiring approval for all expenses, you can be sure that every penny is being spent wisely.
Create a system for both offchain and onchain expenses
Expenses by web3 teams can happen in fiat and onchain, in a variety of cryptocurrencies. Create a policy that covers both types of transactions, with clear policies around which types of cryptocurrencies are supported, as well as limits on gas fees. Be clear about which tokens you will reimburse, as well as if employees can ask for reimbursements in a different token (e.g. they incur the expense in Ethereum, but asking for a reimbursement in USDC can add a lot of complications). One important aspect for onchain expense policies is to also acknowledge which wallets you will send funds to, as well as if you require employees to prove ownership of the wallet.
An expense policy is a crucial tool for startups looking to keep track of spending and ensure that their money is being well-spent. While creating an expense policy may seem like a daunting task, it doesn’t have to be—just follow the steps outlined above and you’ll be on your way to developing a strong expense policy for your startup in no time! If you’re looking for a free expense management tool designed for web3 startups and DAOs, book a demo with mesha here.