According to a study by independent research company Loudhouse, only one in two small firms is likely to have an expenses policy in place.

And while the vast majority of staff are honest and trustworthy when it comes to handling your firm‘s money, unfortunately there will always be some who see it as an opportunity to spend more than is justified or even to make dubious claims for their own gain.

It‘s not just staff you need to watch either. While you may feel you can do as you like with your organisation‘s cash, it‘s important to keep your personal money separate from that of your firm and to set an example to employees about what is and isn‘t acceptable when away on business or entertaining clients.

Stephen Fox, a fraud defence expert and partner at national law firm Ralli Solicitors offers the following advice to small business owners on how to keep expenses - and your staff - under control:

Whose money is it, anyway?
Being a major shareholder in, a director of, or even the outright owner of a business does not entitle you to treat the business's money as your own. Other stakeholders in the business - like the bank,shareholders, HMRC, the local authority, the pension fund, suppliers, creditors and employees - have legitimate interests in the conduct of its affairs that may take precedence over yours. You might think, quite rightly, that it's 'your‘ company, but its money is emphatically not yours to spend. You can spend the money it pays you, after tax, in salary, bonuses, legitimate expenses and dividends as extravagantly as you like.

Stay in your comfort zone
When travelling on business, owners and employees‘ expenditure should reflect their own normal income and lifestyle. If they spend the company‘s money on luxuries that would normally be beyond their own pocket at home they are asking for trouble

One man‘s meat
That said, in some image-conscious sectors like the fashion, professional sport or entertainment, clients are more likely to expect a degree of extravagance. Conventions differ in different industries. A football or show business agent negotiating a big contract could probably justify higher proportionate entertainment expenses than a sub-contactor negotiating the same price for a wastewater pipeline trench on a public building project. Public sector rules are very strict

That‘s entertainment?
It depends what you're buying, too. Paying for a £250 lunch after discussing financial restructuring with a highly rewarded City broker who earns a million-pound-a-year bonus would be considered 'business as usual‘. Paying £250 for bouncy castle at a customers‘ kids‘ birthday party could be considered a corrupt payment in, say, the engineering or construction sector

Forget percentages
The sums spent entertaining potential clients or customers should be measured according to the magnitude of their potential value to your business but the percentage diminishes as the numbers increase. Spending £50 buying lunch in pursuit of an order valued at £2,500 (2%) would probably be acceptable in most companies, whereas spending £5,000 at a corporate event chasing a £250,000 order would be considered highly excessive and blowing £50,000 seeking an order worth £2.5m would border on criminality. Spending has to be proportionate

Sweet somethings
Spending money on entertainment after a deal has already been done and the transaction is already in progress could be viewed in a different light, too. The justification 'keeping the customer sweet‘ isn‘t the same as winning the order or contract in the first place

Buddy-building
Be very careful how you spend the company‘s money with colleagues in the employ of the same enterprise or group. Team-building or becoming better acquainted with colleagues is fine, up to a point, but extravagant outlay on, say, drinks, hotels, gambling and entertainment when a conventional meeting would suffice could easily be construed as an irresponsible waste

High flyer?
Top people may need to be pampered but as a general rule travelling should be arranged on the basis of the most cost and time efficient method; not the most luxurious or pleasing method available

Family affair?
There should always be a solid business justification for including partners, spouses, siblings, offspring or other relatives and any non-business connections in corporate event involving an expense account. Their being present to add a little charm or glamour to the occasion is rarely considered an adequate reason these days

Horses for courses
Take care to separate money spent on your hobbies and outside interests from your legitimate business spending, especially such things as overseas travel, the use of holiday homes, golf club membership and activity, horse racing, sporting events, gambling, boating, clubbing and the use of illicit substances or services in a non-business context. If you‘re participating because these are things that you like to enjoy, that might just have a beneficial business consequence, you‘d better be ready to explain exactly what those benefits are