How to Write an AI Use Policy for Your Small Business (With a Free Template)

The Five Questions Every AI Policy Must Answer

The first question — what tools are approved — is the most important. Without an approved list, employees will use whatever they find convenient. That means free consumer tools with permissive data retention policies, tools from vendors you've never vetted, and tools that may not comply with your industry's regulatory requirements. A simple approved list, even if it only contains three or four tools, closes this gap immediately.

The second question — what data can be entered — requires you to think through your data classification. At minimum, you should prohibit entering customer PII, financial records, health information, legal correspondence, and trade secrets into any public AI tool. You should also address the gray areas: Can employees use AI to draft internal memos? Can they summarize meeting notes that include client names? The more specific your policy, the less room there is for misinterpretation.

The third question — who reviews AI output — is often overlooked. AI tools make mistakes. They hallucinate facts, misrepresent sources, and produce confident-sounding errors. Your policy should specify that AI-generated content used in customer communications, legal documents, financial reports, or public-facing materials must be reviewed by a human before use.

Reporting, Consequences, and Enforcement

The fourth question — how to report incidents — matters more than most business owners realize. If an employee accidentally shares sensitive data with an AI tool, or discovers that a vendor's AI has been mishandling data, you need a clear process for reporting and responding. Without one, incidents go unreported and unaddressed until they become much bigger problems.

The fifth question — consequences — is not about punishment. It's about seriousness. A policy without stated consequences signals that the policy is aspirational, not operational. Even a simple statement that violations will be addressed through the standard disciplinary process is enough to establish that the policy has teeth.

Getting It Done This Week

Writing this policy doesn't require a lawyer, though having an attorney review the final version before implementation is a good idea. Our AI Workplace Policy Kit includes a complete, small-business-ready template designed for compliance that covers all five of these areas, plus an approved tools list template, an incident response checklist, and an employee acknowledgment form. The whole kit is designed to be deployed in a week, not a quarter.