Business Travel Expenses 101: Everything You Need To Know
Business travel expense is the second-largest cost factor for a company and at some point, every company struggles with managing them.
Everyone wants to streamline the expense tracking and reimbursement process so that they control travel costs and reduce back and forth between the employees and the finance managers.
Let’s see all the necessary information related to business travel expenses, what expenses can be claimed under business travel expenses, and how to manage them efficiently.
What Is A Business Travel Expense?
Business travel expense is the cost an employee incurs while traveling for business-related work or activities. It can include transportation, meals, and accommodation expenses.
Companies often book travel and accommodation for the employees. However, in cases when employees pay for business travel expenses, they are reimbursed. All employees are expected to keep receipts and documentation at all times.
What Can Be Claimed As Business Travel Expenses?
In order to qualify as a business travel expense, the trip should be related to a business activity or objective. While employees may mix leisure with business travel, the bulk of travel should be for work, such as client meetings, seminars, etc.
The business expenses can be broken into:
- The cost of transport like flight, train, taxi, cab, parking fee, etc.
- The cost of accommodation like the hotel, resorts, etc.
- Expenditure on meals and drinks consumed during travel
- Incidental expenses such as laundry, tips, and entertainment
Also, if employees are hiring a car or using their vehicle for business purposes, it can be claimed as a business travel expense and they can get it reimbursed as per the US Mileage Reimbursement policy.
What Can’t Be Claimed As Business Travel Expenses?
There are mainly 3 things that cannot be claimed as a business travel expense. These are:
- Any expenses incurred during travel for personal reasons
- Personal expenses like shopping and meeting with friends during business travel
- Commuting to and from the office
Apart from this, if your employees’ spouse, parents, children accompany them on the business trip, their expenses cannot be claimed as business expenses. Also, if there is any fine like a parking fine, it is not borne by the company.
Ways to Pay Business Travel Expenses To Employees
There can be multiple ways to pay business travel expenses to your employees. But first, it is important to ensure that your travel & expenses policies clearly state the mode of payment used for different travel requirements so that there is no confusion later.
Here are some different ways to pay travel expenses to employees:
1. Per Diem
Per diem (or per day) means a daily allowance that companies give to employees. The per diem policy defines how much employees can spend per day on food and lodging, while they travel for work.
The companies can either give it in advance or the employees can get it reimbursed after returning from the trip. You can read up further about per diems in the US and how to set them as per the IRS guidelines.
2. Corporate credit card
You can provide a corporate credit card to the employees to pay expenses. The company can limit the costs and track all the transactions for reporting the expenses.
3. Cash payments
You can provide an estimated amount of cash (or a little more than that) for the whole trip to the employees and ask them to submit receipts for all the expenses to track the expenditure. They can return the excess amount after they return from the trip.
You can reimburse the expenses incurred by employees during the trip. The employees can upload receipts, file expenses, and then submit them to the finance team. The finance team, then, verifies and reimburses the expenses.
How To Manage Business Travel Expenses
Managing business travel expenses is essential for cost-saving. Here are some ways you can manage corporate travel expenses:
1. Automate travel expenses with a T&E solution
One of the best ways to manage business travel expenses is to use a travel and expense management platform that completely automates your approval and reimbursement workflows.
Automating your reimbursement process makes expense filing easy for employees and eliminates any manual filing errors. Moreover, they will be able to scan and upload all the invoices on the go leading to accurate expense filing.
You, as an employer, will know if there are any out-of-policy bookings and can control them.
2. Fix the payment method
You need to set the payment method for various travel expenses. For instance, you can set per diem for food and accommodation, and set mileage rates for transportation. But be consistent with the payment methods you choose.
3. Set proper travel expense procedure
You need to set guidelines for estimation, submission, and reimbursement of expenses. Keep in mind these points while framing your policies:
- Estimating the expenses: Ask employees to make an end-to-end projection of expenses before the trip. It will give them an idea of how much to spend.
- Receipt Collection: Guide your employees to always collect every single receipt and also the format you expect the expenses to be provided in i.e. tax invoice in PDF/ computer-generated receipt, or physical receipt.
- Timely expense submission and claims: Employees should clearly know the timeline as to by when they have to file the expenses after they return from their business trip.
For instance, you can ask them to file the expenses within a month of their return. Any expenses filed post that will not be considered.
- Expense reimbursement period: You must set a timeline to reimburse your employees i.e. within 20 days of the expense claim. Late reimbursement can cause frustration and demotivate employees.
4. Encourage employees to follow the corporate travel policies
As a travel manager, you must inform the employees about the company’s travel expense policies and ensure compliance. The following steps can help you create awareness about your policies and increase adoption:
- Policies should be easily accessible: You have to make sure that the travel and expense policies are placed at a common place where any employee can find them such as the intranet or any other common folder.
- Send company-wide emails regularly: Keep sharing the updates in company policy via regular emails.
- Organize Small Sessions: To create awareness about the policies and their importance, you should hold small sessions or gatherings regularly wherein you can tell them about it play quizzes.
This will keep the employees engaged and also, they will learn about the policy.
- Integrate a T&E management software with an inbuilt policy feature: Integrating a travel and expense management software with an inbuilt policy will let you present the terms of the travel policy to employees at the time of booking.
This helps improve policy compliance as an employee is aware of his/her expense limit and gets a notification if anything is booked out of policy.
Do’s & Don’ts To Reduce Business Travel Expenses
As a travel manager, it is your responsibility to reduce travel costs. However, you have to take into account other factors, such as employee satisfaction and safety.
For instance, while selecting hotels and accommodations, it is essential to consider the sanitation, hygiene, and security of the location, even if you need to spend a bit more.
Here are some do’s and don’ts to follow as you think of controlling business travel expenses:
|Give rewards and incentives to cost-saving employees||Do last-minute bookings. Only allowed in emergency cases|
|Include policy compliance exceptions||Give a shared hotel room to employees. It can be unpleasant and uncomfortable.|
|Encourage the use of public transportation or shared transportation (in case of group travel)||Focus only on corporate deals and not on the well-being of travelers|
Manage Your Business Travel Expenses Well With ITILITE
Managing business travel expenses is one of the significant tasks to save costs for your company. A cloud-based integrated travel and expense management software such as ITILITE can help you save cost, ensure near 100% travel policy adoption, and make the process of filing expenses easier and faster.
We offer a free demo of ITILITE to see how it helps in reducing travel expenses.