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Business Travel Expenses 101: Everything You Need To Know

All_about_business_travel_expenses

Business travel expenses are the second-largest cost 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 can control travel costs and reduce back and forth between the employees and the finance managers. 

In this blog, we will provide you with all the necessary information related to business travel expenses, what expenses can be claimed under business travel expenses, and how to manage them efficiently! Read on.

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 employees might incur when they travel away from home for a few days or weeks for business meetings, conferences, etc. 

Most of the time, companies book travel and accommodation for the employees. In cases when employees incur business travel expenses on their own, they are reimbursed. However, employees must 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. As long as employees are able to show that the trip was taken specifically for professional advancement or client meetings, most expenses incurred during the trip can be counted as business travel expenses.  These can be broken into:

  • The cost of transport like flight, train, taxi, cab, parking fee, etc.
  • The cost of accommodation like the hotel, resorts, AirBnbs, 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 CANNOT Be Claimed As Business Travel Expenses?

There are mainly 3 things that cannot be claimed as a business travel expense. These are: 

  1. Any expenses incurred during travel for personal reasons 
  2. Personal expenses like shopping and meeting with friends during business travel 
  3. Commuting to and from the office

Apart from this, if your employees’ spouse, parents, children accompany them on the business trip, then 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 tell employees the mode of payment being used for different travel requirements so that there is no confusion later. Here are some different ways to pay travel expenses to employees:

  • Per Diem: Per diem (or per day) means a daily allowance that companies give to employees, guiding them on how much they 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. To know more about per diems in the US and how to set them as per IRS guidelines, read this blog.
  • Corporate credit card: You can provide a corporate credit card or company bank account to the employees to pay expenses. The company can limit the costs and track all the transactions for reporting the expenses.
  • 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. 
  • Reimbursement: 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 and expenses with a cloud-based integrated T&E solution: One of the best ways to manage business travel expenses is to use a travel and expense management tool that completely automates your approval and reimbursement workflows. You will know if there are any out-of-policy bookings and can control them. Also, automating your reimbursement process will make expense filing easy for employees and will eliminate any manual filing errors. They will be able to scan and upload all the invoices on the go leading to accurate expense filing, further reducing travel costs.

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 reimburse for transportation. But be consistent with the payment methods you choose.  

3. Set procedures for proper travel expense estimation, submission & reimbursement: 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 and expense policies and encourage them to follow it. 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 its 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 measure appropriately where saving money is cost-efficient and not burdening the employee. Traveler safety is a priority, after all. 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:

Do’sDon’ts
Give rewards and incentives to cost-saving employeesDo last-minute bookings. Only allowed in emergency cases
Include policy compliance exceptionsGive 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)Remove business class privileges to save cost. It may demotivate the team
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 T&E 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. 

Apart from all this, it provides you with an exhaustive inventory of transportation and hotels and provides 24*7 support to the traveler, with safety tracking features. Interested to know more? Book a demo with our product expert today!

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