Business travel expense forms the second-largest controllable cost for any company. Therefore, it makes sense that every business sets up certain travel and expense (T&E) policy guidelines to manage these expenses.
A T&E policy simply sets the ground rules for travel expense management. It clearly defines the responsibility of all stakeholders involved – employees, managers, accounts team & HR. The T and E policy also contains rules regarding the company’s expense management system. See our T&E policy example in this article below.
Its main purpose is to curb unnecessary business travel expenses by taking preventive measures.
Implementing a comprehensive travel policy is essential for managing t&e expenses and ensuring compliance with tax laws and company guidelines. But did you know that a well-designed travel policy can also help you save money on expenses?
To estimate your potential savings on corporate travel expenses based on your company’s travel policy, try using our savings calculator. Click here to access the calculator.
Read on to understand everything about travel and expense policies, why you need to have one, and how to create an effective one. You can also download a free customizable business travel expense policy templates to use as a T&E policy example in your company.
A corporate travel and expense policy is a set of rules that define how a company will reimburse employees for all expenses they incur during a business trip.
It includes reimbursable and non-reimbursable travel expense categories, spending limits according to different employee levels, guidelines about t&e expense filing, and official repayment methods.
With no Travel and Expense policy in place, predicting and controlling employee spending can be challenging. This is because, without an official policy document, there is no way for employees to know where to spend and how much. Additionally, they may find it difficult to file expenses without knowing the standard procedure.
Hence, it is crucial to have a proper travel expense policy in place. This way, you can curb unnecessary travel spending and ensure faster filing and reimbursement.
The travel and expense policy should elaborate on how to report expenses and what to include in them. It should also describe how the company will reimburse employees for expenses during business travel.
The IRS rules regarding reimbursable and non-reimbursable expense categories are pretty stringent. Any violation can lead to heavy fines. Hence, the policy should include IRS guidelines about business travel expenses. This way, you can make the employees understand the legal requirements of government tax and audit authorities.
An automated travel and expense policy helps in the following ways:
A clear and concise T and E policy helps employees understand how much and where they can spend and how the company will process their expenses.
It will also lay down limits on different purchases. Thus, repetitive questions that your finance or HR managers need to answer reduce drastically.
A well-defined T&E policy helps prevent expense fraud through clear guidelines about expenses. With proper clarity, the finance team knows which costs to reimburse and which ones to reject. It helps them to validate expenses quickly.
Moreover, with a proper policy in place, employees know which expenses are reimbursable. This prevents the common unintentional events like out-of-policy spending.
A part of setting travel and expense policy is to identify the key stakeholders and define their roles and responsibilities in the t&e expense management process. Here are a few core stakeholder categories and their roles:
A major incentive to set a travel and expense policy is to align with the tax and compliance guidelines laid down by governing authorities. You can check the guidelines laid down by the IRS to stay compliant and audit-ready.
As the employees know the budget, they book hotels and transportation accordingly. This makes reimbursements faster and boosts employee morale.
An automated travel management software can help with seamlessly gaining all 5 benefits while also optimizing travel expenditure. Use the calculator below in order to calculate the present health of your T&E system.
To create an effective travel and expense policy, the HR and Finance managers of a company need to collaborate. Also, it is essential that you continually communicate about the policy to all employees and update them in case of any changes.
Although there is no one-size-fits-all approach to policy creation, here are the three fundamental sections that should be a part of your policy.
The first section of your policy should lay down the objectives of the policy and its benefits for employees. It should clarify who the policy is for and the goals you want to achieve by revising or formulating it.
The second section of the policy should be to explain the entire expense reporting and reimbursement process i.e., the workflow for pre-authorization, expense report creation, submission, finance approval, and reimbursement.
Your policy needs to tell all the employees clearly:
If you have outsourced your company’s travel management, provide a link to your company’s expense management platform. You can also share the contact number and email address of the travel management solution provider’s points of contact.
It’s necessary for employees to know if they require pre-authorization before making any business expense, travel-related or otherwise. If employees need permission to spend, make sure to include the approval workflow in the policy document.
Do you provide company credit cards for business transactions, or would you reimburse on a per diem basis? The employees should know about the official mode of payment for business transactions.
You need to tell all the employees the documentation they must present for reimbursement. This can be as per internal guidelines or a government mandate.
Employees must be aware of the deadline to file the expenses every month. Otherwise, it will cause the financial team a lot of inconvenience with the employees chasing them for reimbursement at any time.
It should be clearly mentioned how approvals will take place. The expense claims can be accepted or rejected based on the defined budget. Also, there should be a proper workflow for approving authorities to approve or reject an expense report.
Expense audits are necessary to identify errors and frauds. Hence, you must lay down expense audit framework in the policy. The framework should clearly indicate the procedure finance team must follow to ensure all approved reports are fine.
You should clearly mention the timelines when the employees will get their claims. For instance, it can be 15 days after filing an expense report and receiving approval.
The third section of your policy should include all the expense categories that will be considered for reimbursement. Some common considerations can be:
The employees should know about the different methods of transportation available to them – plane, train, rental car, etc.
Is business-class allowed for all employees? Will they be reimbursed for extra luggage? In case they are using their personal vehicles, how will they report their mileage, and what’s the limit? Will you also reimburse the paring fee?
What is the standard acceptable rate for a hotel room? Can they get Airbnb or studio apartment options? You can also mention accommodation rates as per geographies and employee level.
Will you reimburse employees on a per diem or per meal basis? Or will they get a company credit card? What is the limit? Is room service also included in it? Will you reimburse for client dinners?
Is your company providing medical insurance for employees, especially when they are traveling abroad? Also, are you providing travel insurance? Who can the employees reach out to know about it?
Will the company reimburse employees for international calling charges? If the company will reimburse international calls and texts, then what is the maximum amount?
What if an employee is charged with a parking fine? If an employee’s mobile phone is broken or lost, will the company pay for the damage? You must include guidelines regarding the reimbursement of such miscellaneous expenses.
Moreover, you can also provide a list of miscellaneous expenses that won’t be considered for reimbursement, such as alcoholic beverages, personal leisure, childcare, and personal grooming.
To help you create a comprehensive travel and expense policy, we have created a customizable template. It contains all the essential policy elements like objective, reporting and reimbursement process, reimbursable and non-reimbursable expenses, and policy exceptions.
You can use this template as it is or use it as a T&E policy example to create a new policy for your company. To download your free copy, click on the button below.
Creating a travel and expense policy for your company is only half the work done. For your policy to be effective, powerful implementation is the key. Hence, for better implementation, you should automate travel and expense management with a software solution like ITILITE .
ITILITE is a travel and expense management platform that offers granular expense policy configurations. With such as configurations, you can define spending limits for every travel expense category according to various employee levels. Once, you have set up the limits, the software will ensure no out-of-policy expenses get filed. Moreover, the system will auto-audit duplicate expenses and weekend spendings.
If you want to experience seamless policy implementation through the advanced features of ITILITE, get a free demo now.
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