Building a better travel and expense policy: step by step
Travel and expense management (or T&E) is the process of collecting all travel-related expenses in order to write them off (and not pay taxes on that amount). In most countries, business-related travel, including flights, hotels, and ground transportation is fully expensable.
This is great news. But you need to have your ducks (aka business travellers) in a row. A travel and expense policy provides a great framework for guiding employees and regulating how expenses are managed and processed. From setting budgets on flights and accommodation to standardising expense management processes, your travel & expense management policy should answer any (and all) questions about company travel, so you don’t have to.
Of course, the main purpose of a travel & expense management policy is to control spending. But a solid policy (with no room for ambiguity) will also help you deal with all the challenges often associated with travel and expense management.
What are the challenges of travel and expense management?
Ask any travel manager about the headaches associated with T&E and they’ll probably have a laundry list at the ready, including:
- Overspending. It’s easy for an employee to lose track of their spend – or for hidden expenses (think anything from Wi-Fi charges to mobile roaming, parking and taxis) to come back and bite – if expenses are not under constant supervision.
- Late or incomplete expense reports. Post-trip admin is probably the least popular aspect of any trip, especially if employees are struggling with outdated (clunky) or onerous (manual) processes, or unaware or unsure of your company’s guidelines.
- A rise in fraudulent expense claims. Unfortunately it happens, with travel managers dealing with duplicate, exaggerated and even misreported business expense claims.
- Lack of visibility. Without a fixed way of recording and storing expense data, you’re left with no insights into spending trends and patterns.
There’s an old saying (thanks Murphy!) that says if something can go wrong, then it probably will. And if you don’t have clear T&E guidelines in place things can easily go wrong, potentially fraudulent behaviour can’t be controlled or addressed, and travel spend can get out of control. Quickly.
At the end of the day, a dynamic approach to travel and expense management (supported by an expense management tool) can save time, save money, and transform your travel programme.
Travel & expense management is not one-size-fits-all
No two companies are the same, so naturally, not every company’s travel and expense policy is going to look the same. For example, some companies will need to reimburse incidentals, but that won’t really apply for others. Some provide per diem allowances while others only reimburse actual expenses. Some play fast and loose with company credit cards, while others limit corporate cards to the exec set. You get the picture.
The key to creating an effective travel & expense management policy is to first figure out your organisation’s specific needs from a control and spend perspective. And to figure out what you need, you’ll need to analyse your current expenses. Here are some key factors to consider:
- How much does an average business trip cost?
- What percentage of your employee’s travel?
- How often do they travel? To where?
- What is your return-on-investment (ROI)? This can be easy or difficult to measure depending on the nature of the trips.
(Pssst! All that data sound like a daunting task? Don’t worry – travel management software can make this process so much easier.)
Defining the scope of your travel & expense management policy
Once you get a handle on what you need, it’s time to set some guidelines.
Keep in mind: T&E policies are meant to manage and regulate the process for submitting an expense report. As you create it, here are a few expense categories to consider:
Transportation expenses can include airfare, train or bus tickets, car rentals, and taxi or ride-sharing services.
A comprehensive travel and expense policy should clearly state which modes of transportation are allowed and what limits are in place for each.
For example, team members may be allowed to rent a car for up to a certain cost per-day or only use a ride-sharing service for trips under a certain distance. Are your employees flying first or business class? The policy should clearly state which class of flight bookings will be applicable for reimbursements.
Whether you opt for hotels, guesthouses or B&Bs, your policy should state where your employees are allowed to stay and what the maximum per-night rate is – keeping in mind that a travel management company (TMC) will be able to offer specially-negotiated rates and exclusive deals.
If hotels aren’t being booked through your online booking tool (OBT) or dedicated travel consultant, make sure you drive travellers to your preferred booking solution. This way you can define capping amounts for hotel bookings and ensure you’re not overpaying for hotels or other accommodations.
3) Meals and Per Diems
When defining a corporate travel expense policy, remember not to overlook meals and incidentals.
The per diem – also known as a subsistence allowance – should cover these expenses, including meals, snacks, incidentals (such as laundry or tips), and even entertainment expenses. It should also provide guidance on what types of meals are covered and what limits are in place.
For example, employees may be allowed to expense a certain amount for lunch and dinner, but not breakfast or alcoholic beverages. Most importantly, set clear boundaries not to mingle personal and business expenses. So even though your policy does cover a few drinks with clients during a sales pitch, team members shouldn’t use it as an excuse to turn up at happy hour on the company dime.
4) Corporate Credit Card Expenses
These cards are typically issued to employees who frequently travel for business, allowing them to charge expenses directly to your company. Not every organisation implements company credit cards for travel, but if you’re one of the companies that do, you’ll need to lay some ground rules.
The expense policy should outline what types of expenses are allowed to be charged to the card (like airfare, hotel rooms, and meals), who can use one, and what limits are in place. Just as with per diems, discourage employees from using this card for non-business purposes by emphasising the consequences for violating policy.
Creating an effective travel & expense management policy
Every organisation requires rules and regulations to perform its day-to-day operations smoothly. Travel and expense management is no different. And trust us: you don’t want to get stuck scrambling for receipts when employees return from a training event or leave them in the dark while waiting for expense claims to be reimbursed (talk about a hit to employee morale).
A well-written and well-communicated travel and expense policy streamlines – and simplifies – the process. But the work doesn’t end after successfully writing your first draft. Like any operation, an efficient T&E policy is enforced and consistently refined.
Communicate your policy to your employees. And if they try to claim excess reimbursement? Stand by your policy. Afterall, it’s there for a reason. If your policy says it won’t pay for extra luggage fees, don’t pay them. If it sets a maximum mileage rate, don’t pay above that. The easier you make it to comply, the more your employees will guide themselves.
Phew – that was a lot. If the thought of building a business travel expense policy for your organisation from scratch has you running for the nearest exit, don’t fret. Our Travel Managers can assist you in developing travel policies (including T&E) and help you load them onto the YOUR.CT platform, ensuring they’re easily accessible to all! They’ll also help you set up dashboards and expense reports so you can monitor your spend and identify cost saving opportunities.
All you need to do is get in touch.