Best practices for travel expense management
Business travel expense management is incredibly important to the success of a company. If you are working in this area then you are at the forefront of managing cash flow and overseeing one of the business’s largest overheads. Using this guide is here to help you eliminate some of the stress associated with expense management and help you to build a process that will undoubtedly impress.What exactly are business travel expenses?
A business travel expense is a cost incurred when traveling for business purposes. This can include the cost of products or services necessary for the trip and is usually associated with traveling away from home for days or weeks.Need to get better control of your business travel spend?
Learn the best ways to optimize your business travel budgetWhat business travel expenses can employees claim?
The key rule when claiming any expense is that it should be exclusively and necessarily incurred in the performance of your job as it relates to business objectives. What that means is that you (as opposed to your business) should not be personally gaining from claiming the expense.Here are some examples:- The actual costs of the travel (the flight, train ticket, hotel cost, etc)
- The subsistence expenditure (your food and drink consumed during the time you travel)
- Any other costs that came about because you made the journey such as entertainment.
What is not a legitimate travel expense
What you also need to consider though is what is not included in “Business travel expenses”. That list looks like this:- Commuting to and from your usual office
- Any travel taken for private reasons.
What about driving? Can I claim expenses if I hire a car, or use my own car to drive for business reasons.? Yes, absolutely. To find out exactly how much you can claim, check out our UK Mileage Allowance Guide.You are obliged to report travel expenses for tax purposes. However, some costs do not require reporting to HMRC. Cost such as an employee bus service or taxi services when ride-sharing isn't available are exempt from tax reporting.1. The company credit/spending card
Although there is no legal requirement to do so, having employees submit expense claims can cost time; you might want to consider a company spending card which, if nothing else, makes it much easier to keep track of the finances. There are a lot of companies that offer both expense tracking and company credit cards, such as Pleo - these will allow you to track and control expenses from one source.If you decide to opt for company spending cards, be sure you conduct some research before going directly to your current corporate bank. Pleo have a good guide on how to choose a company credit card.2. Pay with personal cards and submit expense claims
For many small to medium size businesses, this is the simpler option. Asking employees to pay business expenses from their personal account is pretty standard practice. Reimbursing expenses can be a time-consuming process for both Admin professionals and staff. Factors such as asking for tax receipts, only add complexity to the process. More details on the tax implications of claiming expenses can be found here. If this is the preferred method of your company, then it’s a good idea to use a software such as Expensify or Spendesk. These will help you digitize and track expenses.Be the best office manager ever by saving your company time and money on business travel
3. Communicate the expense policy
Many companies include their expense policy within their business travel policy, and nearly all have issues around compliance. No matter what payment option your company has selected, spending outside company rules leaves the business in awkward situations. If you have given someone a company credit card, and they spend out of policy, then the money has already gone. If the employee has bought something on their personal card and made an expenses claim outside policy the employer faces the unpleasant scenario of either paying the bill or leaving an employee out of pocket and disgruntled.The best way to avoid this is to make sure every employee knows the rules. Make sure you communicate the rules clearly and regularly, so they have no excuse but to follow them.Here are ways to achieve this:- Company-wide emails every quarter - Send an email with the policy every quarter, this may not be necessary if you are a small team.
- Talk about it at all-hands meetings - Your job is important and saves the company money, and people need to know the rules. At the next meeting ask to speak for a few minutes giving examples (not naming names) of good and bad expense claims
- Post it on your company intranet - Make sure it is a live document and easily accessible. Link it to a Google doc or whatever tool you use, this means updates don’t require you to ask employees to delete or disregard previous versions,
Wherever possible, automate expenses for them by using a tool like TravelPerk which eliminates employees having to report their flight and accommodation expenses.If you’re worried that someone in your company is deliberately not following the rules and is cheating your business out of money, make sure to read our Guide on how to recognize and eliminate expenses fraud.How to calculate and track business travel expenses like a pro
Given that the average company will spend around $950 per employee per year on domestic travel alone, it is likely that Admins and those working in expense management will be asked for reports and breakdowns of how the company is spending on travel. Here are some of the elements that will make your quarterly or yearly reporting much easier if you establish these elements now.1. Record everything and tag each expense
Sounds obvious, but if you are not using a software to do this for you, this spending time on organising every receipt, invoice and expense report will pay massive dividends when you come to analyze spend. Travel and expense reporting are extremely important as in many countries these costs are tax-deductible, meaning big savings for companies.The first thing to do is to make sure you are keeping a comprehensive record of all your business expenses on a regular basis. Doing this every day is best, but at the very least, you should aim to do it twice a week. Everything you spend must be tallied! Watch out for cash payments, these can easily be missed off your record, but they’re still a business expense, and they must not be forgotten. The best way to do this is to choose one of the many business accounting software on the market. You can see our recommendations on the major players here. It’s a good idea to tag expenses so you can easily pull meta information when needed. The more granular your records, the better, consider grouping and tagging travel expenses in multiple ways.- By trip type (existing client, sales, corporate event)
- By department
- By expense type
It’s a good idea to make sure that your recurring expenses are set up in your accounting system. If you know that you’re going to pay a vendor every month, set that entry to recur in future months. That will make sure you don’t miss it, and it’ll help you better plan for the future.Project your travel expenses
With all your expenses tallied and recorded, you can look at previous years spending and identify how much you’re likely to spend. This will help you see where you’re spending too much, or buy cheaper flights, hotels, etc in advance. Look at seasonality, recurring expenses, new employees coming in opening a new national office.Need more tips on managing business travel?
Read our tips and tricks on corporate travel managementHow to reduce travel expenses for small businesses
Whether you're an SMB or a large corporation there’s a lot of ways you can reduce your business travel expenses on business travel bookings, here are 6 that you can fix straightaway.1. Do you have to stay the night?
Most low-cost airlines and even train companies have early morning and late-night options. While these can mean a little less sleep, they can also be a good way to save money as they mean you don’t have to pay for a night in a hotel or Airbnb. If you use a tool with automated travel policies, you should consider making all trips with an overnight stay require approval.5. Get the Per Diem right
Do you provide your travelers with a daily allowance for meals and other incidental expenses? Make sure to adjust it on a city by city basis. There can be big fluctuations in prices even within the EU for example. Remember HMRC sets rates on meal allowance and what you can reclaim, so keep the per diem close to that so you pay less.
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