Among an organization’s most prominent controllable costs, business travel expense is the second largest after salaries. It impacts the organization’s bottom-line irrespective of the company’s size. While ‘travel and expense’ are unavoidable because of their relevance to revenue generation, each organization must create a strategy-driven T&E policy for optimum fund utilization. Corporate Travel & Expense (T&E) policy helps save costs and facilitates compliance by providing guidelines for all stakeholders. Scroll down to understand the highlights of the T&E policy and the need to create and implement it in the organization.
What is a Travel and Expense Policy?
A Travel and Expense policy, or T&E policy, is a set of guidelines, rules, and recommendations for employees, travel managers, and finance staff. It deals with travel booking, expense reporting, and reimbursement. The travel expenses cover all expenditures on business trips to complete business objectives.
Business travel expenses cover the cost of goods and services on business trips by employees. These may include air tickets, fuel costs, lodging expenses, food expenses, purchase of stationary, and cost of local transportation. Employees pay for purchasing goods and services during business trips and claim to the company for reimbursement. They must attach supportive documents and receipts for audit compliance while claiming.
Creating a corporate travel & expense policy is crucial for governing business travel and costs because there are so many types of travel expenses. A T&E policy lists allowable expenses for reimbursements. For example, an organization may not allow the purchase of liquor during business trips or set upper limits for the class of air travel and tariff for hotel accommodation at various employee levels.
A T&E policy example for business travelers in a small organization may include general guidelines like choosing the shortest and the cheapest mode of travel besides staying in economy hotels on a room-sharing basis. A T&E policy should also highlight rules and guidelines for the safety and well-being of employees. It recommends guidelines on practical aspects like using specific formats for expense claims, mode of expense reporting, and approval procedure.
An automated travel management platform allows expense reporting through an app by providing scanned copies of receipts. It simplifies expense reporting and speeds up approval and reimbursement. Online submission through an app boosts employee satisfaction as it minimizes the efforts and time for report submission, besides faster settlement of claims.
What to include in a travel and expense policy?
T&E policy can never be a one-size-fits-all for all companies, as each organization has different travel objectives. However, the following components are common in any organization’s corporate travel policy.
1. T&E policy objectives
Describe what the corporate travel & expense (T&E) policy aims to fulfill, including benefits to employees that enhance their safety and well-being. It will ensure the smooth adoption of the policy for its seamless compliance. Employees must adopt information about the booking platform to complete the travel booking process. The T&E Policy should include a link to the booking software besides the contact number of technical support or a responsible person in a travel agency in case of outsourced travel booking resources for travel management.
2. Pre-approval procedures
Ensure that the T&E policy explains the pre-approval procedure to plan business trips or incur a particular travel expense. Include the travel expense approval procedure in the workflow approvals. Choosing travel management software will help travel managers configure workflow approvals to eliminate policy violations.
3. Payment methods and proofs
A T&E Policy should provide details of acceptable modes of payment, such as per-diem, corporate cards, prepaid cards, and so forth. The policy should explain the type of payment proofs employees must present and payment claims for auditory compliance.
Employees must know the timelines for expense report submission after returning from a particular business trip. The policy should also define the timeframe for expense reimbursement by accounts after the line managers approve the expense claims. It will help avoid delays in claim settlement.
Employees must get a clear idea about various approval processes through a T&E Policy. These include the scenarios when their claims may cause rejections. It will help them avoid making wrong claims or purchasing unauthorized goods and services during business trips. Include the specific approval workflows to inform employees about the standard approvals necessary for claim settlement.
6. Allowable expenses
Provide an exhaustive list of reimbursable and non-reimbursable expenses on the T&E Policy. The expenses for accommodation, transportation, mobile charges, food and drink, health insurance, and incidentals should include in the reimbursable and non-reimbursable list.
Why should businesses make a travel expense policy?
A comprehensive T&E Policy reduces instances of claim rejections because of better compliance and knowledge of rules. It provides a set of rules with limits on different expenses, reducing ambiguities. Effective communication and execution of travel and expense policy mitigate expense fraud as the accounts team knows how to validate expense claims. SaaS-based travel management platforms reduce the probability of expense duplication and non-compliance with booking guidelines.
Employees incur myriad expenses during business trips. They may not be aware of reimbursable expenses causing avoidable rejections of expense claims. A T&E Policy sets transparent guidelines to know the reimbursable expenses. It also makes employees aware of the consequences of expense fraud. A corporate travel & expense (T&E) policy has a crucial role in streamlining travel and expense management of the company to optimize costs, improve compliance, and enhance the travel experience. Using an online travel and expense management software boosts the effectiveness of T&E policy and facilitates its smooth adoption across stakeholders. Further, some travel management platforms like Paxes can also be integrated in the expense management software for better effectivity.
Travel And Expense Policy FAQs
How can employees contribute to compliance with the T&E policy of the company?
Besides understanding the T&E policy guidelines, employees must use fair judgment to know the legitimacy of expenses before purchasing goods and services during business travel.
What is the aim of corporate travel & expense (T&E) policy?
A T&E Policy clears the confusion about reimbursable and non-reimbursable expenses by providing information about expense categories to include in the expense claim. It aims to control and govern business travel costs by ensuring compliance.
What are the disadvantages of not having a corporate travel & expense (T&E) policy?
The most noteworthy disadvantage of not having a clear T&E Policy is the increase in non-reimbursable purchases. It will lead to frequent rejections of expense claims. Employees will lose interest in business travel because of expense rejections.
What does a standard expense report comprise?
A typical expense report format contains the employee name, the period of a business trip, the purpose of the business trip, and the department, besides details of travel expenses each day.
Who approves an expense report?
An immediate supervisor or line manager approves an employee business travel expense report. They must provide reasons if there is a rejection of a particular expense claim.