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The Complete Guide to Travel and Expense Management in 2024
Businessman points to holographic icon of business trip concept.
Efficiently managing travel expenses is critical to a company’s growth. Fortunately, there are many software solutions that can help you with this. These include Ramp, Zoho Expense, SAP Concur, Expensify, Emburse, TravelPerk, and Rydoo.
In this article, Ramp explains what travel and expense management is, how to design an effective T&E policy, important tax considerations, and how software can streamline this often difficult company process. I will.
What is Travel and Expense Management?
Travel and expense management, also known as T&E management, is a set of processes and policies that companies use to manage travel expenses. This feature is important for managing outflow cash flow, adhering to company expense policies, and maintaining financial visibility.
The travel expense management process involves setting clear guidelines and policies for employee travel and effectively enforcing them using tools such as employee credit cards and expense management solutions.
How to design a travel and expense management policy
There are six key steps to creating an effective travel and expense management policy.
Set travel booking guidelines: Identify the vendors (airlines, car rental companies, hotels, etc.) your employees should use to book travel. Draft Expense Submission and Reimbursement Procedures: Outline the expense reimbursement process for your employees to follow. Policy Compliance and Safety Details: Details the safety regulations and tax compliance that employees must follow when traveling on official business. Adapt your policies to remote and hybrid work: Assuming remote work is part of how your company operates, include guidelines specific to remote work. Use travel and expense policy templates: Use travel and expense policy templates to ensure you don’t miss any important parts of your policy. Implement and communicate your travel and expense policy: Share your travel and expense management policy company-wide and require new and existing employees to acknowledge that they have read it.
Tips for managing business travel expenses
1. Draft a travel policy
Creating a comprehensive travel policy is a fundamental step in managing travel expenses. The policy should clearly explain what is considered a reimbursable expense, set daily spending limits, and specify preferred vendors for flights, lodging, and rental cars. By following the six steps identified above, you will be able to create an effective T&E policy for your organization.
2. Communicate the policy
Once you create your travel policy, make sure your employees are aware of it. Share your company’s travel policy with all employees, whether they are likely to travel or not. Make your policies easily accessible and send reminders to review them before your trip. Make sure to read your T&E policy as part of your new employee onboarding process. A clear and thorough travel policy can help prevent confusion when it comes to refunds.
3. Record and categorize all your expenses
Establish a way for employees to track and categorize all travel-related expenses. This could include the use of corporate cards and expense management software that allows employees to upload receipts and track spending in real time. Categorizing your spending helps your team analyze spending patterns and identify areas for cost savings. It also streamlines approval processes and reimbursements, and keeps financial reporting accurate.
Tip: What is the purpose of a travel expense report?
The purpose of an expense report is to document and itemize expenses incurred during a business trip. This eases the refund process and helps businesses track and manage travel-related costs.
4. Calculating travel expenses
Once the trip is complete, calculate the total cost of the trip and divide the expenses into categories. This will give you valuable information to help you plan accurate budgets for future trips to similar destinations and events. You can also identify trips and employees that exceed average costs. Understand where your company is spending money on travel by reviewing expense categories such as travel, fuel, food, entertainment, and other expenses.
5. Predict future travel expenses
Having historical data from past trips can help you predict future travel costs. Forecasting future spending is important for budgeting and strategic corporate travel planning, and helps allocate resources more effectively. Also, understanding your company’s travel needs and spending means you can plan to negotiate corporate rates with providers such as airlines, hotels, and car rental companies.
What travel expenses are tax deductible?
Needless to say, taxes are important considerations to keep in mind when designing your company’s travel and expense management policies. The IRS allows you to deduct certain travel expenses, so make sure your employees understand that only these specific types of expenses will be reimbursed. It’s important to keep track of all receipts for these charges in case your company is audited.
Deductible business travel expenses include:
Travel Expenses: Travel expenses include airfare, tolls, taxes, and lodging. Please note that the travel destination must be away from the area in which your company normally operates and the length of travel must exceed one day. Meals: Up to 50% of meal costs during business trips will be deducted. Automobile Expenses: This category is most often associated with business use of a personal vehicle and can be deducted using either the standard mileage rate or the actual expense method. Office supplies: The cost of office supplies required for business travel is deductible. Education: Sending your employees on trips to take classes or attend certification seminars can result in multiple deductible expenses. Incidental Expenses: Incidental expenses such as laundry and dry cleaning costs, tips for hotel staff and valets, and equipment rentals are tax deductible.
Tip: What type of expense is travel?
Travel expenses are typically classified as operating expenses. This includes travel, lodging, meals, and other related expenses required to conduct business activities away from your primary place of employment.
Challenges of manual travel and expense management
Inefficient travel and expense management processes create several pain points for organizations, including:
Complexity: From airfare and accommodations to meals and transportation, managing corporate travel can be an overwhelming task. This complexity often leads to errors in manual data entry, which can result in inaccurate records and compliance issues. Lack of visibility: Organizations often struggle to gain real-time insight into where their travel and expense budgets are being spent. This lack of visibility into spend makes it difficult to identify cost reduction opportunities and optimize spend. Inconsistent enforcement: Without strong systems in place, it’s difficult to ensure employees follow company expense policies. This opens the door to potential tax compliance issues. Overspending: Without a way to consistently apply T&E policies, budget overruns, misallocation of funds, and even cases of expense fraud can occur. Administrative burden: Manually managing travel reservations, receipts, expense documents, and reimbursement processes increases the administrative burden on finance teams. Slow employee expense reimbursement: When your staff is stuck in manual T&E processes, reimbursement to your employees’ bank accounts will be slow. This can lead to frustration and low morale.
Travel expense management software solutions
Travel and expense management software simplifies the expense reporting process, automates approval workflows, and makes financial data organized and easy to review.
Travel and expense management systems can also provide valuable insight into your company’s spending patterns and notify you when transactions are outside of your company’s policies or when your spending in certain categories is higher than your benchmarks. .
This article was produced by Ramp and reviewed and distributed by Stacker Media.
