A Comprehensive Guide to Travel and Expense PoliciesBy Rebecca Morrison
Everything you need to know to create a T&E policy that your business travelers will adhere to.
Traveling has been an integral part of conducting business since the beginning of commerce. Although business travelers have since traded horses for airplanes, they still encounter logistical challenges. Fortunately, these challenges can be ameliorated with comprehensive travel and expense policies. Companies create these guidelines to help their travelers get where they need to go while staying on budget.
You’re likely reading this because you either want to build a travel and expense (T&E) policy from the ground up, or you want to adjust your current policy to better suit your company’s needs. You’ve come to the right place, because our guide to travel and expense policies will equip you with the information and tools to tackle either of those projects.
What are travel and expense policies?
Travel and expense policies are a set of rules created by companies to prescribe how employees can book corporate travel and spend money on work-related expenses.
Companies create T&E guidelines as part of their corporate travel policy to make employee spending more predictable. Finance teams have an easier time controlling company spending when there are restrictions in place that determine how much employees can spend on travel time expenses.
So how does a travel and expense policy work? First, key stakeholders such as finance and HR executives or a dedicated corporate travel manager get together to create the company’s T&E policies. Then, the guidelines are rolled out company-wide.
Employees then follow these policies as they book and conduct travel, or make purchases on behalf of the company for work-related expenses. In a nutshell, travel and expense policies tell employees how much they can spend on business purchases, how to keep track of travel expenses incurred, and how to create expense reports to get reimbursed for out-of-pocket expenses. Typically, business travelers need to keep receipts as proof of purchase in order to receive reimbursements.
Budget holders and finance teams are responsible for enforcing policy adherence. Tools like corporate travel booking tools and virtual credit cards simplify T&E policy enforcement. Some companies also offer their employees a condensed one-page travel policy that summarizes key policies, which can be easier to reference than searching through a 15-page document.
Comprehensive T&E policies help companies stay on budget.
Benefits of enforcing travel and expense policies
Creating a thorough travel and expense policy is only half the battle. Making sure that travelers obey it can be a challenge. Enforcing your company’s travel and expense policy is important for several reasons.
First, policy non-adherence can lead to overspending. When overspending happens, your company has to either dip into savings to expand the operational budget, or skip important business trips that were originally budgeted for.
Second, when employees don’t adhere to the T&E policy, you may decide to make the out-of-policy purchases with their own funds. However, this practice can lead to tension in the workplace, especially if the employee unintentionally disobeyed the policy out of confusion.
So how can your company enforce its travel and expense policy, and who should be responsible for policing? Travelers are the first line of defense and should be self-enforcing the policy. However, a complicated policy filled with jargon can easily lead to confusion and policy non-adherence. Usually it’s a company’s finance team who are left to reverse the damage.
Holding policy breakers accountable by making them pay for wrongfully incurred employee expenses is just one way to enforce your T&E policy. Technology can also help with corporate travel policy enforcement. When your company uses a travel booking tool that’s made for business travelers, it can program its T&E policies and restrictions into the software. This tool highlights in-policy purchases, which eliminates confusion as a defense against over spending.
An expensing tool can also simplify policy enforcement. Look for a solution that lets employees upload virtual receipts while on the go. Expensing tools with apps help speed up the reimbursement process by letting travelers send the accounts payable team expense reports as soon as they finish their trips, rather than waiting to do it when they’re back in the office. On-the-go expense tracking helps travelers get reimbursed for out-of-pocket expenses faster and gives finance teams more visibility into spending.
Components of a travel and expense policy
In order to create a T&E policy that meets your company’s needs, you should engage an internal or external corporate travel manager or business consultant to evaluate some preliminary questions before you dive in deeper. They should investigate things like:
- How many people in your company travel?
- How often do they travel?
- What is the average cost of a business trip?
- What’s the ROI on business travel?
If you have an existing corporate travel policy, ask yourself the following questions. If you answer “no” to any of them, then it may be time to conduct a travel policy review.
- Does the currently policy do its job?
- Does it keep spending under control?
- Does it simplify travel logistics and reporting for travelers?
What kind of policy topics should your T&E guidelines cover? Here’s a comprehensive list of business travel expenses to include in your policy:
- Accommodations - Create spending limits for popular destinations.
- Transportation - Set preferences and spending caps for ground and air travel.
- Mileage and parking - When employees drive personal cars for work, how should they track their mileage? What are the reimbursement limits for parking?
- Corporate credit card policies - Set guidelines that determine who can use a company card and for what.
- Meal allowance - The GSA’s guide to meals and incidental expenses is a good starting point from which to base your company’s per diem spending rates.
- Reimbursement policies - Explain how employees can get reimbursed for out-of-pocket expenses while traveling. How do they keep track of receipts?
Fine tune these components to meet your company’s unique business travel needs.
How to develop comprehensive travel and expense policies
After you’ve explored preliminary questions about your current or impending travel and expense policy, you must conduct a deeper analysis of your needs. This research should include questions about:
- Users - Who will be using this corporate travel policy? Junior team members, the C-Suite, or both? Will you need separate policies for different departments and levels of seniority? If not, how can you write a set of policies that applies to and is understood by all employees?
- Budget - What is your companys’ budget for T&E? Who makes this determination? Will you set your own per diems and mileage rates or adhere to the GSA’s guidelines?
- Expensing - How will employees be reimbursed for out-of-pocket expenses? Will you accept reimbursement requests or set up nonaccountable plans for your business travelers? Who will have access to the corporate credit card? How can business travelers keep track of
- Access - How will the policy be distributed company-wide? How will you make it accessible to travelers on the go?
Create a T&E policy in four steps
After you’ve conducted the above research, follow these steps to put your findings to use and create a comprehensive travel and expense policy:
- Look at examples of other T&E policies to get a sense for the format and level of detail you should include in your company’s policies.
- Use an online tool to serve as a template for your T&E policy.
- Ask for feedback. After you’ve created your T&E policy, share it with employees from different departments and ask them to point out any language that is confusing or vague.
- After you’ve received employee feedback about the policy, incorporate it into the final draft.
Commonalities between effective T&E policies
While no two corporate travel policies are the same, because every company has unique travel needs, there are some elements that all effective travel and expense policies have in common. In order for a corporate travel policy to be effective, it must be accessible and easy to understand.
When you make your company’s policy easy to find, you minimize the risk of policy disobedience. Make the policy available via your corporate travel booking tool, on the cloud, on your intranet, and in hard copy in the HR office so that employees won’t have trouble accessing it.
T&E policies that are easy to understand leave less room for misinterpretation, which diminishes the risk of employees making expensive mistakes.
T&E policies for small businesses
The effects of mistakes are magnified when you work at or own a small business, which is why it’s immensely important for small business corporate travel policies to be clear. Here are a few effective travel and expense policy tips for small businesses:
- Flexibility - Allow your business travelers to book flexible fares rather than basic economy. Oftentimes business travel plans change. Travel change fees are typically $200, so your company can save money by getting a flexible fare that can be adjusted for free if needed. Bonus: if you use a corporate travel booking tool or travel agency, change fees can often be waived because of the relationships these companies have with travel vendors.
- Per diem guidelines - We recommend that small businesses follow the GSA’s per diem guidelines for meals and incidental expenses. These policies give you an idea of how accommodation and meal prices vary across the country so that you can give your employees a reasonable amount to spend.
- ROI - Teleconferencing into a meeting is much cheaper than traveling to a meeting. Create guidelines to help you decide when it’s worth it to travel for work, and when it’s not.
Revisit your company’s T&E policies as your business grows and changes.
No matter the size of your business or the frequency of your travel needs, Lola.com can help your business travelers get there on budget, and help your finance team reduce the time they spend on T&E bookkeeping afterwards.