Your Complete Guide to Reporting Travel Expenses
tl;dr: Travel expense reports carry a bad rap, but by leveraging the right expense management tools the reports can become a painless and valuable resource for your company’s budget planning.
If you are a frequent corporate traveler, or manage employees who frequently travel, you know the looming dread of a travel expense report awaiting you that first Monday back in the office.
They're tedious, time consuming, and often result in the frustrating realization that you, or your employees, went over budget. Again. And if they're submitted incorrectly, you're back at square one.
How to Prepare a Travel Expense Report
What do you or your employees need to know before preparing a travel expense report? The most important first step is to review your company’s Travel and Expense Policy before preparing an expense report. This policy should explicitly outline which business expenses are reimbursable and which expenses need to be paid for out-of-pocket. These guidelines are mostly driven by the IRS, but your company can also have some say in what you’re willing to cover for traveling employees.
It is also important that everyone in the company is in tune with how the organization handles expense reporting. Do you use a software or online expense management tool? Or do you need to get a paper copy of the expense report statement? Either way, the report template should be entirely read over before it gets filled out.
Receipts are another important aspect of expense reporting. Employees should be tracking their spending throughout the trip, so collecting receipts and adding up total spend at the end shouldn’t be (too) tedious. The receipts should then be itemized and arranged by expense categories, like business meals, travel, lodging, entertainment, etc. Then the receipts in each of these categories should be arranged by date. It is extremely important to be diligent and detail-oriented when reporting expenses because, well, money doesn’t grow on trees.
On a similar note, make sure any personal out-of-pocket expenses are subtracted from the total amount spent while traveling. There’s usually no need for the company to pay for employees’ extra drink (or two) at happy hour. Once you've triple checked everything on the report, it is ready to submit.
Elements of a travel expense report
Now that you have a general idea of how to prepare a travel expense report, let’s take a look at the specific breakdown of a report.
The elements of your company’s travel expense report will be unique to your corporate travel needs and policy. But, there are a few key pieces of information that should always be included in order to maintain organized expense tracking.
These essential categories include:
- Date of expense
Which day was the expense incurred?
- Nature of expense
The company’s travel and expense policy should already indicate which expenses are reimbursable and which aren’t. Make sure that filed expenses are organized under a category that is eligible for reimbursement.
- Amount of individual expense
In each report, it is likely that there will be a variety of expenses for daily meals, transportation, and any extra fees encountered along the way. Make sure the total of each individual expense is indicated and matches the amount on the relevant receipt.
- The specific account the expense should be charged to
Which department is responsible for employee flights and hotels? This may be a different department than is responsible for covering the marketing materials or paying for client travel and entertainment.
- Subtotal for each type of expense
Each expense category — like meals, lodging, transportation, and entertainment — will have their own subtotal. This number is especially important for budget tracking.
- Advances given before the trip
If there was a cash advance granted before the trip, subtract it out so that the grand total reflects only expenses that haven’t been taken care of yet.
- Grand total amount for reimbursement
Double check that the math adds up.
Your company’s expense report may also include a specified timeframe for expenses to be reported. If that is the case, make sure reports get done sooner rather than later so that finance doesn’t get bogged down toward the end of the month. Your company might also have a specific timeframe for how soon employees will be reimbursed after the expense is reported. This will likely influence how quickly employees file expense reports, especially if they are hoping for reimbursement before their next credit card payment is due. Lastly, the report might include a summary of your company’s T&E policy to see if employees stayed within the allocated budget. Compare the spending on each report with the policy to see how it measures up.
Challenges of managing travel expense reports
Travel expense reports are crucial to staying on budget and making sure there is value behind your company’s spending habits. But, they can also be tedious, and are often less useful as a reactive response to an employee’s spending. What types of difficulties like these might arise while managing travel expense reports?
- Paper receipts
Face it: we’re in the digital age, and we’re in deep. With new kinds of electronic payment methods constantly coming out, the days of paper trails are long gone. But, without receipts, how is your company meant to keep employees accountable and maintain accurate spend tracking? Luckily there are now online expense management tools that offer streamline expensing, no receipt search parties necessary.
- Lack of visibility
One of the biggest challenges companies face with expense reports is a lack of real-time visibility while employees are booking travel and on the road. If you’re still dealing with an analog expense reporting system, there is no way for you to see if an employee is overspending until it is too late. This leads to lots of reactive budget shifting rather than proactively implementing, and managing, a spending policy. A consistent travel policy encourages employees to stay within budget because they are familiar with what to spend and where. However, a flexible approval process is also important in order to reduce last minute (and expensive!) bookings.
Yeah, these expense report issues are no joke. Luckily, there’s a way around them.
Using a corporate travel management software that integrates with an online expense tool, like Lola.com and Expensify, all of your employees’ travel receipts will be automatically sent to the expense tool for easy tracking and reporting. This type of software also allows you to monitor your traveling employees’ spending in real time so you can be proactive and enforce your T&E policy rather than having to scramble after the fact to make up for going over budget.
Travel expense reports carry a bad rap, but by leveraging the right expense management tools the reports can become a painless and valuable resource for your company’s budget planning.