Remember when you first started working and the idea of traveling for business sounded exotic and adventurous? Then you discovered that business travel means seeing too many hotels and convention centers and not leaving much time for exploring new cities. You also discovered the limitations of your employer’s travel and expense policies. For most business travelers, images of fine dining and staying in 5-star hotels are quickly replaced by the reality of keeping travel costs down to keep profitability up.
Travel and expense policies may take away some of the mystique of travel, but they benefit both employers and employees. Having a travel and expense policy protects employers from fraud and employee error. It also prevents conflict and confusion for employees, providing boundaries and clarity that helps them do their jobs better.
- Fraud prevention. If the policy is clearly outlined and monitored, fraud should be easy to detect and prevent.
- Conflict avoidance. Employees appreciate clearly stated rules and structure.
- Team unity. If different employees are expensing different items because there is no clear policy in place, some team members may feel that others take advantage of the company or are treated unfairly.
- Satisfy tax requirements. In order to deduct the employees travel expenses, a receipt with specific information must be submitted. A credit card statement is not sufficient support. A policy stating this stipulation lets employees know what documentation is required.
- Include a travel and expense policy as part of an employee handbook that is distributed and reviewed during the onboarding process.
- Reiterate the details of the policy when an employee is promoted to a position with different travel and expense provisions.
- To prevent fraud and errors, implement internal controls. Common fraudulent activities that cost employers a significant amount of money can be identified with simple internal controls.
- For example, expenses that do not make sense can be identified. An internal control system may notice if an employee submits travel expenses that include both train tickets and mileage for the same travel portion or expenses a client meal on a weekend that they were not working.
- Be specific. Vague policies leave too much room for interpretation and create conflict.
- Describe the types of expenses that qualify for reimbursement.
- Documentation and information required. Having receipts for all reimbursed expenses is the safest policy.
- Timeframe for submission, commonly within one month of incurring expense. This helps limit double-dipping as well. It also helps with record-keeping to accurately reflect costs associated with a particular job or project.
Expenses to Address
- General travel. All receipts must note the purpose of the business travel.
- How many are covered each day? Is there a per-day max for meals? Restaurant receipts must note name and location of restaurant, date, amount and number of people served.
- Materials and supplies. The purpose and use of the materials and supplies should be provided.
- Hotel receipts must categorize lodging, meals, phone calls and other expenses.
- Car rental and mileage. How should mileage be tracked?
- Are cell phone bills fully or partially reimbursed?
- Air travel. Statement or e-ticket must note passenger name, date and place of travel.
While business travel can quickly lose its allure, a good travel and expense policy will stand the test of time. By clearly communicating the policy, travelers and employers will be on the same page, avoiding tax issues, preventing conflict and reducing expensive fraudulent submissions and inadvertent errors. Contact us for help creating your travel/expense policy, developing an internal control system or reviewing your policy to identify opportunities for improvement.