A Guide To Travel And Expense Policy For Modern Businesses – Part 2

What complications will a business have without a T&E policy?

A well-crafted travel and expense policy addresses some of the major concerns a business could be having related to its travel expenses. Overlooking could lead to policy violation, fraudulent claims, unaddressed queries, out-of-policy spending, and more. Let’s understand the different types of challenges faced with undefined & unclear travel and expense policies.

Challenges faced by employers:

  • Spending heavily month on month on various business expenses due to unsupervised budget.
  • Employees ending up spending more and irresponsibly during business trips.
  • Rise in unreported fraudulent claims and duplicate invoices.
  • No spending discipline among employees. With each having their way.

Challenges faced by approvers/verifiers:

  • With no deadlines marked for approvals, the reimbursement process gets delayed.
  • Approvers accepting fraudulent claims as there are no guidelines for them to identify which is in-policy and which is not.
  • Where manual checks are involved, the approval cycle is usually long and more prone to errors.

Challenges faced by finance teams:

  • Numerous auditing and accounting issues due to non-compliant expense management at employee level
  • Incorrect expense data leading to wrong interpretation of expense trends and patterns.

Challenges faced by employees:

  • Unintentional policy violations and out-of-policy expenses for which they might be held responsible
  • Unclear about various expenses leading to confusion while spending
  • Repercussions of delayed approval impacting employee morale
  • Unsure of whether expenses will be reimbursed, they will not risk spending from their pocket and avoid business trips in the future.

Objectives of a travel expense policy

By now it is clear why an organization needs to have a travel and expense policy. While a well-defined T&E has a great role in streamlining expense reporting by reducing the many risk factors involved in it, equally important is to clearly articulate the objective behind it. It should be clear to both the management and the employees the key purpose of the T&E policy.

Defining the expense reimbursement process

A T&E policy should define the expense reimbursement to its employees and outline the three categories in the process

  • How an employee must report expense
  • Explain in detail what type of expenses can be reported
  • How an employee must be reimbursed for expenses

Imposing rules for employees to limit and record travel spending

A travel and expense policy imposes rules and conditions to manage and control expense reporting. It should define the spending bracket according to designation of an employee, the nature of job, and other variables.

For every category, the policy should have distinct ways to track expenses. These ways should be elaborated to limit expenses as much as possible.

Setting limits on business expenses using a travel and expense policy

A travel and expense policy should state how and when employees must make a booking and what class of flight is applicable for reimbursement. For hotels, it should state the kind of hotels that are allowed for accommodation or if the company is tied up with a particular hotel chain for a location, the policy should mention it.

 For transport, it should affirm the mileage rate as per the location and type of vehicle.

Rules for corporate cards provided to employees should define the boundaries between personal and business expenses. For per diems, the amount provided should be specified for the location along with criteria. 

Stating the duties and responsibilities concerning business travel expenses

A T&E policy should state the responsibilities behind business travel and what role an employee or the manager is expected to exercise while spending and reporting expenses related to it. It should specify the action required from them before, during, and after a business trip, and the budget limit to complete the whole task.

Describing the process of expense reporting, approval, and reimbursement

A travel and expense policy should outline the procedure for reporting an expense, the specifications behind the submission for expense approval, and the process to avail reimbursement. It should also state the time frame to report expenses and the consequences in case of delays or misses.