What is a Travel and Expense Policy and How to Improve It (Whitepaper Included)

With more companies running hybrid and remote environments, many employees are required to travel from all over the country (or world) for in-person meetings. Managing how travel-related expenses are handled and reimbursed is an important policy consideration.

However, developing a travel and expense policy that works is easier said than done.

What Is a Travel and Expense Policy?

A T&E policy is a corporate policy that governs employee spending during a business trip or when entertaining someone on behalf of the business. Naturally, many of the expenses incurred during such events are business expenses that the company should cover. However, since most companies don't want to write a blank check to employees, it is vital to have a policy governing how companies can spend money, what it can be spent on and how the costs will be covered or reimbursed.

For example, a T&E policy may require working with certain vendors for travel arrangements. It may establish a per diem that employees can use for meals and other minor expenses during business trips. The policy should also explain how employees can submit expenses for reimbursement.

One of the critical challenges of travel and expense reimbursement policies is that individual employees, including those that may not normally be involved with expenses, have a lot of control over how money is spent. Thus, it is crucial to establish a firm policy and optimize compliance to ensure that all expenses are appropriately covered and records are kept correctly.

The Benefits of Using a T&E Policy

All businesses that have even semi-regular employee travel should have a policy. The policy may be as simple as establishing a per diem and requiring proper record-keeping for some smaller businesses. However, even if your policy is only half a page long, it is worthwhile having. These are some of the benefits:

• Ensure Record Keeping: As a business, keeping good records of any expenses is essential. These are necessary both for budget auditing and planning and for tax season. A good policy helps clarify how and when records need to be captured.
• Avoid Frustration: Not knowing how travel and expenses are handed can be frustrating for travelers. For bookkeepers and managers, excess spending and lost receipts are frustrating. Getting everyone on the same page reduces stress across the board.
• Prevent Fraud: A good policy helps to reduce the risk of fraudulent or inappropriate spending/expense reporting by increasing visibility. It is easier to identify when something looks off in an expense report if you follow a consistent procedure.

Improve Productivity: Your company's business trips are intended to be productive events for your team. Your employees shouldn't be spending half the trip stressing over which expenses are likely to be reimbursed.

Travel and Expense Policy Best Practices

If you want to increase T&E policy compliance, you need to start with a solid policy. The following best practices will help:

1. Be Concise: A good policy should be easy to understand. Therefore, it is best to use short, concise, and instructive language. Avoid having too much wording to describe each policy provision, especially if the concept is simple. Remember, this is a document for internal rulemaking, not legalese.
2. Be Clear: By the same token, keeping the policy as straightforward as possible is good. Try to avoid having too many exceptions or variations of rules. Ideally, if someone wants to know how to handle the cost of a meal with a client, there should be a straightforward sentence or two explaining it. Breaking the policy up into easy-to-reference sections also helps.
3. Pick Your Battles: It is difficult to control every aspect of how employees incur expenses related to travel and entertainment. Sometimes it is better to offer some extra flexibility. Consider which battles matter and which ones you can let slide.
4. Establish Policy Ownership and Goals: A single person should own the policy. Additionally, the team creating the policy should have clear goals for its purpose. This will make the writing process more manageable.
5. Prioritize Adoption: Overall, you should optimize for compliance and adoption. If you have two competing options and one is more likely to be followed in the real world, pick that one.
   
   

Sample T&E Policy

A June 2015 report from the Aberdeen Group reported that companies with best-in-class Time & Expense software “require 43% less time to fill out an expense report” and automated expense reports speed up approval time by 265% (from 9.3 days to 3.5 days)1. This marked improvement demonstrates the value of automation.

However, those statistics also show that while the manual workload is reduced for end-users and approvers, the workload is not necessarily reduced for the finance groups and auditors, who also have an essential role to play in the expense report process. There’s not much talk of tools for those in accounts payable, managers, and auditors looking to uncover fraud and ensure compliance with company policy.

Be sure to get more details in our free white paper, designed to serve as a resource for those trying to navigate complex expense reporting and auditing problems. You will learn more about best practices for how to establish an expense reporting process, specific information on how to deal with particular expense types, policy recommendations, and how the latest in audit innovations solves some of the problems inherent in expense reporting.

Download whitepaper here: https://www.data-basics.com/content-library/how-to-navigate-complex-expense-reporting-and-auditing-problems-white-paper/

5 Ways To Increase T&E Policy Compliance Rates

No T&E policy is worth its salt if people don't follow it. The following are five tips that will help you increase your compliance rate.

• Automate as Much as Possible

Simplicity for your team members should be a top priority. One of the best ways to achieve this is to automate a lot of the process. For example, if you have an app that captures expense reports, that is simpler than having to email forms to the expense team.

• Simplify Reporting

As much as possible, make reporting expenses easy. If it can be done with a few taps on the phone, people will be much more likely to report their expenses than if they need to fill out multi-page forms when they get back to their hotel rooms.

• Consider Enforcing a Booking Procedure

In some cases, it is better to limit options. Giving employees a singular process for booking travel arrangements that are directly paid for using a company card is much easier than having a policy governing reimbursement of travel costs.

• Communicate Consistently

Make sure to communicate about the policy and the importance of compliance often. If people can easily find information on the policy, they will be more likely to follow it.

• Have a Carrot and a Stick

Finally, it is a good idea to have some rewards and punishments. Consider offering a reward to employees that have consistent policy compliance. Conversely, you may want to limit the travel options for those with poor compliance.

Get More Done With Your Travel and Expense Policy

In conclusion, writing up an effective travel and expense policy is a tedious task that requires prior planning and evaluation. To learn more about creating the right policy for your company read our extensive whitepaper that gives a comprehensive rundown of the processes you need in place for successful policies.

Get your free copy here: https://www.data-basics.com/content-library/how-to-navigate-complex-expense-reporting-and-auditing-problems-white-paper/

It is easier to maximize T&E compliance when using effective expense tracking software. Check out DATABASICS to find a solution that is right for you.