Everyone in the business world constantly talks about T&E. From T&E policies to T&E frauds, the word is often overused. However, the big question here is what does T&E actually mean? As a CFO or a finance head, you need to fully understand T&E and what it means to manage your organization’s finances efficiently.
Sadly, most finance leaders out there don’t know what T & E means. Even if they do know what the T&E stands for, they do not fully understand its importance in business.
Want to know what T&E is and how it can help save money and time for your organization? We’re breaking down all you need to know about T&E in this post. Read the entire blog now to learn more.
Read also – A Guide to Travel and Expense Management
What does T&E stand for?
There are not one but two answers to this question. For many firms, T&E is a travel & expense. On the other hand, some companies use the term for travel & entertainment expenses. There is no right or wrong answer to this question, and the definition changes from organization to organization.
So, in most companies, T&E is the daily costs incurred by employees while they are out on a business trip. These business expenses include travel costs, hotel charges, meals, and transportation.
Any expense incurred by the employee while traveling for business falls under the T&E expense category. And the employees need to be reimbursed fairly for all the legitimate expenses during the trip.
To educate employees on what they can spend money on and how much they can spend, most companies have a travel and expense policy in place. All expenses made by the employee must comply with the policy to be fully reimbursed.
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What types of expenses are included in T&E?
Based on your organisation, things that can be included in T&E expenses can change. Here are some of the most common expenses that can be included in a T&E report:
1. Travel and Transport
This is the most common expense incurred by the employee while he’s out for a business trip. All the cost borne by the employee to travel for business purposes is part of this expense.
This could include air tickets, train, bus fares, taxi costs, rental cars, fuel money, parking, toll charges, etc. The expenses incurred by the employee to reach the workplace are not part of this and should not be reimbursed.
Companies must reimburse employees for expenses incurred for meals while they are on a business trip. This could include money spent on client lunches too. There are certain food and beverages that companies don’t reimburse.
For example, most companies do not reimburse employees for alcohol as per the expense policy. Before filing the expense report, employees should check the expense policy of the firm.
Money spent by the employee on hotel or accommodation can be included in the travel and expense report. However, to control expenses, your company could set an accommodation policy for employees based on their designation. This way, you can control costs and curb unnecessary T&E spending.
4. Client Expenses
All the money spent on a client is included in T&E. These expenses could be money spent on food, drinks, and entertainment for clients.
Read also – Expense Categories
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The importance of travel and expenses (T&E)
After payroll/salaries, T&E is the second biggest expense in an organization. Also, if you’re not careful enough, your firm could be leaking a ton of money in travel and expenses. This is why as a CFO, you need to pay great attention to the T&E of your firm.
Firstly, you can use the T&E reports filed by the employees to track your employees’ expenses and ensure it’s within your budget. You can also use the t&e expense reports to find the categories where your employees are spending a lot and try reducing them.
Secondly, using the reports, you can track employees who regularly don’t comply with the T&E policy of the company and warn them. Also, you can find employees who submit fraudulent expense reports and punish them accordingly.
Finally, you can use the T&E reports to understand the trend of the current expenses and use it to forecast future expenses accurately.
Read also – What are Business Travel Expenses?
Why is it important to report T&E expenses?
In most countries, T&E expenses are tax-deductible. That’s why companies meticulously ask their employees to collect receipts, bills, invoices, and other proof of expenses while submitting their employee expense reports. The companies can then submit these proofs of expense and claim tax deductions.
Types of T&E reporting process
Companies use manual, automated, or a combination of these methods to report and track travel and expenses. Here’s a detailed breakdown of both manual and automated expense reports:
1. Manual T&E reporting process
As the name suggests, employees report expenses, and the companies track these expenses manually. In this method, the go-to tools are spreadsheets and expense reporting templates. After filling out the expense report templates, the employees must submit proof of expenses such as bills, receipts, invoices, etc.
2. Automated T&E reporting process
Firms use travel expense management software to report and track expenses in automated expense reporting. The expense reporting process in automated T&E software is pretty simple. Your employees need not fill out countless paperwork and save every receipt to file an expense report.
How to report T&E expenses using travel and expense management software?
Here are some steps employees can follow while reporting the T&E expenses:
- Store your bills, receipts, and other proofs of expenses
- Ensure you list each expense in the T&E system or the mobile app
- If the company uses a manual method, fill out the necessary paperwork.
- Attach the proofs of expenses along with the expense report
- Receive the reimbursement
This is how the expense management process works in most organizations. However, the process can differ based on the policies of your firm. Some companies want the employees to manually fill out expense reports and submit them along with paper receipts for T&E reimbursement.
On the other hand, in companies that use expense management software, employees just have to fill out the expenses on the system along with digital receipts and submit it for approval.
Benefits of automating your T&E expense reports
Automating your expense reporting process can do a world of good for your firm. The T&E automation process can help save you money, time, and effort. You don’t have to take our word for it. Here are the reasons why you should automate expense reports:
1. Save time, save money
You can save plenty of man-hours and employee effort by automating your expense reporting process. Your employees don’t have to spend the entire day filling out expense reports. Remember, time is money.
In manual expense reporting methods, the chances of error are high. The error could be committed by the employee filing the report, the manager approving the report, or by the finance team. However, in automated expense management reports, the chances of error are none!
3. Faster approval process
Employees don’t have to wait for days and months for their expense reports to be approved. The reporting managers and finance department can quickly approve the reports with a single click.
4. Higher compliance rates
Automated expense reporting can have a positive impact on compliance rates. In an automated expense reporting system, whenever employees submit reports that do not comply with your company policy, the system automatically flags expenses that violate your company’s T&E policy and notify the approver.
Why choose Happay for T&E management?
If you are looking for the best travel and expense management software, look no further than Happay. Here’s how Happay’s T&E software can streamline expense management in your organization:
- Automate end-to-end T&E operation in one single platform.
- Fully integrated with travel management companies, ERPs, and HRMS solutions, allowing you to push and pull relevant data efficiently.
- Fully automated approval workflow and faster T&E process
- Use OCR and capture business travel expenses automatically on the go
- Get real-time expense data and turn it into actionable insights
T&E – FAQs
1. What is T&E in the company?
T&E stands for travel and entertainment expenses in a company. T&E costs is the money spent by the employee on behalf of the company which the firm must pay back.
2. Why is T&E important?
In most cases, T&E expenses are tax-deductible. This means organizations can use the proof of the expense and claim tax deductions. That is why T&E management is important in many companies.
3. What is T&E policy?
T&E policy is a set of rules and guidelines that employees and companies must follow for employee expense reporting, processing, and expense reimbursement.
4. What is a T&E audit?
T&E audit is the process of reviewing employee expense reports for policy compliance. You can automate T&E audits by using expense management software like Happay.