A Comprehensive Guide for Travel and Expense Policy (T&E Policy)

What is a Travel and Expense Policy?

If you want to reach your destination with the least number of hiccups, it’s best you follow the instructions laid out by Google Maps! A travel and expense policy does the same- provides a comprehensive guide to employees for business travel.

About 80% of employees admit to taking part in leisure activities when they travel for business purposes(bleisure-business and leisure). In fact, 74% of employees in a poll felt that their business travel budget must include money for extra-curricular leisure activities! 

What do you think about it? If you don’t already have a travel and expense policy in place, it is time to draft one that includes all aspects of business travel so your employees have a perfect guide as they travel for work.

Also, Read: A Guide to Corporate Travel Policy with Template

Why should Businesses make a Travel and Expense Policy?

Guidelines or boundaries are about providing a structure, and structure is essential in building anything that thrives- Henry Cloud

A travel and expense policy does the same; provides a structure for traveling employees in an organization.

You can organize information about travel budgets, travel advances and allowances, reimbursement claims, and other important details presented in a structured manner so it works like a guide. 

Here’s a quick look at how policies can help.

• Eliminates grey areas, policy violations, fraud, and other issues related to travel expense management.
• Improves travel policy compliance as employees follow guidelines to record and claim travel expenses. 
• A well-defined travel policy contributes to better control over travel budgets, mileage rates, travel allowances, caps on expenses, and per diem rates.
• Employee experience will improve as expense filing and reimbursements are streamlined.

Components of a Travel and Expense Policy

The goal is to ensure all categories have spending brackets based on the employee, their designation, travel purpose, and other variables. While the primary goal is to restrict the expenses within the existing limitations, it also helps track expenses.

The major types covered in any travel and expense policy are

1. Flight/train ticketing

This category must have everything that relates to booking tickets – train or airfare. You may mention the class of air travel that is allowed for employees, the sectors that employees may travel in, upper limits for airline tickets, and so on.

If employees cannot book, business class or first class tickets, then that must be mentioned too. If you have a travel agent, then their details must be published and made available.

2. Cabs or travel within the city

The car rentals category must have everything related to the usage of cab services. It would help if you put down rules for tracking mileage, location, distance traveled, etc.

3. Hotels and accommodations

Based on negotiations with vendors, your employees may be instructed to stay in a particular chain of hotels or those rated a certain number of stars. Also, make sure you mention the upper limit on the room fares and per diem for every category of employee in your company.

4. Corporate cards

It is common to see employees using a personal credit card for business expenses and claiming those later. However, these days, companies commonly issue corporate credit cards to employees (especially those who travel often) for business-related expenses.

Your rules must clearly state that employees must not mix personal and business expenses while using these corporate credit cards.

5. Advances, per diems

Any cash advances, per diems, or travel advances your company gives to the employees must be clearly stated along with any caveats attached. For instance, you may insist on limits for business meals and original receipts for the same.

6. Insurance or other medical expenses

Any medical and insurance coverage you may want to provide for the employees must be mentioned, along with information about the insurance company you may tie up with.

Also Read: A Guide to Corporate Travel Management

Automation in Travel and Expense Policy

The above figure is a simple depiction of the complexity of the travel and expense process.  Without a structure or a travel and expense policy, business travel can become quite an operational nightmare!

Automating the important parts of the travel and expense process can ensure that traveling employees adhere to the travel and expense policy. Automatically, you will eliminate non-compliant and fraudulent claims and streamline your workflows. 

Among others, here are some parts of the travel and expense process that can be automated:

1. Travel booking
2. Expense report creation
3. Expense approval
4. Expense reporting
5. Accounting
6. Expense Reimbursement
7. Analytics

Quick Read: The Transformation of Travel and Expense (T&E) Automation

The need for a Travel and Expense Policy

T&E expense policies are critical in helping streamline and structure business workflows. 

A simple yet well-defined expense policy will expressly state travel allowances, the process of expense reimbursement, entertainment expenses, expense approval processes, corporate credit card usage, etc.

Defined rules can save costs, prevent personal expense claims, eliminate fraud and help to ease workflows as your company grows. 

Further, a well-planned and structured policy strongly influences employees’ spending habits, productivity, and internal compliance with guidelines. With travel rules in place, employees travel stress-free, only claim actual expenses, and are assured of quick reimbursements. 

Further, an effective travel policy (comprehensive) works well to stem fraud while offering sharp and valuable insights to decision-makers. A complete and effective travel and expense policy is the perfect ally for growing organizations.

How does a T&E Policy benefit Enterprises?

1. It sets the bar high for employee experience

Employee experience is a huge responsibility for all companies. When employees travel for business reasons, a stress-free experience ensures that your employees are happy, ultimately contributing to a lower attrition rate.

In this regard, an authentic travel and expense policy will help to set employee expectations correctly. Your employees will know the proper travel expense amounts, the process of claims, and how they will receive the money spent on business travel.

2. You will be “audit-ready” at all times

Having a policy in place ensures that your regulatory and tax requirements and clearly defined. So, all your workflows may be designed around the same, ensuring you are always audit-ready.

3. Workflows are streamlined

In any company, numerous stakeholders and several employees support the objectives. Clear-cut policies, especially regarding travel and expenses, will allow everyone to work efficiently and effectively.

Well-designed travel expense policies will clearly state the roles and responsibilities of accounting and finance personnel, human resources, approvers, auditors, and employees.

4. Complete spend visibility

It is always best to rely on guidelines to ensure that your company has firm control over its bottom line. Additionally, demarcated rules regarding expenses can help control excessive spending.

Having policies in place also helps make critical business decisions regarding budgets, vendor spending and negotiations, and numerous other aspects that can significantly impact your business.

5. Firm control on fraud and cash leakages

If you have a well-defined travel and expense management policy, your company can have better control over fraud or cash leakages (due to duplicate claims or padded invoices/receipts).

As the organization grows, you may find it challenging to record, track, and settle business travel expense claims efficiently. While a clear-cut expense policy will take care of that for you, an automated expense management system will ensure savings in cost and time. 

Also Read: What is Business Travel Cost?

How to create an effective Travel and Expense Policy?

Remember the Google Maps reference at the beginning of the post? How do you think they come up with a map for you? First, they get down to the basics to understand what a traveler needs! 

Before you begin to create a comprehensive travel and expense policy, some groundwork must be done. You could follow a template, but it is best to design one from scratch. To begin with, follow these steps:

1. Understand your existing practices

You must begin by understanding your current (if you have one) processes. If you are starting afresh, it’s time to meet all the stakeholders to develop a comprehensive travel and expense policy.

2. Set goals

It is best to begin by defining the travel and expense policy goals. The plans may be to improve the employee business travel experience or the need to upgrade or automate the process. It helps to set the course toward achieving it.

3. Involve your stakeholders

It is essential to involve all the stakeholders in this process. 

• CEO
• COO
• Travel Managers or travel desk
• Human Resources
• Finance or Accounting team

4. Incorporate your company’s culture

This is probably the primary step in this process as it involves creating a policy that suits your company’s culture. 

Do you want to consider writing a comprehensive and detailed policy? Would you prefer just giving broad outlines? 

5. Manage the process

There are a couple of ways that you can manage the process. Some may consider automated expense management software, and others may want to engage the services of a TMC or a travel agency. Among other services, they make travel arrangements and book travel for you. 

Either way, you must include regulations for all scenarios, including enforcing the rules mentioned in the travel and expense policy.

6. Draft the first copy

In this stage, it is essential to categorize and cover all aspects of the employee travel process. Once you finalize the categories, deep dive into each of those to ensure there is clarity. 

For instance, if you are setting limits on air travel, make sure you mention economy class with the upper limit on fares. Similarly, provide details of hotel rooms that your employees may book(executive suites or others).

The idea is to avoid ambiguity and cover all possible scenarios for employees in business travel.

7. Take feedback before you finalize

Once you have the first draft, you should bring in all stakeholders and take the necessary feedback. You can return to the drawing board based on the input or proceed to implementation.

Also, Read: 10 Best Travel Management Software

Formulating the Travel and Expense Policy

It is impossible to foresee and define every aspect of T&E. Hence it is good to treat T&E policy as a continuously evolving framework.

Make the T&E policy as comprehensive as possible, describing all conceivable scenarios.

Here are a few categories and examples to get you started on the process:

1. Transportation

Air Transportation

• Domestic travel
• International travel

Ground Transportation

• Cars
• Rental Cars
• Personal Vehicle
• Taxis
• Train, Bus

2. Lodging

• Domestic
• International

3. Others

• Meals
• Incidental expenses
• Cancellation Policy
• Reimbursement Policy
• Approval Process
• Do’s and Dont’s
• Disputes and Settlements

Also, Read: What is a Corporate Booking Tool?

What to include in a T&E Policy?

What you may include in your T&E policy is individual to the organization. However, there are a few common categories that almost every enterprise includes in the policy. 

For instance, list the types of reimbursable and non-reimbursable expenses. Miscellaneous expenses are often a grey area, hence it is better to list and include them.

Here are some common miscellaneous reimbursable and non-reimbursable expenses. It is not a complete list; you may choose to remove or add any items.

Miscellaneous Reimbursable Expenses

• Laundry and dry cleaning charges when travel is more than (x) number of consecutive nights.
• Internet connectivity in hotels, airplanes, and public places.
• ATM fees when withdrawing money on your card for foundation-related business expenses
• Mileage on personal cars and costs related to the operation of the vehicle, including service, maintenance, insurance, and depreciation, etc.
• Overweight baggage or additional costs if the overage is due to equipment required for business
• Business visa (or equivalent) or expenses associated with obtaining a business visa
• Voice over Internet Protocol (VoIP) related expenses, i.e., Skype minutes.
• Local SIM cards for use in foundation-issued mobile devices or cell phones.
• Electronic toll payment.

Non-Reimbursable Expenses

• Out-of-pocket expenses submitted more than (number of days. Eg: 60 days) after they were made
• Incurring expense for earning airline miles for personal use
• Health club services, e.g., massages, manicures, personal trainers
• Personal travel expenses, including sundries or recreational reading
• Movies (in-room and in-flight movies)
• Costs for personal guests
• Cost of business clothing
• Expenses incurred by spouses or partners of employees
• Personal gifts
• Gift cards in any amount for employees or non-employees
• Gifts to customers, vendors or participants
• Any contributions paid on behalf of customers
• Donations added to final hotel bills
• Tourist visa during the long transit

A couple more tips

• Create an FAQ section for exceptional situations. Eg: A meal with a client etc,
• Clearly and repeatedly educate your employees about the T&E policy
• Make T&E training mandatory for employees
• Educate the employees on the importance of T&E to exercise good judgment concerning business expenses and spend the company’s money judiciously as their own.
• Provide a platform and create a seamless process to make it easy for the employees to report expenses on time.
• Periodically review the T&E data to extract insight to save money.

To increase employee compliance, don’t limit your travel policy to just dos and don’ts. Instead, explain why these particular rules have been laid down and how they align with your organization’s objectives. 

How to proceed

1. Set a goal

A well-structured policy relies on this process’s clear picture of your goal. For instance, 

1. Do you have a dedicated travel desk that takes care of all the travel-related bookings? 
2. Do you have a specific agency that takes care of everything for you? 
3. Do you plan to shift to travel expense management software from your current manual processes?

2. Create a budget

A budget is highly critical as everything else depends on it. Knowing your business’s financial position (existing and projected), you can set limits on travel – international and domestic. 

Budgets may be stated and allocated based on several factors such as frequency of travel, departments, and so on. Allocations may also depend on the company’s growth in the foreseeable future.

3. Accountability

Your travel and expense policy must detail the process of claiming expenses and specify timelines. 

Make sure that your employees are aware that they must file their expenses within a specific time to ensure that their reimbursements are settled. Further, deadlines always ensure that time-bound processes are executed on time.

4. Zero in on details

It is essential to cover all aspects of travel expenses under the policy. It may seem cumbersome, but it is best to cover every minute detail. 

For instance, travel expense recording, reimbursement approval, and settlement must be described in detail so employees know exactly what to do and expect. You may want to consider the following:

• Define the expense tracking mechanism, so finance teams know what to look for in expense reports.
• List out the documentation that employees must file in their expense reports. You must consider setting out acceptable and unacceptable documents, so there is clarity.
• Set the turnaround time for employee reimbursements, and decide if employees will be paid by cheque, a direct transfer into their accounts, or any other means.

5. Detail and define the workflows

The more clarity you provide in your workflows, the easier it will be for your employees to make decisions on behalf of the business. 

For instance, when the employee takes a prospective client out for dinner during travel (it is assumed that this is in the company’s best interests), he should be able to claim it as a travel expense. Clarity about all possible events will help employees act in a manner that benefits your company.

Your travel and expense policy must cover all categories in this department and provide clarity on all issues.

Quick also: Expense Management Workflow

How to enforce your Travel and Expense Policy?

You may have put together a well-structured and detailed travel and expense management policy. 

However, it will be effective only when your employees use it efficiently and you do not discover any policy violations (at least not an alarming number).

So, how can you ensure that there are no violations?

a) Communication

One of the easiest ways to tackle the problem is to communicate the terms and rules of the policy with your employees. 

Make sure you use simple, easy-to-follow language and minimalistic yet precise forms for expense filing – the more straightforward the process, the greater the chances that people will stick to the rules. 

b) Consistency is key

There will always be exceptional cases where employees do not comply with the rules and claim excess amounts or duplicates. Here, it would help if you insisted on sticking with the conditions mentioned in the policies. 

By staying consistent, employees will understand and learn that the rules may not be bent to their convenience.

c) Consider going digital

A well-designed and customized travel and expense management software will save time and costs for your company and ease your workflows. 

Further, since your policies can be built into the system’s architecture, frauds, errors, and policy violations will become non-existent. Expense tracking software can help you track expenses while analyzing and accurately forecasting your budgets.  

Also, Read: A Guide to Business Travel Management

Challenges in a Travel and Expense Policy  

1. Policy violations

When employees are not well-informed or do not understand the policies there is a greater chance of out-of-policy claims. 

Unless you ensure that your employees understand the policies and their responsibility in this process, policy violations and out-of-policy claims will remain challenging. Designing a travel and expense policy is the first step in this process.

2. Your partner network

Your travel and expense policy‘s effectiveness depends on your network and partners in the travel industry. As partnerships increase, your chances of getting better deals on fares and accommodations will improve. 

So the challenge is not having the right connections so your employees can have a better travel experience. 

3. The efficiency of your processes

Manual processes can be time-consuming and tedious. It is stressful for employees as the expense report filing process becomes long-drawn. Finance teams must complete a lot of paperwork to ensure the claims are authentic and valid. 

CFOs lack a bird’s eye view of the expenses, making it impossible to forecast more precisely. Lack of automation is one of the many challenges with this process. 

4. Lack of visibility of expenses

With access to travel data, expenses, and other numbers, it is relatively easy to identify the areas that need control. However, with manual processes, it is hard to visualize the same, or you get access to data only after incurring expenses. 

Furthermore, the analysis is neither a 360-degree view nor available centrally. Finance teams must collate information and use individual tools to convert them into reports. 

5. Travel on short notice

For any business, expenses are always a matter of concern. When it comes to business travel, last-minute bookings or travel plans made in a rush tend to be more expensive than those planned ahead of time. 

With automated expense management software, you can lower the burden a bit as the apps can help unearth good deals on flight fares or accommodations. 

Also, Read: 4 Ways to Simplify Your Expense Approval System

What happens when you don’t have a T&E Policy?

Creating a travel and expense policy ensures that your employees have a reference when claiming travel expenses. Without a policy, employees and other stakeholders will face numerous challenges.

Here are some challenges of not having a travel and expense policy for your business. 

Employees

• Without a good guide, employees may spend too much or too little (fear of rejection of travel expenses reimbursement). The former will result in policy violations, and the latter will contribute to unsatisfactory employee experiences.

• There may be cases where employees don’t claim certain expenses simply because they are unclear about the policies. They may feel like the effort may not be worth it.

• The uncertainty over travel expense policies may be a reason for employees to dread/avoid business trips.

• Employee experience at work directly impacts their productivity. If expense report filing, claims processing, and reimbursement settling are long-drawn and painstakingly slow processes, this will adversely affect employee morale.

Finance Teams

• Without a proper structure, there will be ambiguity about deadlines, approval, and the reimbursement process. Furthermore, finance teams may erroneously approve fraudulent claims without understanding approved travel allowances, budgets, and costs.

• One of the most significant repercussions of not having clear-cut T&E policies is the problems your company will face with the accounting and audit process.

• Without an expressly stated travel policy, most verification and approvals happen manually. This is not only time-consuming but can become quite expensive for the company.

• Another challenge that finance teams will constantly face is the inability to analyze business travel numbers. Finance teams cannot present expense reports or predict future expenses without a sound recording or storing mechanism.

C-suite Employees

• The C-suite depends on expense visibility to strategize and make essential business decisions. However, if travel expenses are not supervised, the business decisions may not be accurate or adequate.

• Fraudulent, duplicate or exaggerated travel expense claims may result in a dramatic cost increase. 

How Happay can help your Company?

Happay’s T&E system is mature, scalable, and integrates completely with your system. Whether the goal is compliance, employee experience, agile processes, or cost control, our systems help you achieve it all.

How we can help to automate your travel and expense policy.

• Happay works as a T&E partner to set up established travel policies.
• A robust and customized infrastructure is built to suit your specific policies.
• Whether you have simple, linear workflows or deviational ones, we configure the workflows to suit your needs.
• Multiple offices or legal entities in multiple locations can be easily configured into the Happay system to give you and your finance team easy centralized access.

Conclusion

Make your business workflows streamlined and effective with the help of a comprehensive travel and expense policy. While the significant benefit is that employees enjoy business travel, you reap the real benefits as you eliminate fraudulent and non-compliant claims.

Travel and Expense Policy – FAQs