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If your employees are starting to travel more this year, make sure you have an effective travel and expense (or T&E) policy. A great travel and expense policy outlines how employee expenses for business-related travel are managed, such as airline tickets, hotel reservations, ground transportation, and meals. More importantly, by establishing clear guidelines upfront, you'll eliminate confusion, minimize errors, and promote responsible spending habits among your employees.
The primary goals of a T&E policy are to:
In this guide, Ramp will explore the basics of creating such a policy, outline essential components, and provide practical steps for writing a clear and effective travel and expense policy for your business.
An effective T&E policy should cover all aspects of business trip planning and expense management, including pricing, travel advances, and travel management. It should also address how personal expenses are handled, ensuring reimbursement requests are submitted with original receipts. To align with travel and expense policy best practices, the policy should be clear, comprehensive, and easily accessible to all employees, promoting adherence and simplifying the approval process.
Let's take a closer look at the key elements:
Expense categories
Clearly define the types of expenses that are and are not eligible for reimbursement, such as air travel, business meals, car rentals, entertainment expenses, professional development, and office supplies. Non-reimbursable expenses might specifically include personal leisure activities or upgrades beyond the allowed standard. By establishing these expense categories upfront, you can provide employees with clarity on reimbursable expenses and help them make more informed spending decisions.
Booking and approval process
A travel and expense policy should provide clear instructions on how employees are to make travel arrangements. This includes selecting preferred airlines, securing hotel accommodations, and arranging ground transportation. It should also outline the process for obtaining pre-approval for certain business expenses, such as when employees are required to use a designated travel agency or corporate booking tool.
Expense submission and reimbursement
Specifying the required documentation, timelines, and approval workflows for submitting and processing expense reports is essential. This includes detailing the types of receipts or supporting documents needed, the deadlines for submitting expense reports, and the approval process.
Credit card and corporate card usage
If you provide company credit cards or corporate cards, your policy should address the rules for using them. Specify the acceptable uses, requirements for timely expense reporting, and consequences for misuse. You should also outline the procedures for obtaining and maintaining these cards, as well as guidelines for reconciling statements.
Per diem rates and incidental expenses
Determine the daily allowance you'll provide employees for meals and minor expenses during business travel. This requires setting up per diem rates that may vary by location or role and defining the types of incidental expenses that are reimbursable, such as local transportation, tips, and internet access.
Insurance and liability
This section will typically outline what travel insurance coverage your company offers to employees, such as emergency medical, medical evacuation, lost baggage, and so on. It may require employees to purchase supplemental insurance when traveling to higher risk destinations. Specifics should be given on how to file claims, submit documentation, and report any covered incidents that occur during business travel.
Ground transportation
This part lays out policies and procedures related to rental car usage, such as mileage reimbursement rates and documentation needed if an employee opts to use their personal vehicle for business travel purposes. Typically, finance teams set daily or per-trip spending limits set for ground transportation costs to keep expenses reasonable. Many companies require employees to use preferred rental car vendors or take advantage of pre-negotiated corporate rates.
1. Set clear guidelines for travel bookings
The first step in creating a T&E policy is to establish guidelines for how employees should book their travel arrangements. This includes specifying the preferred vendors, such as airlines, hotels, and rental car companies, that employees should use, as well as any negotiated corporate rates.
You'll also want to outline the allowed class of service for various modes of transportation, whether that's economy, business class, or first class. Equally important are the procedures employees must follow when booking travel, such as using a corporate travel agency or an online booking tool. Setting these guidelines upfront helps manage travel costs, ensure consistency in employee experiences, and maintain visibility over business spending.
2. Outline expense submission and reimbursement procedures
Next, you'll need to define the process for employees to submit expense reports and receive reimbursement. This involves outlining the required documentation, such as receipts, invoices, and mileage logs, that employees must provide.
You'll also need to establish expense report submission deadlines, whether that's weekly, monthly, or another timeframe, as well as the approval workflow. This may include having the employee's manager review and approve the expense report, followed by a review from the finance department. Clarifying the reimbursement timeline and the acceptable payment methods, like direct deposit or corporate credit cards, will also streamline the expense reporting process and ensure timely reimbursement of employees.
3. Incorporate policy compliance and safety measures
Your T&E policy should also address compliance with relevant laws and regulations, as well as safety considerations for business travelers. This may include adhering to per diem rates and other IRS guidelines for deductible expenses, as well as policies around the use of company credit cards or travel expense reimbursements.
You'll also want to provide guidelines for booking accommodations and ground transportation to ensure the safety and security of your employees while traveling. Establishing procedures for reporting lost or stolen company property, such as laptops or mobile devices, is another important compliance and risk management consideration.
4. Adapt the policy for remote and hybrid work environments
As businesses continue to adapt to remote and hybrid work environments, it's important to ensure your T&E policy addresses the unique needs of a distributed workforce. This may include reimbursement guidelines for home office equipment, supplies, and internet/utility costs, as well as policies around virtual team building or client meetings, such as allowances for meal delivery or virtual event tickets. You'll also need to consider how your policy applies to employees working remotely from different states or countries, including potential tax implications and insurance coverage.
5. Use a template to create your travel and expense policy
Once you've confirmed the details for your policy, it's time to document it. Use an expense policy template as a starting point to ensure that no critical components like mileage rates, parking fees, or hotel reservations are overlooked. Customize sections in the template to fit your business purpose and company's travel needs.
6. Embed your travel and expense policy into your finance tools
Documenting your policy is just the first step. To prevent out-of-policy spending, you'll also want to use travel and expense management software to build guidelines into your company's booking processes and corporate cards. Look for tools that allow you to do the following:
7. Communicate your travel and expense policy
With your policy and tools in place, the final step is to communicate the policy to all employees. Consider hosting an in-person training session or creating a discussion forum for employee questions. Regularly review the policy to address changing business needs or regulatory requirements.
Effective business travel starts with your travel and expense policy. With the right guidelines and travel management tools, you'll help your company save time, stay in compliance, and keep costs in control.
This story was produced by Ramp and reviewed and distributed by Stacker Media.
