With the steady rise of business travel worldwide, managing company-wide travel expenses has become a priority for many. Entertainment and travel expenses are the second-largest controllable costs that organizations have. Streamlining business travel expenses, reimbursement and guidelines can help businesses reduce their overall expenditure, therefore improving bottom lines.
Before we get into details about what business travel expenses are, let's set the context for the term “business travel” better. When employees travel out of office for work-related tasks, it is considered business travel. This could be a visit to a trade fair, a business meeting, a conference, a week-long trip to another office or to meet a client or a vendor among other things. In short, any out-of-office travel that is undertaken for business purposes can be called business travel.
When employees in your company spend on any travel activity related to business, it can be categorized as a business travel expense. This includes any amount spent on meals, transportation (including airfare, trains, car rentals, taxis or self-driven vehicles), and accommodation (in hotels, studio apartments or Airbnb) as permitted by the company's rules.
Apart from these, other incidental or miscellaneous expenses related to business travel can also be categorized as a business travel expense and reimbursed accordingly. Knowing what constitutes business travel expenses or company travel expenses can help you create a travel expense budget to follow and reduce your costs.
Any legitimate travel expense for business purposes explicitly outlined in your company's business travel policy can be claimed as a travel expense. The underlying aspect to keep in mind is that the expense should be business-related. It should benefit the business to increase revenue, customers, production quality or add to business productivity in some way.
Employees should be able to claim expenses related to transportation. This includes airfare, train tickets, bus tickets, cost of fuel for personal transport used for business purposes, and on-ground travel expenses on a business trip. Even among these expenses, it would be prudent to outline what class of transport is permissible. For instance, you may not allow employees below a specific designation to fly business class or book first-class train tickets. Taxis and cabs may only be allowed under special circumstances. Fuel expenses may be limited per kilometre traveled or on a daily basis.
While on a business trip, meal costs should be considered a reimbursable expense. Having a per diem budget for each meal per person can be a way to account for these expenses. You may also choose to cover meals for clients, vendors, or colleagues when an employee is on a business trip.
If an employee has to stay overnight at a location for business, then the hotel room or Airbnb cost can be considered a business travel expense. Depending on the location and the duration of stay, you may provide a per night accommodation allowance. You could also specify the kind of hotel or the type of room employees must take.
Certain incidental expenses may arise when an employee is on a business trip. This includes parking fees, WiFi charges, phone costs, laundry and dry cleaning services for extended stays, among other expenses. As long as they are part of the business travel and are justifiable, they can be categorized as travel expenses.
Health insurance and travel insurance for a business trip also constitute legitimate business travel expenses. It is the duty of companies to look after their employees. To ensure the safety of your employees, you should allow them to claim any medical expenses and insurance expenses that arise while on business travel.
Expenses unrelated to business, even while on a business trip, should not be considered a business travel expense and be eligible for travel expense reimbursements. Some examples of these are:
Any expense incurred for the personal entertainment of employees should not be considered for travel reimbursement. For instance, movie rentals in hotels, minibar expenses, cigarettes, spa or swimming pool charges, tickets to cultural shows or sports events, etc., will not come under the purview of business travel expenses.
If an employee goes on a personal meeting unrelated to business, the company should not bear the expenses. This includes transportation, meals, entertainment or any other expense that does not enhance the company's well-being.
Other miscellaneous expenses such as tipping hotel staff, excess baggage, concierge services, airport parking charges, etc., should also not be categorized as business expenses. You should outline these in your business travel policy to avoid confusion regarding what can be considered a business travel expense and what cannot.
Suppose an employee combines work with leisure, commonly called a bleisure trip. In that case, any expenses related to personal travel will not be eligible to be claimed as a business travel expense. The same rule applies if an employee decides to extend their stay at a destination they are visiting for business travel.
By tracking and keeping a record of business travel expenses and have a travel reimbursement policy, you can stay in control of your costs. Given that this is the 2nd highest controllable expense for a business, you can identify areas you tend to overspend on, control them accordingly and keep the overall financial health of your business is good shape.
One of the most important reasons to track business travel expenses is for tax purposes. The Inland Revenue Authority of Singapore allows companies to claim business travel expenses as a deduction while filing taxes. Keeping track of the amount spent on company travel expenses can help you reduce your tax liability. Moreover, you need to keep a trail of these expenses to prove to authorities that you have not mishandled funds in case there is an inquiry/audit.
Tracking your business travel expenses will help you verify if employees are adhering to business travel policy guidelines. It will help managers and top executives approve or decline travel requests and manage travel reimbursements. It can also nip any potential frauds in the bud.
When you track business travel expenses, you can get a better idea of where employees are spending money on a business trip. This can help you edit your policy and provide a more comprehensive and useful business policy to your employees. This will result in more satisfied and happier employees.
The key to controlling travel expenses related to business travel is to have a clear and robust business travel policy. Make your travel policy as detailed as possible, including points on how much employees can spend on transport, meals, accommodation, incidental expenses, etc. A clear policy can eliminate any confusion regarding business travel expenses and limit overspending. Here's a Corporate Travel Expense Policy template that you can download and begin your journey to creating a robust business travel system!
It isn't enough to have a good travel policy. Your employees should be aware that it exists. Distribute your business travel policy to all employees, regardless of whether you expect them to travel or not. Make it easy to access by integrating it into your employee portal. Send a reminder to employees who are scheduling a business trip to refresh their memory. Also, keep the policy simple to understand and highlight key aspects.
What if you could set up your expense management tool to send an email to the employee and their manager in case of out-of-policy bookings? A travel management tool can help you do that. You can do the same for bookings that are too close to the travel date. Ensuring these outliers require management approval will encourage your employees to stick to the policy and make advance bookings. You can use Aspire's approval flows to set up approval processes, notify managers of bookings and control out-of-policy spending.
Offering employees an incentive or a reward for sticking to the travel policy can encourage them to reduce spending. If an employee makes cost-effective or low-budget bookings, consider rewarding them with part of the savings or gifting them a voucher. This will boost employee morale and make them more likely to stick within the budget. You could also have strict repercussions for those who don't adhere to the policy guidelines.
A smart way to reduce travel expenses related to business trips is to partner with hotels, transportation services and insurance agents. You can then avail discounted corporate rates for frequent bookings. Encouraging your employees to book with your partners will not only ensure better rates but even benefit your employees through offers and upgrades.
As far as possible, try to bundle services. For instance, if you choose to book accommodation that also offers food, you can save on meal expenses. Going through a travel agent who arranges the flights, hotels and meals could also prove to be cost effective.
Booking travel too close to the business trip can increase travel expenses. Encourage your employees to plan their journeys in advance and book ahead to have the most cost-efficient bookings. For instance, you could provide booking timelines wherein you state that domestic travel needs to be booked 15 days in advance and international travel 30 days in advance. This way, you can take advantage of lower costs.
The starting point for keeping close track of company travel expenses is to create a budget. Start with a company-wide budget for a year. Depending on which teams and employees need to travel, allocate a yearly budget to them for business travel. Using a budgeting software can help streamline the process and estimate expenses more closely. Aspire's budget tool enables you to take control of your business's travel expenses and control spending.
Establishing clear categories for your expenses can help you track and reduce spending. Categorize business travel expenses into transportation, accommodation, meals, on-ground transport, etc. Set up a miscellaneous category for other small spends. Encourage your employees to stick to these categories while filing for travel expense reimbursements.
Highlight how you want employees to pay for their business travel expenses. Issuing a corporate credit card to employees can help track and manage costs better. It can also reduce fraud. For instance, you can ask employees to furnish their card statements in addition to producing receipts and vouchers. If they have only receipts for cash payments, they could be forged. Aspire's unlimited corporate cards can enable safe and secure spending. As far as possible, discourage spending from personal credit cards and in cash.
Avoid giving shared accommodation to employees to save costs. This could lead to an unpleasant and uncomfortable experience. Don't skimp on insurance. It can cost you more in case of an emergency. Also, it is easy to get carried away with corporate deals because of cost savings. However, make sure that it is also convenient for your employees.
Business travel is important for any business that is trying to scale its operations. Estimating and keeping track of business travel expenses does not have to be a challenging task. Planning your business travel expenses in advance can give you a comprehensive idea of how much business travel spending you will incur in a year. It will also make the process of travel expense reimbursement easier. Moreover, being smart with your bookings by providing employees with a set list of spending they will be allowed to do, bundling services, looking for tie-ups and enlisting a travel agent to manage business travel can help you keep these expenses under control.