7 travel and expense policy best practices

Travel and expenses (T&E) are one of the largest expense categories for many businesses. To keep spending in check, every company should create a corporate travel policy that defines which travel costs will be reimbursed.

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In this article, we’ll explain what exactly is a T&E policy and some advice for handling your company’s travel management and expense reimbursement.

What is T&E?

T&E is an acronym for "travel and expenses," though it’s also known as "travel and entertainment." It encompasses the costs employees bear while on business trips or when entertaining clients, including travel bookings, rental cars, and other miscellaneous expenses for business purposes.

What is a T&E policy?

A travel and expense (T&E) policy is a set of guidelines provided by a company to its employees, outlining the types of travel-related expenses that can be reimbursed and the procedures for reporting and approval.

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It specifies allowable expenses, spending limits, approval processes, and reimbursement procedures, so that employees know what kind of expenses will and will not be reimbursed. A well-planned T&E policy maintains financial transparency throughout your company.

Benefits of a travel and expense policy

Not having a reliable T&E policy can't only be a time-consuming and frustrating process for arranging business trips, but it can also lead to excessive spending. A precise and automated T&E policy simplifies cost control for corporate travel, removing the need for close supervision, enhancing budget management, and enabling more accurate financial planning and forecasting. This precision helps align travel spending with company objectives and strategies.

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By incorporating these policies with advanced travel solutions, the need for constant requests to the administrative team is reduced, while giving the finance department uninterrupted access to crucial information and reports. Moreover, a clearly defined T&E policy streamlines the approval procedures, reimbursements, and gathering of expense reports, reducing unnecessary workload. Let's delve into some best practices that can help you craft and implement an effective T&E policy.

7 travel and expense policy best practices

A good T&E policy should include specific guidelines about allowable expenses, be clearly understandable to your employees, and maintain compliance with the IRS guidelines.

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Here are seven recommended best practices for creating and implementing a successful travel and expense policy:

1. Consult with company leaders

The first step in creating your T&E policy should involve internal research. Finance teams should carefully review the most relevant company policies regarding employee reimbursement and consider how their new T&E policy will fit within those guidelines. They should also discuss the proposed policy with different departments, like human resources, legal or compliance teams, to make sure they're all on board before making any major changes.

2.  Benchmark T&E costs

Finance teams should also benchmark T&E costs in your business’s location to get a sense of expected and reasonable spending across different business expense categories. This could involve looking up current flight prices, setting an average meal cost, and gathering data on industry standards regarding T&E spending.

3. Optimize for tax deductions

Your policy should follow the IRS guidelines for travel-related business expenses to make sure that your employees’ expenses will be tax-deductible. Knowing which expenses are deductible and what kind of documentation the IRS requires will help save your business money come tax season. You can refer to the chart on the IRS’s website that outlines which expenses you can deduct.

4. Communicate your policy effectively

Once you have a T&E policy, your employees need to be made aware of it. Communicate your new policy to employees through management announcements and any internal company channels like email or Slack. Team managers should also be brought into the process here, highlighting any policy changes and bringing awareness to employees. Sharing early helps catch any questions that come up before company trips.

5. Seek employee feedback early

Early on, expect to do a lot of debriefing on how the new policy is viewed and used by your employees across the company. By gathering feedback from your team, you can make sure that procedures are being followed and identify ways that they can be improved.

6. Introduce company cards

Implementing company cards at the same time as your new expense policy can be a great way to simplify things for your team. Giving your employees corporate cards offers you complete control over spending and category limits. That way, only approved transactions can be made in the first place.

7. Track your T&E trends

After your policy has been in place for some time, you can begin to analyze the data around your company’s T&E spending. Expense management software can track your T&E spending in real time while also offering financial insights like industry standards for certain expenses and recommendations for where you can cut costs.

Streamline your T&E expenses with Ramp

Ramp’s corporate cards and expense management platform can streamline how you implement your expense policies and manage the reimbursement process.

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With Ramp, you can:

• Create a travel card program with built-in spending controls and accounting rules
• Empower employees to book travel anywhere with their own Ramp card
• Get real-time alerts on out-of-policy spending as it happens
• Automate employee expense reporting with powerful receipt integrations
• Provide duty of care with real-time visibility into trips for every employee