Detailed guide on travel expense reimbursement
Business travel expense reimbursement is an essential expense for any company. You must ensure that the reimbursement system of your company is automated and streamlined to deliver increased productivity and help save time for the employees to work on other human-centric tasks.
Manual travel expense reimbursements processing and reporting has numerous errors that, in turn, cost the company more hours spent on fixing the mistakes.
An automated system saves the company any extra effort or money spent on error correction, long reconciliation processes, and data management. A complete travel and expense automation system will help your company establish a streamlined travel process without having to worry about reimbursements.
Travel expense reimbursement is the process of compensating your employees for all the business expenses made during any work trip. The employees are reimbursed for all the travel expenses that they have to make out of their pockets. These valid compensation expenses include travel tickets, meals, hotel reservations, and any purchases made for the clients.
To get reimbursed, employees are supposed to collect all the physical receipts and any other documents as proof of the spending and submit those to the finance department.
Every company has its own reimbursement claim submission system. Once the employees give in claims, the finance department checks all the receipts with other documents and ensures that everything is in compliance with the company travel expense policy. According to that, the finance department approves or rejects the claims.
Travel expense reimbursement process is essential because business travel expenses can be heavy on the employees’ pockets. It is not the employee's obligation to utilize their personal funds to pay for the business trip. It is the responsibility of every organization to reimburse its employees for any out-of-pocket expense made for the business.
If your company takes reimbursement seriously and timely completes the process, your employees will be happy to for in the company. Satisfied employees mean smooth business functioning.
Along with this, reimbursements are categorized under business expenses that are viable as tax deductions. Plus, having a reimbursement process makes it easier for the finance department to settle all claims, and you get greater visibility into the expenses of the business.
The first and essential travel expense, transportation cost, has to be reimbursed. All kinds of transport used on the business trip are supposed to be in the reimbursement claim. These include train or flight tickets, public transport in the city, car rental costs, or ride shares.
Employees must have valid transport expense proof like ticket copy, payment receipts, etc., as proof of transaction.
Business travel expense reimbursement also includes accommodation expenses. Hotel or any other accommodation place charges, valet or parking expenses, internet or sim fees, etc. You can always set expense limits so that your employees know what can be booked inside the budget. This help in sidestepping the problem of overspending.
Another category considered under corporate travel expense reimbursement is business-related entertainment expenses. These are costs employees have to incur to keep the clients or potential clients entertained and engaged. This can be social events, concerts, dinner parties, etc.
Also, if the employee spends on food, drinks, and other refreshments for the clients, those are also reimbursed.
If the employees buy meals for themselves or any refreshments, those are also supposed to be reimbursed by the company. These meals can be for themselves or for the clients. Daily meals can be counted under the per-diem expense of the employee as well. The daily allowance given to a travelling employee is called the per-diem expense.
Incidental expenses are those minimal costs incurred apart from the major costs of traveling. Room service charges, tips to hotel staff or chauffeur, customer gifts, laundry service charges, etc. These expenses can be reimbursed after the trip.
In general, a travel expense reimbursement policy is a document that has all the details and guidelines related to your business travel expenses reimbursement.
It should have enough information regarding everything starting from pre-travel planning to reimbursable amount settlements. Typically, you would also want to include details such as what types of travel expenses are and are not considered reimbursable.
Any hard limits you have on the amount that your company will cover should be stated as well. Procedures such as expense reports and approvals will also make it onto your travel expense reimbursement policy.
There’s no reason to confuse your employees, especially when it comes to a policy that they’ll have to reference a lot.
Having a simple travel expense reimbursement policy that is easily understandable by all employees will streamline all processes involved.
Your policy for travel expenses reimbursement is no good if your employees have no clue how to follow it. You want your travel expense reimbursement policy to have plenty of details about the different steps involved while keeping it user-friendly.
Considering that there are a lot of details on travel reimbursement that you want to include, it’s important to maintain your policy and keep it neatly structured. This way, it’s easier to make changes and adjustments if necessary.
As mentioned, there are different types of expenses that will be incurred during business trips. This includes transportation expenses, lodging expenses, client entertainment expenses, and many more.
You’ll want to break down which expenses fall into what category in your travel expense reimbursement policy to provide clarity to your employees.
Make a list of what expenses are applicable for travel reimbursement. While the details may differ from company to company, reimbursable expenses typically include transportation, accommodation, meals, client gifts, visa charges, and other business-related expenses.
Make sure that your employees know who the right person to ask is for expenses that they’re unsure about.
Any personal expenses incurred by your employees during the duration of their trip are not reimbursable. This means that should an employee choose to do any personal shopping, those expenses will not be allowed for travel reimbursement.
Any travel upgrades your employees choose to get that are outside of the initial travel budget will also not be reimbursed.
You want to be sure that you comply with tax regulations regarding your travel expenses and reimbursements. Note that employee allowances and reimbursements are two separate things.
For tax purposes, ensure you are aware of the differences and what your obligations are for paying travel expenses reimbursement specifically.
To make sure that you don’t get an inflated number when your employees submit their reimbursement claims at the end of each business trip, you want to create a daily budget for each expense category.
This daily allowance is called per diem. Specify what the per diem rates are to encourage employees to stay within budget.
Every company will have its own reimbursement claim requirements. While some might only require an upload of the receipt, others might want more details and supporting documents.
Make sure that when you create your travel expense reimbursement policy, you’re clear on what your reimburses need to get the travel expenses reimbursement claims processed.
To make sure that everyone involved in the travel reimbursement process is on the same page, you want to include a section about how you plan to do reimbursements.
This makes sure that everyone’s expectations are aligned with one another. You also want to outline what are the responsibilities of everyone involved and what is involved.
At the end of the day, a travel expense reimbursement policy is written to have everyone in your company adhere to it to ensure compliance and develop standardized processes.
It’s important that you outline a section about policy compliance and what the consequences are for deviating from the policy or fraud attempts.
Before travel expense reimbursement comes pre-travel approval, employees are supposed to submit a request and all related documents for the trip. This request mentions all the details of the travel, like place, time, dates, purpose, expense budget requirement, etc.
It is essential that your company has a requirest template or set system through which the employees put in their travel requests and get approvals.
Once the employee travel request is submitted, the company is supposed to process the further details. You have to give the employees expense guidelines, a list of all reimbursable expenses, clarity on reimbursement policies, and an approved expense budget. This is done to ensure that the employees have a clear understanding of everything that is allowed and the expense policy limits.
While the employees are on a business trip, it is essential that they document every expense. Receipts of meals and drinks, client entertainment activity receipts, travel tickets, hotel reservation and stay documents, etc. All these have to be collected and stored. These receipts and documents are then attached while claiming reimbursement.
When the employees come back from the business trip, they are supposed to prepare a report of all the expenses incurred during the trip. This report has to include details of all the expenses, like category, amount, merchant, etc.
Along with this report, the receipt of the purchases is attached. The finance department collects these reports and calculates the total reimbursements.
The finance department scans every detail and matches the claim amount to the original receipt attached. This is done for extra ensure that all expenses are legit and everything is in compliance with the company expense policy.
Plus, sometimes, employees slip extra expenses into the expense report. The finance team has to make sure that every expense has a document proof of it. Once checked, the reimbursement is approved.
Once all the details are sorted and the reimbursement claim is approved, the next step is to process the amount. The reimbursement amount is usually given to the employees along with their salaries.
After everything is done, travel expense reimbursement is added to the accounting sheet. All the details are rechecked, and reconciliation is initiated. Every expense is recorded, and then all necessary data is put into reports to maintain a database.
Suggested read: What is account reconciliation, types, benefits and procedure
Streamlining your travel reimbursement process starts by preparing a reimbursement policy. This must be easy to understand and should be distributed amongst all employees.
A comprehensive business travel expenses reimbursement policy must include things like reimbursable and non-reimbursable expenses, dates and guidelines to submit expense claims, deadlines, etc.
Along with this, mention the rules for pre-approvals and how the claim amount will be transferred. A clear understanding comes with a comprehensive reimbursement policy.
Another effective technique to streamline your travel reimbursement process is to digitize the travel and expense management process. A centralized system can help you track and process all travel expenses. The system must allow your employees to easily make reimbursement claims, make submissions, and track the process.
For example, these systems give employees the facility to click a picture of their receipts and upload it through a mobile application instantly. Plus, a digitized system also keeps a record of all the activity and data, and this database can be accessed easily.
It is advised to set reimbursement submission deadlines. Encourage your employees to submit all their claims on time so that the travel expense reimbursement process can be completed quickly.
If they delay their submission, the process will also be delayed, and ultimately employees won’t get their reimbursement amount on time. Put out reminders and be strict with your employees to complete the process on their end within the given time.
Your employees will not just magically get acquainted with the process and guidelines. It is important to set up training sessions. These training sessions should educate the employees on the company’s expense policies, how to make expenses when on a trip, and how to file for reimbursements the right way.
Along with this, also put together a support team to help the employees with any kind of queries, problems, and issues while traveling or filing the claim.
Employees have to run around to get approvals, and the finance department is behind the employees to submit their claims. This is a never-ending cycle. Instead, you should streamline the approval workflows.
Using an expense management system can automatically check the receipts and claims and flag expenses if suspicious. Along with this, these systems allow you to set a chain of approvers who will receive the summary of the claim and, with just one claim, can approve the reimbursement easily.
Last but not least is to conduct regular audits. It is crucial to always be on of all the expenses and have a clear understanding of all the money being spent on reimbursements.
Ensure to keep a tab on all the processes and check if everything is running smoothly.
Auditing regularly helps you to have a clear understanding of the business reimbursement spends and provides data to make any changes in the policies and process for better-streamlined expense management.
It is not a hidden fact that now with easy digitization and automation in the picture, manual processes can be time-consuming and extra effort-taking in comparison to automated systems.
Hence, why stay behind?
An automated travel expenses management system can help you save a lot of time and complete the same processes that took humongous efforts in just a few minutes. Along with this, the system quickly checks every detail and flags any unusual activity or expenses.
A travel expenses management system is easy to use and gets the job done faster. Reconciliation with the accounting books becomes a piece of cake. Moreover, managers can access all expense data in real-time, and the finance team can easily work around the instantly available information.
Ultimately, with everything available and done with just a few clicks, analysis and reporting also becomes effortless.
● Accurate financial records
Manual business travel expense reimbursement process is highly prone to errors. There are various mistakes the employees, the managers, and the finance team can make while submitting, checking, and reconciling travel expenses. However, an automated system takes over the whole process. Your employees just have to upload the snapshot of their expense receipts, and the rest will be done by the system automatically. The managers also just have to approve or reject the reimbursement request summary shown on their screens.
● Enhanced expense reporting and analytics
How much time does your whole team take to compile all expense data, categorize and sort it to make a meaningful report? Probably days! Just imagine all required data being available with just a few clicks. This is what expense reporting automation does for you. It tracks, records, and collects all expense data in real-time and instantly organizes it into meaningful reports that can be accessed anytime. Using this, you can implement changes and make other decisions rather quickly.
Master the art of expense tracking. Delve into our insightful article to learn effective strategies for tracking expenses, and gaining financial visibility.
● Help eliminate paperwork
It takes tons of paperwork and approvals to get just one business trip approved, managed, and reconciled. Employees and managers both have to go through huge lumps of documents to record everything and to ensure that the travel reimbursement process is completed with accuracy. But why not eliminate all this hassle and automate the travel expenses management process? It automatically processes the data and reports, and the managers just have to click approve or reject on their screen, making the process easier and quicker.
● Ensure greater policy compliance
Policy compliance is the most difficult to maintain in an expense reimbursement process. However, automation solves this problem also. Any expense claim that is not in compliance with the company policies and rules will automatically be rejected. The claim will not go further for reimbursement processing if the expense amount or category or any other requirements do not match the company policy. Hence you no longer have to worry about expense fraud!
● Time efficiency and cost savings
The ultimate motive for getting travel expenses management automation is to help your company save time and money. All those hours spent on making expense reports, filing reimbursement claims, checking all the paperwork, getting approvals, and reconciling with the accounting books can be reduced to just a few minutes with automation. Plus, all the extra costs spent on error correction and overtime for completing the process can be eliminated with automation.
● Increased trust and satisfaction
When your employees are reimbursed quickly, and the process is easy and convenient; they will build a sense of trust and satisfaction towards the institution. This convenience and ease can only come through the automation of the travel expenses reimbursement process. Employees just have to upload snapshots of their receipts, and the system will take care of the rest.
● Faster reimbursement (Lowers the personal burden)
Again, the automation system will complete the reimbursement process faster than the manual processing time, so your employees will not have to worry about being short on personal finances or will not have to bear any burden of their personal funds. Faster reimbursements keep your employees happy.
● Easy expense claims
With an expense management automation system, your employees can easily raise reimbursement claims, track the process, check the status of their claims, and finally be updated on when their reimbursement is approved and transferred. Along with this, the system will allow them to follow a clear-cut process without much hassle and documentation requirements.
● Stress-free travel experience
Once you have proper reimbursement and travel expense management structure in place, your employees will not have to worry about reimbursements. Stress-free travel experience for your employees. A proper system assures that if the employees provide evidence for all expenses and file their claims correctly, they will be compensated no matter what.
What use is an automation system if it takes weeks to learn how to use it and has a complicated user interface? Instead, get automation software that is easy to use.
Employees and managers both should be able to quickly grasp the working of it and should be able to use it to the fullest. All features must be effortlessly accessible on the dashboard so that skimming through for information doesn’t take long.
The automation software you choose to integrate with your existing ERP system must have a mobile application version. While traveling, employees might not necessarily have their laptops or access to a PC.
So, a mobile version is convenient for uploading expense receipts instantly from anywhere, and also managers can approve expense claims easily.
Another important feature necessary in an automated corporate travel expense reimbursement system is OCR technology. Optical Character Recognition technology captures essential characters from the uploaded receipt. These characters are amount, spend category, date, time, etc.
Once captured, the system updates all that information into a centric database. This database is updated with new expense information in real-time.
Automation systems also offer the feature of automated calculation of reimbursements. As the system anyways does the whole reimbursement process, the end part calculator is not a difficult thing.
All expense claims are anyways recorded in the accounting sheets, everything is added, and a total can be derived just as easily.
Expense management systems also provide businesses with the feature of automatic expense categorization. This means that as and when an expense is made, the system will automatically capture it and put it under the right expense category in the database and the accounting sheets.
Auto-categorization cancels out all the tedious labor put into just sorting and entering data.
Automation systems help businesses set up a smooth approval workflow. You can set multi-level approvers so that the reimbursement claim is checked 3-4 times by managers and other authorities before being passed.
This means that the expense claim request will be shown to the designated approvers of level 1, then level 2, and then level 3. Employees don’t have to go behind different people all day long to get the reports and claims approved.
One of the most important features to look for in an expense management automation system is integration with accounting software. Your expense management system must be flexible enough to integrate directly with your accounting software.
All expenses, when tracked in real-time, should also be entered into the accounting books in real-time.
Another must-have feature in a travel expenses reimbursement automation system is a policy compliance check. The software should not only process all the compensation claims but also should be able to flag and stop any claim that is not in compliance with the company policies and rules.
You can enter all the required policy information in the system so that it can check the legitimacy of every expense against it.
As an all-in-one expense management software, you can manage all business expenses with Volopay, including employee reimbursements. You can create expense categories for business travel for your own convenience.
Employees will then be able to file reimbursement claims from anywhere through the use of a mobile app in just a few clicks.
With Zoho Expense, you can make and manage online travel bookings. You can also manage offline travel-related needs, enabling you to make itineraries and travel profiles for smoother business travel.
This way, tracking any expenses made during business trips will be simple. Easily pinpoint which travel expenses were made out of pocket and need to be reimbursed.
SAP Concur offers a way to accurately track and report your business travel expenses hassle-free. Employees on business trips can snap pictures of expense receipts on the go, allowing you to keep all your travel expenses reimbursement data in one place.
The reimbursement process can happen much faster when everything is easily accessible.
TravelPerk is a travel management platform that helps you manage business trips and costs. You can collect all travel invoices through TravelPerk and employees won’t have to manually do expense reports.
The platform allows you to view one invoice with all the details at the end of each trip, eliminating the need for paper travel reimbursement documents.
Fyle makes expense reporting stress-free for employees. Expense reports can be done at any time from anywhere with Fyle and will be reflected directly on the platform.
Every reimbursable expense is recorded on a centralized dashboard and can be filtered and viewed to make the travel reimbursement process go smoother.
It is not impossible to find all the above-mentioned features in one platform. Introducing to you — Volopay! An all-in-one expenses management system created to help businesses save time and money that is normally invested in manually managing expenses and reports.
With respect to travel expense reimbursement, Volopay gives ti customers the facility to set up a customized reimbursement process. With Volopay, you can set up multi-level approvers, get instant approval or rejection, OCR to recognize receipt characters, a mobile app for anywhere access, real-time expense tracking, and much more.