In the world of business, effective corporate travel management is often a necessity rather than a choice. Employees traveling for networking events, training sessions, or client meetings is an integral part of any business’s operations. Among the various components of this corporate traveling ecosystem, one aspect that holds critical importance, especially from the perspective of the traveler, is ‘travel expense.’
A travel expense, in the simplest of terms, refers to any cost incurred by the employee while traveling for business purposes. It can range from airfare, lodging, meals, and transportation expenses, to even incidental expenses such as tips or fees associated with the travel. These expenses may at times become a burden for employees if they are expected to cover these out-of-pocket expenses themselves. That’s where the concept of travel expense reimbursement comes into play.
This is not merely an act of courtesy by the company but a well-calculated business strategy. Having well-thought-out travel expense reimbursement policies ensure that the employees can focus on their work rather than worrying about expense management. They won’t have to shy away from necessary expenditures that might add value to the business trip.
On a larger scale, these reimbursement scenarios also have implications on a company’s financial and taxation front. It’s important to understand that reimbursed travel expenses don’t contribute to an employee’s taxable income. As a financial decision, this means that while reimbursement has an immediate cost impact on the company’s bottom line, in the long run, it plays as a significant component in an organization’s fiscal strategies.
Is Your Company Losing Money through Your Reimbursement Process?
Let’s consider this with an example. Imagine an employee travels for a training session overseas. The expense towards air travel, accommodation, meals, and other incidental expenses such as taxi fares, are considerable and are claimed for reimbursement. But here, the direct expense is not merely the total of these costs. The time that the employee spends collating and submitting these expenses, reconciling the costs with the company’s travel policy, and the resources that the finance department deploys to process the expense reports, are all parts of the real cost of travel expense reimbursement.
Moreover, there are out-of-pocket expenses that an employee may have to bear if they don’t adhere to the company’s reimbursement policy or when reimbursements get delayed due to incomplete or incorrect expense reports. This can unknowingly dip into the employee’s personal funds and adds to the real cost in terms of productivity loss and dissatisfaction.
However, smart businesses understand that these costs are necessary and inevitable with business travel. Many do not view reimbursement merely as an overhead but as an investment. Here’s why: keeping employees productive, focused on work, and free from worry about the travel costs can enhance their efficiency. It can mean better client meetings, effective networking and heightened productivity – all of which can have a long-lasting positive impact on the business.
The crux here is that travel expense is not just an expenditure, but an aspect of employee well-being and corporate responsibility.
But, there are ways to make this process more efficient and save money in the process.
Some travel expenses are easily benchmarked. From average ticket prices to the daily rate of rental cars in specific markets to the daily rates of hotel rooms across brands, many data points are quickly examined and compared.
Not so are the actual costs of certain processes.
Multiple inefficiencies combined with inaccurate accounting result in maximized losses from out-of-policy behavior. Put simply, asking travelers to hang onto original receipts, then submit manual reports and wait on reimbursement is actually several inefficiencies combined into one process. The accounting team manually reviewing travel expense reports, along with a long approval chain, requiring multiple layers of approval before an expense is reimbursed, are at least a couple more. That’s multiple steps in a complicated process all calibrated to keep employee travel within policy. How much time would be saved by automating some or all of these steps?
How Can You Streamline Your Expense Policy?
While some companies, especially smaller ones, just throw up their hands and decide to live with the extra costs of out-of-policy travel, we’ve learned there is a way to cut those costs without creating additional expenses through having an integrated travel management solution. The backbone of effective management is a clear and comprehensive reimbursement policy. The policy should have a detailed account of what constitutes a business expense that is eligible for reimbursement. Done right, this will eliminate manual expense reports, enable automatic approvals based on policy, and reduce the amount of time spent by employees throughout your firm on the process.
The major pillars of this solution are…
A corporate credit card.
Giving travelers a company card for airline, hotel, dining, and transportation costs eliminates expense reports and reimbursement altogether. A corporate card can give your accounting team increased visibility into expenditures, but it can also prevent out-of-policy purchases in the first place. Your managers can set spending controls, so instead of having to track down employees to ask questions about unexpected costs, out-of-policy purchases won’t even be processed. When combined with virtual credit cards for guests and infrequent travelers (which also have spending controls) these automated fixes virtually eliminate reimbursements.
An online booking tool loaded with your travel policy.
Once your TMC has loaded your policy (and preferred suppliers) your online booking tool will automatically push in-policy choices to the front where travelers can select them. Out-of-policy choices (if allowed) can be tied to automated travel authorization emails where one click lets managers quickly pass muster on them. (Traditional agent service can perform the same function but it’s a manual process.) By adding black car companies, taxi suppliers, and ride-sharing companies to your preferred supplier list you have brought all aspects of a corporate travel itinerary into view where everyone managing travel can quickly pull up the details of the cost of a trip.
Detailed travel reports.
Getting regular metrics on key travel management goals like advance purchase windows, average ticket prices and policy exception reports will reduce the need for getting down-to-the-penny accounting of costs. By controlling employee behavior at the individual level, managers can address recurring problems directly, while letting the automation of the first two systems enforce policy the rest of the time.
At this point, you will notice we haven’t mentioned automated expense management solutions. While, of course, we work with many clients who have these in place, and swear by them, we also have many clients who don’t want the extra expense, or feel it isn’t warranted by their volume. Deciding where your company stands on the issue is best done by calculating the total cost of the accounting process (including employee time), and comparing it to the cost of the program. Then, you should consider a few other factors. Does your company have an enterprise back-office accounting program it’s attached to? Will the automated expense management program easily integrate with your back-office program?
If the answer is yes, you might want to investigate an expense program like Concur Expense which offers such features as automatic loading of cost details from your travel agency, easy input of itemized receipts, and automatic creation of expense reports. And it offers out-of-the-box integration with many back-office accounting programs.
You should also survey your travelers to see how they feel about the reimbursement request process and expense reporting. If they’re all unhappy with the process, you should probably look into it a bit more seriously.
But, not before trying to get control of your T&E expenses with our suggested solution.
Assembling the data points to review your company’s spend management system, considering the amount of time it takes for employees to compile business expense reports and receive a reimbursement, as well as the time it takes for accounting to complete the monthly reconciliation process – you can get a reliable verdict for whether your expense management process is in need of improvement.
Travel expense reimbursement is a crucial part of corporate travel that holds strategic importance for businesses and organizations. From being a financial decision to becoming a determining factor in employee satisfaction and productivity, the implications of expense reimbursement extend far beyond just reimbursing travel-related expenses.
The ‘real cost’ of travel expense reimbursement, as we discussed, is not confined to the actual expenses. It includes the time, effort, and resources invested in creating, submitting, processing, and auditing these expense reports. Being aware of these hidden costs can help businesses reassess their travel policies and refine their current processes. Adopting a comprehensive travel reimbursement policy, harnessing the potential of digital platforms, ensuring regular employee training, and utilizing professional travel management services are some of the strategies that can revolutionize how your business views and handles travel expense reimbursement.
In this journey of refinement and improvement, Teplis Travel can be a helping hand. With over 50 years of experience in delivering corporate travel management services, Teplis Travel understands the nuances of travel expense reimbursement and its real cost to your business. We strive to offer customized corporate travel services and advanced reporting solutions to make every aspect of business travel, including travel expense management, a seamless experience.
For additional information on how Teplis Travel can help your company with reimbursements, contact our team!