How to Create a Travel and Expense Policy Template
The COVID-19 pandemic and the ensuing border restrictions have virtually halted air travel, making the industry for corporate trips one of the biggest casualties. In 2020, corporate travel expenses plummeted 52% across the world as most companies shifted to remote work.
But while the crisis may have dented business travel, that does not deter corporate payables from coming in. Employees continue to incur expenses that are necessary for them to perform their roles. The work-from-home arrangement has also opened new expense categories, such as the purchase of ergonomic chairs and office desks, with the aim of making this set-up as conducive to employees as possible.
Now, with countries like Singapore making great strides in inoculating their population, analysts are expecting a return, albeit gradual, of corporate travel. This, coupled with the anticipated adoption of a hybrid set-up, underscores the importance of a travel and expense policy (T&E policy). This set of guidelines is necessary not just to simplify the reimbursement process, but to centralize a company’s spending management system to save on costs and labour work.
What is a travel and expense policy?
A travel and expense policy is a set of guidelines detailing how employees should book business-related travels, what items can be reimbursed, and how reimbursement works. It lists the company’s do’s and don’ts on all approved business travels to keep potential cases of fraud at bay and bring costs down by creating wider visibility over the budget.
Having an expense policy is essential to streamlining organizational processes, making business expenses more predictable, and helping employees understand the spending limitations of an approved business trip. A travel and expense policy is often part of a wider corporate travel policy, which reflects a company’s culture and values when it comes to how an employee represents the business outside the office premises.
This policy is also key to creating an expense report used to track business spending. With corporate travel expenses accounting for about 10% of a company’s yearly revenue, an expense report is even more crucial to ensure that your business is operating in a cost-efficient manner. Without a travel and expense policy, a company runs the risk of irresponsible spending during a business trip, having misreported expenses, and encouraging fraudulent behaviour.
What should be included in a travel and expense policy template?
A solid travel and expense policy should anticipate all the potential queries of all the stakeholders. When can one upgrade from first class to economy class? Can one bring non-employees during a business trip? Are there different sets of protocols for domestic travel and international travel?
Failure to address questions like these could lead to overspending, abuses, and fraud, regardless of whether they are intentional or not. Representatives of a company’s finance and human resources department are often in charge of crafting a travel and expense policy. If a company has a dedicated manager for corporate travel, they can get in the mix, as well.
Since the guidelines should be clear and in detail, a travel and expense policy may often take several pages. In some cases, a company may also opt to produce a condensed one-page version summarizing all the key policies. Keep in mind that one of the key goals of a travel policy is to remove ambiguity for better enforcement. To create the guidelines, the following key components must be considered:
Introduction and Purpose
A travel policy should start with a purpose. You should explain to all stakeholders involved that the policy is not just a procedural step but a safeguard to ensure fairness, cut manual work, and improve the overall budget management. If your company has different policies depending on the seniority level or department, your introduction should also clearly explain who the guidelines are for.
The introduction part is also the best venue to mention the benefits (and consequences) of following the protocols, such as getting travel support, to encourage employees to follow them.
Travel booking process
In this section, you should discuss how to book airline tickets and accommodations, specifying the company’s approved booking tool or platform. If your company does not have these, including the contact details of the agent an employee needs to contact if they need to make a booking. The arrangement should likewise include the lead time per travel booking, meaning an airfare or a hotel room booking must be made before a specified number of days before the expected arrival.
This section should also explain the approval process of such bookings. In most cases, the process differs per seniority level. The travel policy needs to write out the names or positions of the approving officers for all types of travel.
Another component of a travel policy is the guideline for using loyalty programs. Expenses for a business trip are often made through a corporate credit card, which is known for offering lucrative perks. The company must specify whether the employee can use the loyalty points and other perks for personal expenses and if there are limitations to doing so. If a corporate card is issued, the expense policy needs to specify if there are certain purchases that should only be made via the said card and not out of an employee’s own pockets.
In some cases, the employee may choose to extend their stay for personal leisure. The T&E policy must detail the rules around such extensions, tackle differences in airfare and accommodation costs during the additional stay and provide a black-and-white guideline for what your company can cover under your travel policy. Other items that you can discuss under the booking process are the rules for bringing along non-employees during a business trip, as well as the per diem for every type of employee.
The next section is all about expense categories. This is one of the key parts of your expense policy template as it will determine how cost-efficient are your guidelines and whether they are aligned with the overall budget. Here are the common categories under expenses:
This type of expense covers airfare, including the type of airline, approved booking tool, or preferred third-party vendor. The policy should address the nitty-gritty details of corporate travel, such as what type of travel class is allowable. Some companies allow employees to book a business class if a certain mileage is met, while in other cases, only an economy class is permitted for short-haul flights.
Under this section, your company should outline the policies on booking hotels, Airbnb, or apartments. This should cover the authorized booking tool or travel agency, nightly rate ceilings per city or country, the hotel’s star classification, and reimbursable hotel expenses like parking. You can also specify the hotel and negotiate rates whenever available.
Other travel expenses
Corporate travels incur other types of expenses that fall outside of airfares and hotel bookings. They can be:
- Taxi, ride-sharing, car rental, and other commuting fees
- Business meals
- Business-related telephone charges
- Asset repair costs during the business trip
Remember to be as specific as possible when listing down allowable reimbursements. For example, you can set an amount allowed per breakfast, lunch, and dinner meal. In some cases, companies opt for per diem or a daily maximum.
To remove ambiguities, the T&E policy should set out rules on what costs are excluded. This can be as specific as room service charges, room upgrades at an extra cost, and minibar purchases, additional cost and meal expenses of a non-employee joining the business trip, excess baggage, laundry or dry cleaning, parking fines, and entertainment expenses, among others.
When discussing non-reimbursable expenses, seek the opinion of finance leaders and stakeholders who frequently go on business trips to come up with a fair and justifiable list.
Reimbursement process and filing of expense report
In this section, the policy should identify the tool used to file an expense report, the person in charge of receiving the report, the deadline for submission, and the average processing time of reimbursements. But the most important component of this section is the list of items that an employee must include in expense reporting. Typically, these are original receipts that the employee can upload directly to the expense management tool.
Other T&E policies dedicate a section to travel support to ensure employees that they are being taken care of during a business trip. This is where you need to specify other information on travel arrangements such as the name and details of the persons in charge in case of flight cancellations or other booking problems. You can also include information on the company’s travel insurance in this section as part of the expense policy template.
Manual vs automated travel expense filing
Corporate travel expenses easily accumulate especially among companies with frequent jet-setters, making them hard to track and adding to the monthly burden of the finance department. Technology draws the fine line that separates efficient business travel management from the opposite.
Traditional companies that use manual travel expense filing require employees to collect their paper receipts for a specified period and only then can they begin crafting the report. This cumbersome process not only leaves room for costly human errors, but it also extends the work of the HR department by going through piles of receipts, authenticating each, and separating allowable expenses from not. This results in delays to the reimbursement process, slow claim submissions, and loss of productivity.
Manual filing of expense reports also tends to prevent a company from gaining full visibility into the budget and spending trends, which could have been essential when crafting an effective travel policy.
On the other hand, an automated travel expense filing adopts a centralized and end-to-end expense management process covering claims submissions, authentication, approvals, and release of reimbursement. Under this process, an employee simply has to log the expenses online and directly upload the original receipts, which will then get picked up by the expense management software for it to analyze and extract details from.
Once submitted, the employee can generate the expense report within minutes, leaving a digital audit trail for all the stakeholders. This process is much more efficient as it offers black-and-white guidelines on what types of expenses are allowable or not while minimizing the possibility of committing fraud.
3 ways you can improve your T&E policy and process
1) Go Paperless
Manual work is a daunting task, be it for verification of submitted claims or plain manual data entry. To unload this burden, companies must adopt a paperless policy through an expense management platform.
Spenmo, for example, requires four easy steps when processing corporate travel reimbursements: first, an employee will have to upload the photo of the original receipt to the Spenmo app; next, they will log a few key details such as expense category, and then send the form to the approving manager; third, the manager will approve or reject the reimbursement request; if approved, the payout will be released in an instant either via the Spenmo dashboard or company payroll.
2) Use Corporate Cards
Assigning a corporate credit card to employees helps fine-tune a company’s expense management by leaving a digital audit trail for all business purchases. The company can customize its account to block certain spends and merchants, giving it full control of and insights into an employee’s incurred costs during travels, as well as reducing the possibility of committing costly human errors.
Additionally, a corporate card prevents out-of-the-pocket expenses, which often lead to piles of physical receipts that are hard to sort and authenticate individually. It also helps segregate business and personal expenses since transactions made via a corporate card are easily seen and tracked by the finance or human resources department.
3) Keep it up-to-date
You should also revisit your expense policy regularly to ensure that it stays relevant and up-to-date with the existing protocols, be it company-wide or regulatory. The policy should also be readily available to employees to reduce the risk of disobedience. It should be accessible via your travel booking tool, on the company intranet, and on the cloud. The HR should also have a ready-made hard copy for additional access.
A travel expense policy is an essential part of budget management as it helps the company’s senior leadership gain insight into an efficient allocation of money through spending patterns and trends while allowing the employees to claim reimbursements in a fast and systematic manner. It helps reduce the risk of committing fraud by outlining the black-and-white details of what types of expenses are allowable and not, as well as the approved booking tools.
Companies must fully automate their expense management to remove time-consuming and inefficient manual work such as going through each receipt and authenticating them, a process deemed cumbersome among human resources professionals.
Having an automated expense management platform that supports your travel expense policy also helps centralize the system for all the stakeholders, creating a digital audit trail that anyone can refer back to when verifying a transaction. The expense policy must be relevant to company-wide and regulatory protocols, adopt the latest practices such as the use of corporate credit cards, and be readily available to anyone within the company
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