Mapping the Travel Expense Accounting Process
You’ve probably landed here because you’ve been tasked with tackling your business’ travel expense accounting. Individual business travel and expense spends can reach as high as $40,000/month, not to mention the often neglected minor travel expenses that don’t end up on the final travel expense report. Given that 49% of the corporate travel budget is spread out over gas and other miscellaneous expenses, travel departments often have a hard time putting a pin on each individual charge incurred by employees on business trips.
Small and medium-sized businesses have a way around this; 75% of companies turn to expense management software to track down individual employee travel expenses, weed out fraudulent transactions, and better understand their corporate travel budget.
Circling back to the behemoth in the room, travel expenses are considered among the top three controllable business expenses (alongside wages and salaries). Most CFOs agree that while difficult to control with pin-point precision, it’s all about minimizing costs where corporate travel expenses come into the picture.
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Recap: What is Travel and Expense Accounting?
Travel expense accounting means documenting, summarizing, and managing business-related travel expenses for reimbursement claims and tax deduction purposes. Business owners, CFOs, and accounting teams need robust structures, policies, and procedures that help track individual employee spending during business trips.
The Travel Expense Accounting Process at a Glance
Unpredictable travel expenses have a certain impact on the company’s bottom line. On the one hand, companies that spend generously on travel tend to see big returns in employee satisfaction and customer loyalty.
But how much is too much?
Effective travel expense accounting can help answer this in more detail. The travel expense accounting process maps out a series of steps aimed at generating accurate reports on employee spending during corporate trips.
Here is a breakdown of the travel and expense accounting process:
1. Documenting expenses with valid proof of purchase
Valid travel documents, receipts, and invoices are the cornerstone of travel expense accounting. Travel departments must firmly remind traveling employees to present invoices, receipts, and other supporting documents as proof of purchase for travel services.
2. Sorting through eligible expenses
Your travel expense policy takes effect when sorting through eligible travel expenses; specifically, reimbursable and tax-deductible expenses. Such costs include airfare, car rental, accommodation, and meal expenses.
3. Analyzing expenses and spending habits
Employee spending habits are shaped by policy mandates, training, and incentives. Overspending, for instance, is common where no spending limits have been specified in the travel expense policy. Still, companies with specified spending limits may consider incentivizing good spending habits for those employees that help the company minimize unnecessary overhead.
4. Summarizing the travel expense report
All activities in the travel expense accounting process intimately tie to the travel expense report; an executive summary of individual expenses, travel dates, expense categories, trip duration, and other relevant information.
Travel expense accounting enables business owners to maintain the ideal balance between cost-cutting and overspending on employee travel. In a report by Harvard Business Review, more successful companies view travel expenses as an investment rather than just another cost to minimize.
Documenting Travel Expenses in the Travel Expense Report
Traditionally, travel expense reports have provided oversight into employee spending habits during business trips. A properly documented travel expense report brings much more strategic value to the business:
- Accurate spend data helps inform budgeting decisions
- T&E trends can help the business map investments to employee satisfaction or identify pain points that need to be addresses
- Better budgeting decisions allow the business to invest in building long-term client relations
- Clearer insights into spend improve cost control and allow for better risk planning
More recently, several companies have opted to switch from basic Excel-based expense reports to more robust end-to-end travel expense management software with all tools needed to record, sort, organize, and coordinate travel expenses between employees, finance, operations, and travel departments.
That said, the secret to maintaining an accurate travel expense report is no secret after all. Some key activities that contribute to a more accurate report include:
- Collecting receipts digitally as valid proof of purchase. In some rare events, substitute receipts may be accepted where original receipts are missing
- Mapping expense fields to your general ledger or ERP so individual transactions and expenses can be recorded and categorized with the details your accounting team needs, including specific dates, locations, purpose, and the nature of the expense
- Calculating totals for each category to determine the overall cost of travel at the end of the trip, and how spend compares to the budget
Furthermore, consolidating all data pertaining to travel expenses in one dashboard will help greatly in settling reimbursement claims and tax reporting.
Challenges of Travel Expense Accounting
A well-documented travel expense policy and travel expense report go hand in hand in scrutinizing employee spending on business-related travel.
Traditionally, employees would spend their own money for business-related travel and claim reimbursement later. Recording such expenses would take place on a paper form that would be later submitted to the travel department for review.
Today, spotting and resolving errors quickly becomes unsustainable and time-consuming with antiquated travel management systems. Additionally, the organization and documentation of manual records grows increasingly difficult as travel expense reports pile up. Retrieving old receipts, and tracking supporting documents for accommodation, meals, and transport costs can further complicate matters as employees struggle to gather and submit such information to the travel department in a timely manner.
Eventually, all these challenges lead to delayed reimbursement, costly errors, and potential non-compliance with travel expense policies. To minimize the impact delivered by these challenges, consider an automated expense management platform that streamlines the travel expense accounting process.
TravelBank is the Only End-to-End Expense Management and Accounting Solution You Need
Manually tracking every diminutive charge through your corporate credit card can undermine your travel expense management and policy enforcement efforts. For this reason, over 20,000 businesses trust TravelBank with streamlining and automating expense accounting and management.
One key benefit of TravelBank over similar industry players is that we have a truly all-in-one solution supported by the best people and technology in the business. In particular, we’re always updating our solution to help managers, finance and accounting departments, and employees book facilities, approve reports and track spending all under one roof.
TravelBank’s technology also syncs up with your corporate credit cards, granting the finance department the power to set limits on travel spending, further enforcing your travel expense policy. Employees can create and submit expense reports in minutes through the web-based dashboard or mobile app.
Given the portion of company revenue that goes into travel expenses, it is crucial for companies to ensure that their travel budget is kept under control. Consider a travel management platform for simplifying manual entries, minimizing errors, and boosting compliance with your company’s travel expense policy.
FAQs about Travel Expense Accounting:
What expenses can be considered tax-deductible for business travel?
Generally, any reasonable expense that helps the company generate income can be considered tax-deductible. Such expenses include transportation costs (such as airfare or mileage), shipping of baggage, and non-entertainment-related meals. It is important to consult with a professional tax accountant or refer to the IRS guidelines on deductible business travel expenses.
Should I keep receipts for all my travel expenses?
It is essential to keep receipts for all travel expenses. Proper documentation is necessary to support any expenses incurred during a business trip. This will help later with reimbursement claims.
Can I deduct personal expenses during a business trip?
Personal expenses incurred during a business trip are not tax deductible. Only costs directly related to your business activities, such as transportation, accommodation, and meal expenses are tax-deductible. You should always consult with a professional tax accountant or refer to the IRS guidelines on deductible expenses.
Do I need to submit an expense report for business travel?
If you are employed by a company or organization, you may be required to submit an expense report to receive reimbursement. A travel expense report is essential for the company’s performance evaluation and can be handed in manually or automated through a travel expense management platform.