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Traveling for work is essential across many industries, yet it can turn into a hefty cost if not handled with care. Be it for conferences, client meetings, or scouting new business opportunities, the expenses stack up—from flights and hotels to dining and transportation. 

Thankfully, there are smart approaches that companies can adopt to make the most of their travel spend without cutting corners on work quality or employee well-being. In this piece, we’ll delve into some handy advice and savvy ways to help you keep your company’s travel costs in check.

Understanding business travel expenses

DEFINITION
Trave expenses
Travel expenses are the ordinary and necessary expenses incurred while traveling away from your tax home for business purposes. This applies to self-employed individuals and full-time employees.

For clarity, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home. If you don't have a designated home office, your tax home is wherever you live.

When it comes to tax exemptions, the expenses incurred while traveling for business reasons are generally eligible for a travel deduction. Deductible travel expenses include:

  • Airfare: Cost of flights and baggage fees for business trips, whether domestic or international.
  • Hotel or lodging expenses: Accommodation costs during business travel, including the room rate and applicable taxes.
  • Meals and incidental expenses: Reasonable costs for meals while traveling on business, along with incidental expenses like gratuities, laundry and dry cleaning charges, and internet access charges.
  • Transportation costs: Costs associated with transportation during business travel, such as car rentals, taxis, or rideshare services. If you use your car, you can deduct actual expenses or the standard mileage rate, as well as tolls and parking fees.
  • Business-related expenses: Expenses directly related to conducting business, such as conference registration fees or client entertainment.

However, these travel expenses are tax-deductible only if they were used for business-related activities. This means that any claimable business expenses must be completely related to doing your job and meeting your company's business goals, not personal purposes. You cannot claim an expense for something that benefits you personally instead of your business.  Examples of expenses you can't claim include:

  • Commuting to your place of work.
  • Personal vacation days or leisure activities.
  • Traveling with a spouse or companion.
  • Personal expenses like gifts or souvenirs purchased during the trip.

Crafting an effective travel and expense policy

Creating a travel and expense policy is the first step in managing business travel expenses effectively. It’s more than just rules; it’s about crafting a guide that helps everyone in the organization understand how to handle travel-related decisions and spending. A thoughtful travel policy can prevent confusion, ensure fair treatment of employees, and safeguard the company against unnecessary costs.

When developing a travel policy, consider including the following elements:

1. Approval process

Your travel policy should start with a clear approval process. Define who is responsible for approving business travel—this could be a direct supervisor, department head, or a dedicated travel manager. Outline the criteria for what makes a trip necessary and what documentation is needed to support the travel request. This process should be straightforward to prevent delays and ensure that all travel is justified and aligns with business goals.

2. Booking guidelines

Set out specific guidelines for making travel arrangements. This should include a list of preferred airlines, hotel chains, and rental car companies that offer the best value or corporate discounts. Encourage booking within certain time frames to take advantage of lower rates. This proactive approach can lead to significant savings.

3. Expense reimbursement procedures 

Clearly articulate the steps for submitting and reimbursing travel expenses. Establish firm deadlines for submitting expense reports post-travel, and require itemized receipts for most costs. Explain the review process, who will be involved, and the timeline for reimbursement. This ensures transparency and helps employees manage their finances effectively.

4. Travel preferences 

Clarify the company’s stance on travel accommodations and services. For instance, state that employees should book economy flights for short trips and may opt for business class on longer, international flights if it’s within budget. Define what types of hotel rooms are appropriate and when it’s acceptable to use services like rental cars or ride-sharing. Setting these standards helps control costs while keeping travelers comfortable.

5. Per diem or meal allowances

If your company uses per diem rates, provide a clear breakdown of daily allowances for meals and incidental expenses, which can vary depending on the destination. Include any special circumstances that might warrant a deviation from these rates, such as high-cost locations or special events.

6. Corporate credit card usage

If employees are issued corporate credit cards, outline the do’s and don’ts of using them. Specify what types of expenses are permitted and any spending limits. Also, detail the process for reporting and reconciling credit card statements to ensure accountability and prevent misuse.

7. Travel safety and security

Employee safety should be a top priority. Include guidelines on what to do in case of an emergency, how to stay safe in high-risk areas, and whom to contact if help is needed. Keep this section updated with the latest travel advisories and safety protocols.

8. Compliance and reporting: 

Emphasize the importance of adhering to the travel policy and the consequences of non-compliance. Outline the procedures for documenting travel activities and expenses, and specify how and when to report this information. This not only ensures policy adherence but also aids in financial planning and analysis.

Once you’ve developed this detailed travel policy, share it with all your employees. Ensure it's accessible to everyone, even those who don't travel often. Regularly remind your team to consult the policy before embarking on business trips. Effective communication of your travel policy is key to avoiding misunderstandings and ensuring smooth reimbursement processes for travel expenses.

Methods of business travel reimbursement

Different methods are available for employees to manage their travel-related expenses, each with its own set of advantages:

  • Corporate credit cards: Companies often provide employees with corporate cards for business expenditures. This keeps travel costs together under a single account, adhering to the company's financial policies. It's an easy way to handle expenses without needing many reimbursement requests.
  • Personal cards with reimbursement: In some cases, employees might prefer using their personal cards for business travel expenses. This method allows them to front the costs and later submit detailed expense reports, complete with receipts, for reimbursement. This gives more control over spending but needs careful record-keeping. 
  • Per diem allowances: For specific travel scenarios, companies may opt to provide a fixed daily allowance, known as a per diem, to cover standard expenses like meals and incidental purchases. The per diem rates are predetermined based on the destination, which means employees are spared the burden of collecting and submitting a multitude of receipts. The IRS has established guidelines for meal allowances during business travel. For 2024, the standard meal allowance for most travel destinations within the continental United States is $59 per day, and higher for high-cost locations. This allowance is intended to cover breakfast, lunch, and dinner expenses.
  • Cash advances for travel: Another option is for companies to issue cash advances to employees before they embark on their business trips. This provides a fund from which all anticipated expenses can be paid. Upon returning, employees are responsible for reconciling the actual expenses incurred against the advance received and returning any surplus funds. This method requires careful estimation of actual costs beforehand and diligent accounting after the trip to ensure accurate financial reporting.

Expense submission and reimbursement process

To ensure a smooth and efficient expense submission and reimbursement process, companies should follow these steps:

1. Establish clear expense policies

Develop comprehensive guidelines outlining permitted expenses, documentation requirements, and approval processes. Clearly communicate these policies to all employees to ensure consistent compliance. Outline the types of supporting documents required, such as receipts, invoices, and itineraries. 

2. Categorize expenses 

Implement a system to group expenses into relevant categories, such as travel, meals, lodging, and incidentals. This practice promotes consistency in reporting and facilitates accurate expense tracking.

3. Calculate trip costs

After the end of a business trip, tally the total expenditure by type of expense. This data aids in setting budgets for similar future travel and spotting any outliers in spending. Study categories like transport, meals, entertainment, and other miscellaneous expenses to understand where your company is allocating funds for business travel.

4. Implement an expense management system

Utilize an efficient expense management system like Ramp, to record and track expenses in real time. This approach streamlines the process and minimizes the risk of errors or lost documentation.

Use Ramp for travel expense management

Ramp offers an all-in-one solution to streamline travel and expense management from start to finish. With Ramp's corporate cards, employees can easily pay for flights, hotels, meals, and other travel costs without fronting their own money. Ramp's software automatically captures and categorizes expenses from the corporate cards, eliminating the need for tedious expense reporting. 

Employees can simply snap photos of receipts through the mobile app, and Ramp will match them to transactions. Managers get real-time visibility into travel spending through customizable expense approval workflows and reporting dashboards. 

Ramp's platform seamlessly integrates with accounting software, saving finance teams from manual data entry. With its powerful expense controls, Ramp allows companies to set custom spend limits and receive instant alerts for out-of-policy purchases. Ramp simplifies the entire travel expense lifecycle by consolidating corporate cards, expense tracking, and automation under one roof.

Try Ramp for free
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Contributor Finance Writer
John is a freelance writer and content strategist with over three years of experience and expertise covering topics on finance, HR/business, and IT security for small and medium-sized businesses. His work has been featured on reputable platforms like Forbes Advisor and Techopedia.
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