How to write a travel & expense policy in 7 steps

If your employees are traveling more this year, you need an effective travel and expense (or T&E) policy in place. A travel and expense policy outlines how employee expenses for business-related travel are managed and covers actual expenses, like airline tickets, domestic travel costs, and hotel reservations.

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By establishing clear guidelines upfront, a T&E policy helps eliminate confusion, minimize errors, and promote responsible spending habits among your employees.

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The primary goals of a T&E policy are to:

• Certify that expenditures are reasonable and within the company's budget
• Provide a framework for booking travel and submitting business expense reimbursements
• Ensure consistent and fair treatment of all employees
• Comply with relevant tax and labor laws

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In this article, we explain how to create such a policy, outline essential components, and provide practical steps for writing a clear and effective travel and expense policy for your business.

The essential components of a travel and expense policy

An effective T&E policy comprehensively addresses all elements related to business trip planning, such as pricing, travel advances, and travel management. Additionally, it covers expense management, detailing how personal expenditures are handled and ensuring reimbursement requests are submitted with original receipts. To align with travel and expense policy best practices, the policy should be clear, comprehensive, and easily accessible to all employees, promoting adherence and simplifying the approval process.

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Let’s take a closer look at the key elements:

Expense categories

Clearly define the types of expenses that are and are not eligible for reimbursement upfront so your employees have clarity and can make informed spending decisions. Examples of reimbursable expenses might be air travel, business meals, car rentals, entertainment expenses, professional development, and office supplies. Non-reimbursable expenses might include personal expenses like leisure activities or upgrades beyond the allowed standard.

Booking and approval process

An effective travel and expense policy provides clear instructions on how employees are to make travel arrangements. This includes selecting preferred airlines, securing hotel accommodations, and arranging ground transportation. It also outlines the process for obtaining pre-approval for certain business expenses, like using a designated travel agency or corporate booking tool.

Expense submission and reimbursement

Specifying the required documentation, timelines, and approval workflows for submitting and processing expense reports is essential. This includes detailing the types of receipts or supporting documents needed, the deadlines for submitting expense reports, and the approval process. 

Credit card and corporate card usage

If you provide company credit cards or corporate cards, your policy should address the rules for using them. Specify the acceptable uses, requirements for timely expense reporting, and consequences for misuse. You should also outline the procedures for obtaining and maintaining these cards, as well as guidelines for reconciling statements.

Per diem rates and incidental expenses 

Make sure to clearly define the daily allowance you provide employees for meals and minor expenses during business travel. Per diem rates may vary by location or role, but you also need to define the types of incidental expenses that are covered by the per diem, like local transportation, gratuities, and internet access.

Insurance and liability

This section typically outlines what travel insurance coverage your company offers to employees, such as emergency medical, medical evacuation, or for lost baggage, especially if your team needs to purchase supplemental insurance for international travel or when traveling to higher risk destinations. Provide specifics on how to file claims, submit documentation, and report any covered incidents that occur during business travel. 

Ground transportation

This part lays out policies and procedures for rental car usage and mileage reimbursement rates and documentation needed if an employee opts to use a personal vehicle for business travel. Set daily or per-trip spending limits set for ground transportation costs to keep expenses reasonable, and consider preferred rental car vendors to take advantage of pre-negotiated corporate rates.

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7 Steps to writing a clear travel & expense policy for your business

1. Set clear guidelines for travel bookings

The first step in creating a T&E policy is to establish guidelines for how employees should book their travel arrangements. This includes specifying the preferred vendors, such as airlines, hotels, and rental car companies, as well as any negotiated corporate rates. 

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You should also outline the allowed class of service for various modes of transportation (economy, business class, or first class) and any procedures employees must follow when booking travel (using a corporate travel agency vs. an online booking tool). 

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Setting these guidelines upfront helps manage travel costs, ensure consistency in employee experiences, and maintain visibility over business spending.

2. Outline expense submission and reimbursement procedures

Next, define the process for employees to submit expense reports and receive reimbursement. This involves outlining the required documentation, such as itemized receipts, invoices, and mileage logs, that employees must provide. 

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You also need to establish expense report submission deadlines and an approval workflow. Clarifying the reimbursement timeline and the acceptable payment methods, like direct deposit or corporate credit cards, also streamlines the expense reporting process and ensures timely reimbursement of employees.

3. Incorporate policy compliance and safety measures

Your T&E policy should address compliance with relevant laws and regulations, as well as safety considerations for business travelers. This may include adhering to per diem rates and other IRS guidelines for deductible expenses and company credit cards or travel expense reimbursements policies.

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Be sure to provide guidelines for booking lodging expenses and ground transportation to ensure the safety and security of your employees while traveling. Establishing procedures for reporting lost or stolen company property, including laptops or mobile devices, is another important compliance and risk management consideration.

4. Adapt the policy for remote and hybrid work environments

It's important that T&E policy addresses the needs of a remote or hybrid work workforce. This may include reimbursement guidelines for home office equipment, supplies, and internet/utility costs, as well as policies around virtual team building or client meetings, allowances for meal delivery, or virtual event tickets. Do not forget to consider how your policy applies to employees working remotely from different states or countries, including potential tax implications and insurance coverage.

5. Use a template to create your travel and expense policy 

Once you’ve confirmed the details for your policy, it’s time to document it. Use an expense policy template as a starting point to ensure that no critical components like mileage rates, parking fees, or hotel reservations are overlooked. Customize sections in the template to fit your business purpose and company’s travel needs.

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6. Embed your travel and expense policy into your finance tools 

Documenting your policy is just the first step. To prevent out-of-policy spending, utilize travel and expense management software to build guidelines into your company’s booking processes and corporate cards. Look for travel management tools that allow you to: 

• Approve trips before booking, and route requests to different approvers depending on the team and amount.   
• Dynamically adjust airfares and hotel maximums using market rates for a given route, or set fixed amounts.  
• Help employees find and book in-policy hotels and flights, and block out-of-policy bookings from going through until they receive additional approval.
• Make it easy for employees to submit their expenses via SMS or email. 
• Automatically analyze per diem expenses, trigger alerts for overspending, and flag unusual expenses like weekend spending or excessive tipping.

7. Communicate your travel and expense policy

With your travel policy and tools in place, the final step is to communicate the policy to your team. Consider hosting an in-person training session or creating a discussion forum for employee questions. Regularly review and update the policy to address changing business needs or regulatory requirements.

Make your travel and expense management easier with Ramp

Ramp's corporate card and spend management platform seamlessly integrates with your travel and expense policies, featuring compliance checks and capabilities to automate expense reporting, ensuring every transaction aligns with your guidelines. Expenses are automatically categorized and synced with your accounting software, streamlining reconciliation.

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Ramp's expense management software also provides powerful spend analytics, offering granular visibility into your company spending across departments, categories, and employees. This insight allows your finance teams to identify spend trends, negotiating opportunities, and areas for cost optimization within their travel and expense management processes. By leveraging Ramp's platform, you can improve your approach to corporate spending, achieving new levels of efficiency, control, and cost-effectiveness.