What are T&E expenses?

T&E is an acronym for travel and expenses, although some interpret it to mean travel and entertainment. It describes expenses that arise during the course of business-related travel, or while entertaining clients. Common T&E expenses include meals, hotel bookings, and transportation costs like car rentals and ride shares. Traditionally, employees submit receipts for their T&E expenses and are subsequently reimbursed. 

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Travel and expense management is an essential factor of running virtually any business. In this article, we'll delve more deeply into some common T&E expenses, how effectively handling these costs can help your business, and some effective ways to streamline your T&E processes. Read on to learn everything there is to know about T&E. 

What is a T&E expense?

As mentioned, T&E stands for “travel and expenses,” but is sometimes also referred to as “travel and entertainment.” T&E expenses refer to those expenses employees incur while traveling on business and entertaining clients. A few of the common T&E expenses include: 

• Airfare
• Train tickets
• Car rentals and ride share services
• Hotel Stays
• Restaurant meals 
• Parking and Tolls

‍Is T&E an operating expense?

Yes, T&E (Travel and Expenses) is considered an operating expense, covering costs like business travel expenses and entertainment expenses. In accounting, operating expenses, including T&E costs, are recorded on a company's income statement below the gross profit, showcasing the costs incurred in the day-to-day operations of your business. This recording helps stakeholders understand your company's operational costs and financial health.

What is T&E in a contract?

T&E (Travel and Expenses) in a contract refers to the policy for claiming travel and related expenses during the contract's execution. It outlines reimbursement rates, approval processes, and who bears these costs.

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This section of a contract helps to ensure that expenses are managed fairly, providing a clear framework for both parties to understand and agree upon the allowable travel costs for business purposes, helping to avoid potential disputes.

Why is T&E management important for businesses?

T&E expenses can add up quickly, and often constitute a significant percentage of operational costs. Therefore, it’s important to establish procedures to manage T&E spending effectively. Here are a few reasons why T&E management matters for businesses:

Tracking T&E effectively can prevent unexpected costs

T&E is often a necessary and inevitable aspect of doing business, but without a system in place to track spending, accounting teams can get backed up dealing with costs they didn’t anticipate. 

Inaccurate or insufficient reporting of T&E can result in tax complications

T&E costs are tax-deductible, but because they can span a large range of business expense categories, it’s important to demonstrate to the IRS that each purchase is in fact business-related. Incorrect expense reports can trigger audits, so accurate reporting is crucial.

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For this reason, you’ll want to be thorough with your record-keeping, being sure to keep an organized log of all relevant invoices and paper receipts. A well-structured workflow for managing receipts and approvals can significantly streamline the payable process.

Controlling what can (or can’t) be purchased is critical for reducing T&E costs

While it may be tempting to send employees on their way with a corporate credit card to cover expenses on a business trip, when this is done without any controls or restrictions, it can result in frivolous and unnecessary spending.

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This is why many businesses find it helpful to use cards with predetermined or actively managed permissions regarding which vendors can be purchased from, as well as what can or can’t be purchased on behalf of the business.

What are some common challenges associated with T&E?

Managing T&E can be particularly challenging and is often cited as one of the most difficult costs to manage, along with payroll. 

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These challenges evolve with technological advancements and modern payment methods, and often become harder to tackle as a business grows. Here are a few common challenges around managing T&E expenses:

Reimbursement delays

Expense reimbursement is complicated, and delays in repayment can cause a strain on operations and damage to employee trust. Tools like expense automation can help employees log T&E-related purases and make the overall reimbursement process more efficient.

Unclear expense policies

Many businesses make the mistake of failing to maintain clear travel policies, leaving rules around T&E spending open to interpretation. While you want to provide financial support to your employees while they’re traveling on business, this doesn’t mean that you should open up the floodgates to unnecessary purchases.

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Having clear policies in place around T&E allows employees to spend responsibly and with more confidence, in addition to eliminating the need for finance teams to constantly approve individual purchases.

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Ali Mercieca

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Finance Writer and Editor, Ramp

Ali Mercieca is a Finance Writer and Content Editor at Ramp. Prior to Ramp, she worked with Robinhood on the editorial strategy for their financial literacy articles and with Nearside, an online banking platform, overseeing their banking and finance blog. Ali holds a B.A. in Psychology and Philosophy from York University and can be found writing about editorial content strategy and SEO on her Substack.

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