Managing T&E is an essential factor of running virtually any business, but like most expense management initiatives, it can be a bit more complicated and difficult to keep track of than many businesses expect. In order to avoid unnecessary spending and reporting errors, it’s absolutely critical to have processes in place to manage T&E proactively at all levels of the organization.
In this article, we'll explain what T&E actually means, why it’s increasingly important to manage, and some of the common challenges businesses face when attempting to keep T&E-related spending under control.
What is T&E?
T&E stands for “travel and expenses,” but is sometimes also referred to as “travel and entertainment.” While the volume and nature of purchases will look different depending on the organization, T&E is generally thought to be an expense that an employee incurs while traveling on business and entertaining clients, including flights, lodging, meals, and day-to-day transportation.
Why is T&E management important for businesses?
For most businesses, expenses related to T&E can add up quickly, and often constitute a significant percentage of operational costs. Therefore, it’s imperative to establish procedures in order to manage T&E spending as effectively as possible. Here are just a few specific examples of why T&E management is so important for businesses:
Tracking T&E effectively can prevent the compounding of unexpected costs
T&E is often a necessary and inevitable aspect of doing business, but in the absence of a comprehensive system to keep track of spending, accounting teams can get backed up dealing with costs they hadn’t previously anticipated. When it comes to business expenses across the board, it’s best to keep surprises to a minimum.
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 products and services, it’s important to demonstrate to the IRS that each purchase is in fact business-related to avoid underpayment or misrepresentation and penalties.
For this reason, businesses need to be particularly thorough when it comes to record-keeping, being sure to keep an organized log of all relevant invoices and receipts.
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 necessary controls and restrictions it can result in frivolous and unnecessary spending.
This is why many businesses find it helpful to utilize cards with predetermined or actively managed permissions regarding which vendors can be transacted with, 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 frequently cited as being the second most difficult cost to manage, following payroll. These challenges are naturally evolving alongside technological advancements and modernized payment methods, and tend to become even more difficult to overcome as a business grows. Here are a few common challenges to be aware of:
Expense reimbursement is complicated, and delays in repayment can result in a strain on operations and damage to employee trust. This is why businesses are increasingly utilizing tools like expense automation to help employees log T&E-related purchases and to make the overall reimbursement process more efficient.
Policies around T&E spending are unclear or insufficient
Many businesses make the mistake of maintaining unclear travel policies and leaving rules around T&E spending open to employee 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 transactions.
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.
If you need help creating your own expense policy, check out our expense policy generator.
Error-prone reporting and data entry processes
Utilizing manually updated spreadsheets to keep track of T&E spending can present a number of challenges for businesses.
Not only can it increase the risk of an error or miscalculation, it also places an unnecessary burden on employees to double and triple check entries when they should be focused on more important tasks, such as interacting with valuable clients and representing your business in a positive light.
Interested in learning more about how to manage T&E for your business and keep travel expenses within reason? Check out our more in-depth article on effective T&E planning and management.