What are T&E expenses?

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Travel and expense (T&E) management is an essential part of running virtually any business. In this article, we'll dive into some common T&E expenses, explain how effectively managing these costs can help your business, and share some best practices to help you streamline your T&E processes. Read on to learn everything there is to know about T&E.

What is a T&E expense?

T&E is an acronym for “travel and expense,” but some also interpret it to mean “travel and entertainment.” T&E expenses refer to those expenses employees incur while traveling on business and entertaining clients or partners. Common T&E expenses include:

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• Airfare
• Train tickets
• Rental cars
• Taxis and ride share services
• Business mileage
• Hotels and other lodging
• Restaurant meals
• Parking and tolls

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Traditionally, employees submit expense receipts for their T&E purchases as part of an expense report. If the employee paid for the expenses out of pocket, they’re usually reimbursed.

‍Is T&E an operating expense?

Yes, T&E is considered an operating expense, covering costs like business travel expenses and entertainment expenses. In accounting, operating expenses represent the costs incurred as part of your day-to-day operations.

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You record operating expenses, including all T&E expenses, on your company's income statement below gross profit. This recording helps stakeholders understand your company's operational costs and financial health.

What is T&E in a contract?

T&E 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 ultimately bears these costs.

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This section of a contract helps 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 avoid potential disputes.

Why is T&E expense management important for businesses?

T&E expenses can add up quickly and often constitute a significant portion of a company’s 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. Still, without a system to track and control costs, you can quickly blow your budget, and accounting teams can get backed up dealing with costs they didn’t anticipate.

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

T&E costs are tax-deductible, but because they can span such a wide range of business expense categories, it’s important to demonstrate to the IRS that each purchase was 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 recordkeeping, keeping an organized log of all relevant invoices and paper receipts. A well-structured workflow for managing receipts and approvals can significantly streamline the reporting 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 expenditures on a business trip, doing so without any controls or restrictions can result in excessive or unnecessary spending.

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This is why many businesses find it helpful to use cards with predefined or actively managed permissions that specify what employees can or can’t purchase on behalf of your business and which vendors they’re allowed to make those purchases from.

Common T&E challenges and how to solve them

Managing T&E can be a particular challenge for many small businesses, especially as T&E costs are expected to hit pre-pandemic levels by the end of 2024, according to Forrester research.

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These challenges continue to evolve as tech advances and electronic payment methods become more diverse—and they often become even harder to tackle as your business grows. Here are a few common challenges around managing T&E expenses:

Reimbursement delays

Expense reimbursement is complicated, and delays in repayment can strain operations and damage employee trust. Expense management software with expense reporting automation features can help employees log their T&E purchases more efficiently and streamline the reimbursement process.

Unclear expense policies

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

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Having clear company policies around T&E allows employees to spend responsibly and with more confidence, protecting your bottom line and eliminating the need for managers and finance teams to constantly dispute individual purchases.

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Error-prone reporting and data entry processes

Manually updating spreadsheets to track expenses is inefficient and error-prone. It also places an unnecessary burden on employees to double-check entries when they should be focused on more important tasks, like entertaining valuable clients and representing your business positively.

Manage your T&E expenses with Ramp

Once you’ve defined your company’s travel and expense policy, the best way to streamline your travel expense management process is to use a modern finance platform like Ramp. 

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Our corporate cards let you set custom vendor controls and spending limits, and our automated expense management system tracks and categorizes your employees’ expenses in real time. Ramp lets you upload your T&E policy directly to the platform so you can get instant notifications about out-of-policy spending—or block it before it even happens.

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And with Ramp Travel, you can be sure you’re getting the best rates on your corporate travel thanks to our partnership with Priceline. On top of that, employees can earn rewards by opting for more cost-effective itineraries. All this means you’ll be able to devote more time to the critical work that grows your business.

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Check out our interactive demo environment and see why companies that choose Ramp save an average of 5% a year across all spending.