Business travel expense management means controlling and tracking all costs related to company travel. Unlike other expenses, which are usually spent by team leaders and department managers, business travel expenses occur across the organization. Not only are there more people doing the spending, but there are more vendors too. From airlines to hotels to taxis to restaurants, a single trip can require dozens of expense reports.
Our guide to controlling business travel expenses will help you learn how to consolidate your spending, achieve oversight, and craft policies with high compliance.
What’s in this guide:
- What are business travel expenses?
- What types of business travel expenses can employees claim?
- Best practices for managing business travel expenses
- How to calculate business travel expenses
- Ways to reduce business travel expenses
- How to manage ground transportation costs
- Tactics for reducing air travel costs
- Ways to save on accommodation costs
What are business travel expenses?
A business travel expense is anything purchased by an employee for business purposes when traveling outside of the office. Eligible expenses include airline tickets, train tickets, hotel reservations, taxi fares, public transportation, and in some cases, meals. While business travel expenses are typically initiated by employees, they might also originate from contractors who travel for your company, such as influencers, repair specialists, long-term agency partners, and many others.
Employees can get reimbursed for business travel purchases by submitting an expense claim. However, this particular reimbursement method is somewhat outdated today. Instead, companies can choose to consolidate purchases with business travel vendors, and pay those vendors directly.
What types of business travel expenses can employees claim?
Not everything that an employee buys on a business trip is truly a business travel expense. Usually, businesses will only pay for necessary expenses incurred during the process of performing work. Whether your company chooses to pay for just these or are more generous, all expenses paid for by a business need to be accounted for in some way. In the UK and many other countries, eligible expenses for tax deductions may include:
- Public transportation
- Hotel accommodation, if staying overnight is required
- Food and drink
- Bridge and road tolls
- Parking fees
- Business phone calls
- Printing costs
It’s important to account for business travel expenses accurately as they can reduce a business’s taxable profits, resulting in a lower tax bill for the year. Employees have an obligation to accurately report all expenses so their company can claim those tax benefits. At the same time, employers should quickly reimburse qualifying employee purchases and pay for things upfront (so no reimbursements are required).
Examples of illegitimate expense claims
Employees might knowingly or unknowingly submit reimbursement claims for non-business-related expenses purchased during a trip, such as a novel at the airport or new clothes for an important event. While commuting to and from the office isn’t generally considered as a business travel expense, it might be in some cases.
Best practices for managing business travel expenses
Business travel is one of the hardest expense categories to manage because there are so many decision-makers, travelers, and vendors involved. Here are some important best practices.
1. Promote a company-wide expense policy
Businesses should clearly communicate their expense policies to all employees to ensure that they are aligned with the organization’s compliance expectations. Spending outside of policy can leave your company in a sticky situation. Should you reimburse the employee even if it’s not a tax-allowable expense for your business? Should you risk employee frustration if you don’t reimburse an ineligible expense?
If your expense process is notoriously challenging, employees might delay or skip it altogether when they get busy, meaning the cost is coming out of their pocket. A lot of problems can be solved proactively with an effective expense policy.
Two-thirds of employees admit that they haven’t read their company’s expense policy. Here are some ways that you can promote your policy to make sure it’s actually being read:
1. Team or department expense meetings
2. Company-wide emails prior to business trips or high-travel seasons
3. Post it in your company forum or intranet
4. Include it in company-wide HR documentation, ensuring it’s widely accessible
Fraud is certainly an issue as well. In one survey, 85% of employees admitted to having lied on a reimbursement report in the past in order to get paid a higher amount. Those who commit fraud claim an average of $2,448 per year, with the top offenders admitting to $25,000 per year. Businesses can mitigate this by using automated expense technology that scans receipts to turn them into expense reports, and by running regular audits of receipts. Since you might not be able to manually audit every receipt, you should try to pull representative samples, so that every employee and department is audited at least once or twice a year.
2. Choose your preferred expense method
There are essentially two ways in which you can pay for business travel expenses:
1. Employees pay and get reimbursed – Many companies prefer to avoid this when possible, due to the reimbursement abuse mentioned above. When employees pay with their own money, it can, unfortunately, be easy for them to add a little extra on top of the claim.
2. Your company pays the vendor directly – Instead of employees paying out of their own pocket, your company can pay directly, either with a company card or with a ground transportation platform like Gett, which helps your employees take taxi rides within your policy. While you’ll still need to control expenses with policies and regular audits, you can help to reduce levels of fraud with this method. Rather, you’ll have to watch out for unnecessarily expensive trips, and out-of-policy bookings.
When hunting for a company credit card, make sure to research any hidden fees before you commit. Those fees could add up in a significant way.
3. Implement a smart expense claim procedure
A clear expense process can help to ensure that employees are logging expenses in a timely manner, providing you with more accurate visibility. Expense forms, spreadsheets, and dedicated expense management software are all viable options for expense claims. While small businesses might be able to make do with expense forms and spreadsheets, most will be better off using expense management software.
Here are some factors to consider:
- Receipts and invoices – Where will these be submitted? How will copies be attained?
- Expense management software – Does the tool integrate with your important business and travel booking systems in order to automatically pull in expenses with no need for forms?
- Budget planning – Does your process offer instant visibility into spend so you can accurately adjust your budget?
- Expense submission deadlines – When expense forms are required, how long do employees have to submit them? (Ex: 15 days)
- Reimbursement periods – When reimbursements are required, by when does your company promise to complete them? (Ex: 30 days)
If you book travel with one central platform, you can avoid a lot of manual work. For example, Gett integrates with Concur so your ground travel expenses are automatically imported into your expense management system. And with consolidated invoicing, your employees don’t have to pay for anything out of pocket.
How to calculate business travel expenses
With 57% of companies reporting that lack of visibility is their biggest spend-related concern, it’s clear that things need to change. Companies need visibility into company-wide expenses and the invaluable data that comes from expense reports.
1. Keep detailed records
Whether your business is using expense management software or manually keeping records, it’s vital to be organized and track everything from invoices to VAT receipts. Expense reporting can make a huge impact on your tax deductions. For that reason, expensing software is highly recommended.
Log the following for each expense:
- Business purpose (client account, corporate event, or other travel reason)
- Type of claim (food, accommodation, flights, ground transportation)
- Receipt or invoice
2. Book travel using platforms that provide analytics
You can have a much easier time calculating your business travel expenses if you use travel booking platforms that offer travel analytics. For example, when you book ground transportation through the Gett platform, you can analyze your biggest spenders, in terms of individuals, groups, departments, or projects.
3. Project your travel expenses
Analyze your travel expenses from previous years in order to set projections for the next five years. Typically, CFOs and finance managers will create a spreadsheet with a column for each upcoming year, and a row for each type of expense. You might include rows for accommodation, flights, ground transportation, and food. In your projections, be sure to incorporate new employees joining the business, recurring expenses, new office openings, seasonality, and other factors that could either increase or decrease spend.
4. Calculate expenses per trip
How much does each business trip cost? If you’re not sure, it’s hard to set accurate budgets and policies. If you outline the costs for common sorts of trips, you can set realistic allowances and adapt them for different locations. Knowing cost benchmarks can also help you identify departments or staff that spend more than others. Discovering this information is easy with travel analytics.
When setting allowances, make sure to consider:
- Food and drink
- Ground transportation
- Additional amenities like Wi-Fi and gyms
5. Categorize travel expenses
Categorizing business travel expenses is a must. If you’re using an expense management system, some of this will be done automatically. For example, the software should be able to detect airline vendors versus food vendors. However, you should set up the foundational categories that you want to include, such as air travel, ground travel, meals, accommodation, and miscellaneous. Then, as expenses are automatically pulled into the system via integrations, you can re-categorize anything that wasn’t done correctly. Maintaining these categories will make it easier to forecast your budget and identify opportunities for cost controlling.
Ways to reduce business travel expenses
Business travel expenses can be a major contributor to overall yearly expenses. Here’s how to manage travel expenses in a corporate setting.
1. Are overnight stays necessary?
Airlines and train companies offer early mornings and late-night travel options. Many employees prefer a long day of travel over staying in a hotel and being away from home. So you might be able to cut costs on accommodation while also getting employees back home faster. When overnight travel is necessary, encourage employees to book basic rooms, and see whether or not Airbnb is cheaper in their destination city.
2. Have you negotiated corporate rates?
You can negotiate rates with both boutique hotels and hotel chains. If your company is a frequent customer—and, if you’re able to promise a decent number of bookings per year—the hotel may reward you with special rates. For best results, come armed with data about how many nights you’ve stayed with that hotel or chain, and your predicted annual bookings.
3. Does your travel policy truly fit your company’s needs?
If your travel policy has a low rate of compliance, there are likely to be two issues at play: your travel policy is probably a document, as opposed to being built into software during the booking process. The other issue is that your policy might not fit your company accurately. For instance, your travel policy document might offer the same rules to every employee. Instead, build out a travel policy in your booking tool, and make sure to customize it for different employees based on their seniority level or reason for travel.
4. Are you comparing costs from multiple vendors in one place?
Another way to save on business travel expenses is to compare rates from multiple vendors in one place. This allows you to get the best price, without sacrificing hours searching online. With a software platform like Gett, you can access multiple taxi vendors, ride hailers, and other ground transport options so employees can instantly pick the best rate available. And all of this happens with your travel policy in effect.
5. Are you recovering taxes?
A lot of money is lost through businesses failing to recover taxes on travel spend. UK companies may be entitled to recover VAT on business-related accommodation, meals, transport, conferences, and other events through their VAT return. Companies may also be able to recover overseas VAT incurred on international travel, although the process for this is more complicated.
6. Are you claiming rewards?
Your company might not be using all of the rewards that are available to you. The majority of airlines, hotels, and car rental companies offer reward schemes. For example, Marriott Hotels offers free nights and members-only rates as part of their reward scheme. And JetBlue’s TrueBlue points program allows you to put your points towards qualifying fares. Make sure that your company is pulling points together if the rewards program allows, or that—at the very least—employees are utilizing their points.
7. Are you considering peak travel?
Peak seasons, particularly during the summer months and winter holidays, can increase your travel costs by 50%. Flights, accommodations, and ground transportation will all cost more during high-travel months or school holiday weeks. Air travel, in particular, is prone to big swings. It’s important to strategically plan business travel outside of peak seasons. With many companies going partly remote, work retreats will become even more common. If you can, schedule any events in late winter, early spring, and late fall to avoid high costs.
How to manage ground transportation costs
Ground transportation includes taxi hires, car rentals, mileage reimbursement for personal vehicle use, and public transit. While much cheaper than flying, ground transportation can still add up to a large monthly amount.
1. Pre-plan transportation arrangements
Planning ahead is almost always a good cost savings strategy, and that’s certainly true with ground transportation. If you use a centralized platform, employees can get rates from multiple vendorsin one place. Gett integrates with several third-party ground transportation providers in hundreds of cities around the world. With the Gett platform, you can also create travel policies for ground transportation, like only allowing premium cars for executives, or encouraging walking for trips under a certain distance.
2. Avoid airport parking
In your policy, make it clear that your company doesn’t cover airport parking. Airport parking is more expensive than nearby garages in just about every city. Encourage companies to book parking elsewhere with an app like JustPark, ParkMobile, or SpotHero. If you want to take an aggressive stance against airport parking, you can state in your policy that it isn’t reimbursable.
3. Use public transport when possible
Public transportation is much cheaper than hiring a car. With Gett, you can set policies that will help encourage the use of public transport. For example, you can set a policy that doesn’t allow taxis for short distances (unless that individual has a disability). Instead, the employee will be required to walk or take public transportation. You can also use geotagging to create very unique policies. You might allow employees to take a taxi to a metro station near the office, but not allow other sorts of local taxi rentals without manager approval.
Tactics for reducing air travel costs
The cost of air travel can quickly accumulate, from buying basic fares to flying business class. This is an area where costs can quickly get out of hand, simply because of all of the different options and add-ons. Here’s help on how to keep air travel costs to a minimum.
1. Book plane tickets in advance
When booking personal travel, your employees probably don’t procrastinate booking so they can get an early bird price. But when booking business travel, they might not be so cautious. Booking plane tickets in advance can significantly reduce costs. Consider implementing a strict travel policy that requires tickets to be booked at least 3 weeks in advance. Anything outside of this policy should require manager approval.
2. Compare airline websites
Make sure that employees are checking rates across a variety of websites to get the lowest rate. Employees can check top airline carriers’ websites directly. Travelers can also use a booking platform like TravelPerk to get costs from different vendors in one place, or a browser extension like Shep to keep airline travel in policy, regardless of the website where it is booked.
3. Don’t pay for baggage
Encourage employees not to pay baggage fees unless the trip is longer than 3 days. For most trips, a carry-on or small backpack provides plenty of space for clothing changes and toiletries. Educate employees on traveling light and bringing a “capsule wardrobe”—meaning clothes that can be easily mixed and matched. If baggage fees are a problem for you, you might consider a no-tolerance policy that doesn’t reimburse them.
4. Partner with airlines
Partnering with airlines is a great option for larger companies that travel frequently. To get special corporate discounts, waived ticket cancellation fees, and other perks, you’ll need to approach the airline with data on the number of flights booked with the carrier, and your projected travel plans for the coming year. Keep in mind that booking travel with the same carrier (and not comparing rates) can be costly, so this is only recommended for companies with over 1,000 regular travelers.
Ways to save on accommodation costs
Compared to airlines, it’s much easier to save money on accommodation. Single travelers don’t need large rooms, and because employees frequently travel during the week, they’re usually already getting better deals compared to weekenders. However, hidden costs abound. Travelers might end up spending more on parking, Wi-Fi, and other amenities. Here’s tips on how to save on hotel costs.
1. Always use trusted hotels
Trusted hotel chains have certain standards that they must adhere to in order to avoid brand boycotting and bad PR. Business travelers are often better off staying with trusted hotels that don’t hide their costs. What’s more, hotel chains will reward loyal customers with favorable rate negotiations.
2. Contact hotels directly before booking
Booking with hotels directly often produces a better rate than booking with an online travel agency (OTA). You can even call the hotel and let them know what rates were given elsewhere, and ask if they can offer something more competitive. They’ll be able to give you a better deal because they won’t be paying the OTA commission. Plus, booking with hotels directly establishes a better foundation for later negotiating special rates for your company.
3. Say no to additional fees
Talk to employees about saying no to unnecessary fees, such as minibars, dry cleaning, room service, etc. Clarify in your company travel policy if these things aren’t covered. On an individual basis, you can chat with senior executives about what they need to purchase (if you want to offer them more perks). For common destinations, have a travel manager put together a list of recommended hotels and nearby eateries. And make sure to specify which additional fees are allowable, such as Wi-Fi and parking if they’re not already included in the hotel’s nightly rate.
The final word? Travel expenses come from every direction. Travel is easily one of the toughest expense categories to control. With smart policies and clear guidelines, you can help reduce your spending.
Book all ground transportation in one place and manage your entire business travel spend with ease. Gett could save you up to 45% on your global ground transportation spend. Learn more about Gett.