8 signs that your company is in urgent need of a Travel & Expense policy

A Travel and Expense Policy is an essential requirement for any company whose employees travel to perform their duties. Without one, a manager would be ‘flying by the seat of his pants’, an English idiom that refers to aviators that fly without using instruments.

The typical Travel and Expense Policy should address three basic questions:

  • What responsibilities do employees who travel have with regard to controlling and reporting spending associated with business travel?
  • What types of business travel associated expenditures will the organization reimburse?
  • What procedures should an employee follow for submitting expenses and being reimbursed?

Unfortunately, many organizations still do not have a Travel and Expense Policy in place. Here are eight signs that your company is in urgent need of one.

1. Employees are uncertain about their responsibilities

Without a formal written Travel and Expense Policy, employees cannot be sure what procedures they are required to follow when they travel. This can cause difficulties. For instance, they may not retain evidence of their expenditure, an essential preliminary to composing a travel expense report. Generally, only travel expenses that can be substantiated will be reimbursed. And even where he has been paid a per diem, an employee may still be required to submit an expense report that shows the business purpose of the trip, the location of the venue and dates visited, and receipts for lodging.

In addition, managers and supervisors who must review and approve expenditures will all end up “doing their own thing”, which may even differ at different times. Will the manager remember how he treated some similar situation months ago?

2. Employees are uncertain about the types of expenses allowed

Just as important, employees must be aware of the types of expenses that are reimbursable. They are entitled to be reimbursed for expenses that are necessary, reasonable and actually incurred when traveling on authorized company business. These generally can include the cost of meals, accommodation, entertainment, transportation and a number of ancillary expenses, such as tips.

3. Employees complain about unfair reimbursement treatment

Having no policy in place may result in inconsistency. One type of expenditure is approved by a manager for reimbursement, but refused by another manager. The result is inconsistent treatment that appears deliberate and unfair and raises questions of favoritism, resulting in lower employee morale. Just like the employee who has travelled, supervisors charged with approving expenditure need to know what qualifies for reimbursement and what doesn’t.

4. Employee fraud

By some estimates, “15 percent of all corporate fraud is linked to bogus travel and expense reports.” That alarming figure can be reduced by having a Travel and Expense Policy that prevents dishonest employees from professing ignorance about what’s allowed and what’s not. Then employees will find it more difficult to disguise personal expenses as business expenses, which is one way they attempt to defraud their employer.

A good, written policy could also discourage employees from inflating expenses, another way they might try to cheat. For instance, they may report leaving a bigger tip than they actually did. One way to combat this sort of fraud is by replacing reimbursements with a per diem system. A ‘per diem’ is a fixed payment made to cover or repay ‘travel expenses’, such as transportation, meal and accommodation expenses. A per diem is a standard payment that might only vary by location. For example, the Belgian per diem – the daily lump-sum allowance – for travel to France is 95 EUR, while for travel to the U.K., it is 101 EUR. Consequently, it would be a clear violation of policy if a greater amount were paid.

5. Reconciliation Issues

A Travel and Expense Policy will state how expenditures are classified and treated. With no policy in place, reconciliation difficulties arise, since different departments may classify the same type of expenditure differently. There may also be difficulties reconciling information from employee expense reports to third parties, such as travel agencies and booking platforms.

We've made you an editable Travel & Expense Policy template

6. Excessive time spent on reporting expenses

If employees have to keep checking with colleagues or a supervisor on how to do their expense reports, a lot of time is going to be wasted. Yet, every employee can be furnished with their own copy of the Travel and Expense Policy. Better still, a digital travel expense management tool can reduce errors and take the tedium out of expense reporting.

7. Managerial Procrastination in Reviewing Reports

No policy will probably mean nothing ever gets done when it should. For example, what’s to say how quickly an employee’s expense report should be reviewed or how soon after submission, reimbursement must be made. In the absence of a policy-mandated process and timeline, review of expense reports may depend on someone’s workload… or whim. The result will be frustrated, unhappy employees.

8. Excessive Travel Expense Costs

Lack of a policy can result in travel expenses that are out of control. Without guidelines, anything is possible. And without a dedicated expense management tool, the information to control costs comes after the costs have been incurred, in some instances long after. A policy will set boundaries on behavior and ceilings on costs. A digital tool will take things a step further by executing the control of travel expenses in real time.

Recognizing the signs?

Employees can’t comply unless they know what to comply with

It’s impossible to play by the rules unless you know what those rules are. A policy is vital if an organization and its employees are to observe best practices. Without a policy in place, the organization may run afoul of regulations, while employees will be unaware of their responsibilities and duties. One sure sign a Travel and Expense Policy is required is if different departments have different rules regarding the reimbursement of travel expenses. Another is punitive action taken against an employee. One woman was fired for putting a $9.95 hotel room movie rental on a business travel expense report, according to a CNN Travel report.

Having a policy in place will help you automating the process

A digital tool for managing travel expenses will increase efficiency by saving time and money. But it will require a framework of rules to operate, for example, no expenses on the weekend; maximum amounts for certain categories; no expense possible when there is a per diem, etc. The policy will provide ground rules on how the travel expense system should operate. Perhaps, just as important, creating a policy will force an organization to think hard about the system and how to make it operate optimally.

Originally published , modified

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