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Why You Must Have a Travel Expense Policy for Your Small Business

Why you need a travel expense policy for your small business

5 min
Posted: 23 February 2023
Small Business Coworkers Discussing Expenses

As your small business expands and more of your employees are required to travel for business purposes, providing a comprehensive corporate travel and expense policy is increasingly important. Particularly since, as a small to medium-sized businesses, your funds and buying agency may be more limited than in larger corporations. A well-defined company travel and expense policy can help maximize employee travel compliance, cut down unnecessary spending by avoiding hidden costs, and give you higher visibility into budget spending.

What is a Travel Expense Policy?

A travel expense policy is a set of rules and guidelines for booking flights, hotel rooms, car rental, and rail that clearly defines what is considered a work-related expense for employee reimbursement. These rules are in place to make it easier for employees to book their corporate travel and manage business-related travel expenses.

There’s not a one-size-fits-all travel expense policy; and when creating yours, take into consideration what your business needs are, those of your employees, as well as the budget that your company has allocated for travel.

Learn How to Create a Travel Expense Policy for Your Small Business


Why does your small business need a corporate travel and expense policy?

Traveling is something that’s often necessary for employees and making it as straightforward and clear as possible is very important. Your travel policies should be a combination of your company and employee needs. To prevent road warrior burnout, recognize employees’ expectations and be willing to provide flexible travel nuances like extended route lengths and adding personal travel time. Learn more how travel and expense policy impacts your overall company culture here. 

Streamlining your process with a centralized booking tool and a clear and robust travel and expense policy can help save your employees time, effort and confusion, while providing your business with easier expense management. Centralized booking is a one stop shop for all your travel needs. Instead of looking at multiple travel providers and spending time trying to find the best rate, a corporate travel platform will show you options based on your budget and travel needs. In addition, the centralized booking tool will incorporate your travel policies throughout the booking experience.

If your business requires employees to travel for work, having a travel and expense policy allows you to clearly communicate to your employees the maximum amount of spending allowed when booking flights and lodging, and everything in between. Providing clear guidance can also help reduce gray areas that can lead to expensive mistakes, while also allowing your employees to book their own travel with confidence. Your business’ travel expense policy can help predict travel costs for the company and allows for higher real-time visibility into budget spending.

There are many variables to consider. The recommended option for car rental, airfare and hotel room based on price and safety is always changing. Your approval settings need to be able to evolve with the changing economy and travel landscape. Here are a few basic requirements to consider:

  • Price range of airline tickets based on destination
  • Maximum cost for lodging expenses per night
  • Business class or first-class upgrade permissions
  • Minimum number of days booked in advance
  • Define distinct types of business purposes for travel

Benefits of implementing a travel and expense policy[1]

Sets up employee expectations

Providing a clear guide for employees to follow that outlines what expenses are covered and how the booking process works, reduces misunderstandings and frustration when reserving flights and lodging or when submitting expense reimbursements.

Keeps your small business audit-ready

Establishing a travel policy helps your organization align with any tax guidelines and stay compliant with tax regulation required by the IRS, keeping your company audit ready.

Establish defined roles and responsibilities

Identifying who an employee can turn to for any questions or concerns helps establish trust and confidence within your organization and keeps an open line of communication. For example, if Human Resources will be handling all corporate travel, employees know any questions can be directed to them.

Keep your company’s bottom line at the forefront

Since travel policies keep open visibility into spending in one centralized place, it allows those in charge of budgeting to manage costs and implement preventative measures that can help cut down on overspending.

Help prevent fraud

Mistakes happen but automating reimbursement requests can curb unintentional (or intentional) mistakes like submitting duplicate receipts. A good, clear travel expense policy can help avoid any confusion or gray areas that may lead to human error.

Create Great Company Culture with Business Travel Expectations and Policies


What you should include in a travel expense policy

While no travel policy will look exactly the same, there are a few things that an effective travel expense policy will include. Most importantly, remember that your policy should be dynamic and flexible, as it will have to be updated with some frequency. Ideally, travel policies should be reassessed on a yearly basis, if not more often. Change your policy based on business goals, budget, company size, etc. Below are other important must-haves to include.

Clear language

Use clear and concise language that is easy to understand when drafting your policy. Don’t overcomplicate wording with corporate and legal lingo that may confuse your employees or leave gray areas.

Budget limit amounts and prefer payment methods

Be sure to state clearly what the budget and maximum spending allowed for lodging, flights, car rental, and rail. Any booking tool that you’d like your employees to use should be clearly stated, as well as specific payment methods (like credit cards) that employees should use.

What is a covered expense

Other things to consider as you create your policy is listing out explicitly what a covered business expense is and what isn’t.[2] For example, if business travel includes meeting with potential clients that require entertaining over dinner or drinks, it’s best to include it as a covered expense, since it directly affects the business. If employees have a per diem stipend for food, this is also something that should be clearly stated within the policy’s language. If you’re not sure what is typically covered, some examples include:

  • Airfare
  • Rail transportation
  • Car rentals
  • Hotels
  • Taxis and share ride expenses
  • Conference registrations
  • Parking
  • Mileage and gas (if driving)
  • Tolls
  • Tips for meals and hotels

Instructions for Reimbursement

Lastly, an important component that you should include is clear instructions on how employees should submit their reimbursement request. Everything should be spelled out clearly, including the time frame within which they should submit their reimbursement request, what documentation is needed (receipts or bank statements), how long they should expect to wait to get their money back, and how the money will be returned to them—whether it be a separate check or added on to their next paycheck cycle.

Egencia offers corporate travel solutions to small and medium-sized businesses

As a growing business, you should be invested in the right tools, processes, and systems that promote a meaningful travel program and seamless expense management experience. No matter what corner of the world your business takes you to, Egencia helps you manage your internal policies, travelers and expenses all in one comprehensive, yet easy-to-use platform with 24/7 support.

Request a demo to learn more.

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