Everything you need to know about T&E
Every dollar counts in the business world, yet a significant amount often goes unchecked: travel and expense (T&E). T&E is a substantial category in business accounting that handles costs incurred by employees on the road or while entertaining clients.
These expenses, which often include meals, lodging, travel fares, and client entertainment costs, quickly add up. That’s why you need a solid T&E expense management strategy to keep up with your business's financial health. But before we dive into strategic guidelines and tools for managing these expenses, let's lay the foundation.
What are T&E expenses?
T&E expenses can vary widely, depending on the industry, company size, and corporate policies regarding employee spending limits and acceptable expenditures. Examples of T&E expenses include the following:
Airfare
Hotel accommodations
Car rentals
Meals on the road
Expenses associated with entertaining clients
Tips
Tolls
Parking fees
T&E expense management tips
The following are some best practices management tips when it comes to T&E.
Create a clear policy
One of the first steps in effective T&E expense management is to create a clear policy. This policy should outline what expenses are considered eligible for reimbursement and provide guidelines for employees on how to submit their expenses. It should also specify any spending limits or restrictions and detail the reimbursement process.
Educate employees
Once you’ve got a clear policy in place, another critical part of effective T&E expense management is educating and empowering employees about the company's T&E process. This way, employees are aware of what will and won’t be approved, avoiding any unwelcome surprises.
When they go on a business trip, for example, should they use their own card or a company card? What are the limits for spending in each category? How should they keep track of receipts and other documentation? And, if they need to pay for things with their own money upfront, how do they get reimbursed? Even better, use a T&E platform that helps educate employees on their policy when booking travel and generating expenses.
Use technology
Investing in a T&E expense management software simplifies and streamlines the process. It allows employees to easily submit their expenses, track their spending, and ensure compliance with company policies.
What you want to look for in a good expense management software is something that provides automated approval workflows, allowing managers to review and approve expenses quickly. You also want something that makes it easy on employees when it comes to tracking expenses and knowing if they’ve reached their limit or not.
For example, a platform that uses a receipt scanning feature is ideal. This helps to speed up the reimbursement process and ensures expenses are being properly reviewed and authorized.
Set spending limits
To control costs and prevent overspending, set spending limits for different expense categories. This can be done by establishing maximum allowable amounts for things like meals, accommodation, and transportation. Doing this also helps to encourage employees to be more aware of their spending.
Regularly audit and review expenses
Minimize fraud and ensure policy compliance by regularly auditing and reviewing T&E expenses. This means randomly selecting and examining expense reports to verify the accuracy of the information provided.
Then, you can identify any discrepancies early on and address them right away to maintain financial transparency and reinforce the importance of sticking to company policies.
Leverage data analytics
Data analytics can play a crucial role in T&E expense management. By leveraging data analytics tools, companies can gain insights into spending patterns, identify areas of potential cost savings, and uncover any fraudulent activities. Analyzing expense data also helps to identify trends, such as excessive spending on certain categories or by specific employees.
Creating a robust T&E budget
For small businesses, effectively managing T&E spend is crucial in financial planning and can influence the company's bottom line. Here are the steps involved in creating a T&E budget for your company.
Analyze past spending
Start by looking at past expenses to understand spending patterns. Categorize these expenses to identify where the bulk of the money goes. Then, you’ll be ready to create guidelines around these categories and know where to set limits.
Establish spending guidelines
Set clear policies on what’s considered an acceptable T&E expenditure. This helps in preventing overspending and fraudulent claims, but it also means that employees have a clearer understanding of how the process of spending, documenting, submitting, and reimbursing works.
Estimate future T&E spend
Estimate the upcoming period's expenses based on historical data and projected business growth. Remember to account for things like seasonal variations and planned business expansions. If you have expense software management in place, make sure it has a tool like Expensify’s Insights and Custom Reporting feature, which gives you a detailed, visual summary of company spending.
Allocate funds
Based on your estimation, allocate a specific amount for T&E in your budget, considering your business goals and financial constraints. Is it an important part of your business to wine and dine clients? Does your company employ events contractors nationwide, who need to be reimbursed for on-the-road expenses?
Whatever it is, having a set budget in place makes sure you stay on target when it comes to expenses.
Monitor and adjust
Regular monitoring of your T&E budget is not just important; it’s necessary. When you know what’s being spent and where it’s going, you can adjust the budget to accommodate unforeseen changes or to optimize spending.
Implement a T&E expense management solution
Investing in an expense management solution to streamline the T&E process creates a system of checks and balances, and ensures policy compliance. Instead of guessing how to categorize business expenses, a good tool automates it for you so you don’t have to do the heavy lifting.
Common T&E challenges
Almost every business has T&E expenses, but small businesses, in particular, face unique challenges when managing T&E.
Maintaining a clear T&E expense policy
It can’t be overstated: small businesses must have a clear T&E expense policy. Without it, ambiguity can lead to improper spending or compliance issues.
Solution: Implement clear and robust guidelines that outline allowable expenses and procedures for submissions.
Budgeting and monitoring T&E spend
Small businesses often struggle with forecasting and keeping T&E spending within budget, affecting profitability.
Solution: Use T&E expense management tools to track spending and understand trends for better forecasting.
Processing expense reports
Manual processing of expense reports is time-consuming and subject to human error.
Solution: Adopt automated expense management systems to streamline submissions and approvals.
Ensuring compliance and preventing fraud
T&E can be an area vulnerable to fraud and misuse.
Solution: Regularly audit expenses and educate employees on the importance of compliance to minimize risks.
Supporting a mobile and growing remote workforce
In a world where working from anywhere is starting to become the norm, access to T&E management tools on the go is essential.
Solution: Provide mobile-friendly tools, like Expensify, that allow employees to submit and manage expenses anytime, anywhere.
Manage T&E expenses with Expensify
Expensify simplifies the management of T&E spend, especially when it comes to tracking and controlling expenses. As a platform designed to ease the (often) daunting process of expense reporting, Expensify is a go-to solution for T&E expense management.
Key Features:
Automated expense reporting: Expensify automates the expense report creation process, saving time and reducing errors.
Receipt scanning: Snap and upload receipts using Expensify's mobile app, which automatically extracts relevant details.
Approval workflows: Customize approval workflows to align with your company's policies.
Reimbursements: Process reimbursements quickly, often within a single day.
Integration: Synchronize with accounting software for streamlined financial management.
With Expensify, you can maintain a balanced T&E budget by easily monitoring your T&E spend, ensuring compliance with company policies, and making expense tracking user-friendly for employees.
T&E expenses FAQs
-
A T&E transaction is any financial activity that involves the costs of travel and entertainment related to business operations. As previously mentioned, these transactions typically include expenses incurred while employees are on business trips or hosting clients and may cover airfare, lodging, meals, client entertainment, and ground transportation.
-
The T&E process usually involves several stakeholders within an organization:
Employees: They incur expenses while performing business-related activities.
Managers: Responsible for approving expense reports and ensuring they’re in line with company policies.
Accounting department: Processes reimbursements and maintains accurate financial records.
Auditors/Internal compliance: Ensures adherence to corporate policies and external regulations. The collaboration between these parties is crucial for effective T&E expense management.
-
T&E operating costs are the day-to-day expenses that businesses incur as part of their travel and entertainment activities. These costs form part of the operational budget for companies with staff who travel or entertain clients regularly and can include:
Transportation (flights, trains, car rentals)
Accommodation (hotels, short-term rentals)
Meals and dining
Client entertainment
Miscellaneous travel-related expenses (e.g., WiFi charges, tips, parking fees)
Ready to make your T&E expense management less of a headache? Enter your information below, and we’ll take it from there.
