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T&E Policy: 10 Best Practices to Eradicate Inefficiencies that Impact the Bottom Line

The effective management of T&E spending requires the proper alignment of people, process and technology. In previous blogs I have shared the breadth and depth of the technology now available to help companies control T&E expenses, The New Frontier of T&E Expense Management: 7 Tech Features to Tame the Beast, and how to engage the right people to help define and/or revise the right processes in a two part blog, 10 Steps to Building & Delivering an Effective Business Case: Owning T&E as the CFO.

This blog focuses on the document that defines the rules of the road for T&E spend, and the controls around spending that define its boundaries at micro and macro levels, the T&E policy. A company’s T&E policy establishes the proper alignment of people, process, and technology for the effective management of T&E expenses and reporting.

The 10 T&E policy best practices that define the boundaries and management of T&E expenses include the following:

1. Define travel parameters that are aligned with the company’s corporate culture and budgetary goals, but flexible enough to account for travel in response to business dynamics. 

2. Meet all the rules that define an Accountable Plan as defined by the IRS. This covers everything from expenses and reimbursements, rules for independent contractors, how to report travel, entertainment, gift and car expenses, and much more.

3. Automate policy enforcement with clearly defined spending limits and automatic notification of policy violations to ensure compliance. A 2015 PayStream Advisors report found that 56% of companies are currently using an automated expense reporting system, and many of those organizations have seen improved travel policy enforcement, lower processing costs, increased visibility, improved employee satisfaction and faster reimbursement times.

4. Institute a clear and transparent approval process including the timing of when approval decisions need to be made and the turnaround times for expense reimbursement. Even if employees have to wait a certain period of time for reimbursement, transparency in the process is important to keeping things running smoothly.

5. Specify how travel is to be booked, whether through specific travel agents and/or online booking tools. Sub-policies relative to key areas of travel booking and spend include air, hotel and ground transportation policies.

6. Establish how payments are to be made to be eligible for reimbursement. Also, a corporate T&E card allows visibility into spend and an additional layer of automated policy compliance. 

7. Audit with purpose, be it budget management, fraud/loss protection or auditing to test specific controls and processes. According to Aberdeen Group, 88% of all best-in-class companies regularly audit expense reports compared to the industry average at 63%.

8. Outline conditions under which any exceptions can occur and create a clear audit trail for any exceptions granted to travelers. Business dynamics can require deviations from policy rules, but specific conditions should be defined under which exceptions may be permissible.

9. Integrate travel expense processing to facilitate compliance and create efficiencies by streamlining processes. Again from Aberdeen Group, 66% of best-in-class companies use an end-to-end expense management system with travel booking, expense report management and administrative reporting all in one. 

10. Benchmark key areas of spend and require a review of policy if benchmarks are exceeded by a target percentage. This practice keeps policies from becoming outdated and keeps attention focused on T&E spending trends. Check out this recorded webinar to compare your internal spending benchmarks to that of other companies and broader spending trends. 

Increasing T&E management effectiveness can make the lives of all company employees who travel easier, result in significant cost savings, and it can increase long-term stakeholder value in the process. This requires the proper alignment of people, process and technology, which can’t be achieved without having the right T&E policy in place at your company.

For detailed information relative to the actual structure of a T&E policy, I suggest a travel expense policy template offered by the Society of Human Resource Management. Please note that you will have to sign in to access the information, but it’s well worth it. You’ll find specific guidance about many aspects of employee travel and expense policy I list above, including categories of and conditions for travel expenses to be reimbursed, and specific categories of travel expenses that are not reimbursable. 

Comments

Mary Schaeffer
Title: Publisher & Editorial Director
Company: AP Now
(Publisher & Editorial Director, AP Now) |

You make some very good points Ernie, and I'd like to add one.

We need to start making managers responsible for what they approve on subordinates expense reports. Too often, they just approve without even looking at what's on the report. It doesn't take an employee long to figure out that his/her reports aren't being reviewed. Then, if they are so inclined, the game playing starts.

If there are consequences for managers who approve expense reports that are clearly inappropriate or fraudulent, then perhaps we can get managers to do what they are supposed to do: Review the expense report, question the employee about anything that looks amiss and only when everything is as it should be, approve the report.

Donald Kalkofen
Title: Outsourced CFO/Controller/Director/SEC 4..
Company: Consulting CPA
(Outsourced CFO/Controller/Director/SEC 4 startups & public companies, Consulting CPA) |

Mary makes a very valid point here, it can be very cumbersome and challenging to review row after row of report data, especially if you a sales manager with a large sales team. You could be spending a substantial amount of your time just reviewing rows of expense report items. Systems and tools should provide a better more proactive and visual ability to help managers with expense report reviews.

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