Finance News & Insights

Congrats on your new T&E policy. Now, how do you plan on enforcing it?

Travel and entertainment expenses have long been a sore spot for companies of all sizes. Guest poster Robert Neveu of Certify offers a look at how to develop organization-wide guidelines — and make them stick.

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Developing company-wide guidelines for travel and entertainment expense policy is no small task. The process itself demands a tremendous amount of planning and cross-departmental effort to ensure all the necessary details have been considered and codified.

Once a policy is finalized in writing, it’s really a milestone worthy of celebration as an important step toward greater accountability and transparency in a company’s expense management program.

Unfortunately, most T&E policies lack any practical means for enforcement, rendering even the most comprehensive and thoughtful guidelines ineffective. Still, 73% of companies with a written T&E policy in place leave compliance up to employees or review reports manually for policy violations, according to the Certify 2016 Expense Management Trends study.

One approach companies are taking to solve the policy enforcement problem is switching from a manual expense reporting process to web-based automation. While these systems offer a number of tools to make short work of managing employee compliance, let’s take a closer look at three common features with the greatest potential impact.

Integrated travel booking

Today’s web-based expense management systems typically offer an integrated travel-booking service with two common features that make it possible to stop an out-of-policy transaction before it becomes an expense.

First is lowest logical fare, which works by automatically identifying the best available air or hotel rates for the proposed itinerary, and only the best available rates. While this can limit flexibility for the business traveler, it also assures travel managers the T&E budget is being spent wisely and within policy guidelines.

A somewhat less restrictive but equally effective approach to travel compliance is the pre-trip approval feature. As the name implies, pre-trip approval requires manager authorization prior to securing travel arrangements in the system. This feature can also be configured to meet various policy guidelines, whether every itinerary needs to be reviewed and approved, or just those that deviate from company policy.

With pre-trip approvals in place, out-of-policy spending stands little chance of becoming an expense. This, coupled with lowest logical fare functionality, will truly allow a company to control and reduce travel spend before it occurs.

Category spending limits

Expense category spending limits or spending caps are not the exclusive domain of web-based systems. However, unlike a manual process, these systems make enforcement automatic by incorporating a company’s policy spending limits directly into the system. As an example, say you have a $35 dollar spending limit for dinner per employee in the meals category.

If an employee spends $45 dollars and attempts to add the expense to their report, they’ll receive notification the expense is out of policy. Taking it a step further, some expense solutions offer policy tools within their mobile applications that immediately verify expenses against certain guidelines as receipts are captured and parsed into the system. This “real-time policy check” affords employees an opportunity to modify expenses before submitting their next report.

Determining reasonable spending limits for different expense categories doesn’t have to be a manual process, either. Each year the U.S. General Administration Services painstakingly compiles and analyzes average cost by destination for meals, lodging and incidental costs (taxes and tips).

Known as the GSA per diem rate, these guidelines set the maximum allowable reimbursement amounts for organizations doing business with the U.S. government. Because it is so thoroughly researched, many private companies elect to use the GSA rate as a standard whether they’re running a manual process or web-based system.

And while most companies are not subject to GSA rates, it can also be extremely helpful to review online data services for T&E policies that allow companies to compare spending amounts to industry benchmarks.

Integrated mileage tracking

Mileage reimbursement is a notorious gray area in expense management. If you think about it, employees are asked to use their personal vehicles for business purposes, and in many cases, the employee is left to estimate the total number of miles driven.

Not that there’s necessarily anything dishonest going on, but when it comes time to record the miles traveled, employees will invariably estimate in their favor — if company policy gives them the option. While organizations have used mileage logs for years, this business process has clearly become outdated and is filled with opportunities for error, even fraud.

A simple remedy offered by many web-based expense management vendors is an integrated mileage-tracking feature. This takes the guesswork and estimating out of the process entirely.  One simply enters the beginning and ending destinations, and the exact mileage is automatically calculated for the trip.  And while it may seem like pennies on the dollar, across the enterprise mileage savings can add up incredibly fast. In fact, companies switching from employee-reported mileage to an integrated tracking tool have saved literally hundreds of thousands of dollars year over year in mileage reimbursement alone.

More opportunity for compliance

Compliance with T&E policy can be a challenge, especially when it’s left up to employees to do the right thing.  For those companies using a web-based expense management system, the features described here are just a few of the options that can help improve compliance rates across the organization, remove uncertainty in the process and ultimately increase employee satisfaction with the expense reporting process.

Robert Neveu is president of Certify, a developer of expense report solutions.

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