Does your business offer it's traveling employees per diems? In that case, you're most likely looking for an effective way to manage and record your employee per diem expenses. An ideal way to do so is by using a per diem expense report.
What is Per Diem?
Derived from the Latin phrase which means, ‘for each day,’ Per Diem is a daily allowance given to traveling employees to cover their business trip expenses.
According to the IRS, Per Diem expenses include lodging, meals, and incidental expenses.
Types of Business Expenses in a Per Diem Expense Report
- Meal expenses - This includes breakfast, lunch, and dinner. Per diem rates for meals change based on the location and are broken down into six-tiers.
- Incidental expenses - Incidental expenses include costs that aren’t fixed per se, like room service, dry cleaning, tips to waiters, luggage carriers, etc.
- Lodging expenses - Lodging expenses include overnight stays in hotels, resorts, serviced apartments, inns, etc. Just like meals and incidental expenses, per diems for lodging also vary by location.
Should Your Business Provide Per Diems for Employees?
Per diems are handled differently by different companies. They may either take care of all the business expenses or can be used partially.
For instance, a company can offer a per diem of $156 for accommodation while meals and incidental expenses are taken care of by the employee and reimbursed later.
How to effectively track Per Diems in an expense report form?
How to track expenses on an expense report form?
How can businesses track mileage using an expense report form?
How to Set a Per Diem Rate?
To set up a per diem policy for business expenses, companies refer to the per diem rates given by the Federal government. The government sets the standard per diem rates for business travel (both domestic and international) every year. These rates are devised based on the cost of living in a particular city. Companies can then refer and set up a per diem rate more or less than the federal standards.
To access the federal per diem rates, visit the General Service Administration (GSA) page and enter the city or zip code of the city your employees would visit.
In case you do not find the per diem rate for a city, you can opt for the standard IRS per diem rate. Learn more about the IRS rules for 2020 mileage rate here:
Per diem expense reports
Traveling employees have to submit a per diem expense report within 60 days of a business trip. Even though they do not need to provide receipts for every spend, they would still need to document their per diem allowances.
With these factors kept in mind, you can ensure that your bottom line is in check.
Do keep in mind that per diem does not include transportation costs. Companies can either arrange transportation for their employees or employees can spend out of their own pockets and seek reimbursement. If employees are using personal cars during a business trip, companies can reimburse them using IRS mileage reimbursement rates.
Whichever your preferred method of approaching per diems, you need a powerful expense management software to automate and streamline your cash advances, approval workflows, and expense reimbursements.
To understand how expense management automation can help your organization with per diems, schedule a demo with us today!