T&E expense is an inevitable part of any growing business. The percentage-use varies based on the company size. Nevertheless, companies have to still allocate a part of their budget for T&E.
A recent report by JP Morgan’s report sheds light on Corporate T&E spend benchmarks. According to the report, Fortune 500s spend close to one-third of their T&E spend on travel, which is more than how many media to large enterprises would spend. Though non-travel spends are much lesser in Fortune 500s, they take up close to 17% of the T&E budget in mid-sized to large business.
What this essentially means is, no matter the size of your company, T&E takes a considerable share of your company spend. This is precisely why you should pay attention to it.
That said, what exactly is T&E?
We often hear about T&E expenses. We have a lot of answers to why it is necessary and how we should streamline it. But no one tells us exactly what it stands for. In this article, we talk about everything you need to know about T&E expense reports. Additionally, we also discuss the benefits of automating T&E expenses in your organization.
What are T&E expenses?
T&E expenses, or Travel or Entertainment expenses, are the costs incurred by your employee when on a business trip or while entertaining a client. Based on a survey by Forrester, it is the second most difficult operating expense, after payroll. Most of the travel expenses include air travel, meals, mileage, and accommodation. These business expenses are mostly incurred by the sales team. Companies usually incur entertainment expenses when employees have to take the clients or prospects for dinner or for a sports event.
What is a T&E expense report?
A T&E expense report contains a list of all the expenses incurred during a particular business travel. It is like a file that contains all the paper receipts along with the expense reporting form. Employees are required to submit these expenses to the finance team or the reporting manager within a stipulated time frame to avail timely reimbursements. Usually, companies have a T&E expense policy in place that prescribes the do’s and don’ts of business expenses. It entails the spending limits for each type of expenses and what happens when they violate the set restrictions.
Why is it important to report T&E expenses?
As a common practice, companies set aside a part of their budget for travel and entertainment expenses. It is either paid as a cash advance before the trip or is gets reimbursed post-trip. Therefore, it becomes crucial that companies account for allocated budgets. That is where T&E expense reports come in Also, T&E expenses are tax-deductible. Entertainment expenses, in particular, catch the attention of the IRS because you need to prove that the expense claim is strictly business-related. As a result, it becomes vital that companies keep a record of all receipts for reported expenses.
On the other hand, T&E expenses are vulnerable to fraud. According to the Association of Certified Fraud Examiners’ 2018 Report to the Nations, close to 21 percent of fraud in small businesses is due to expense reimbursements. In large businesses, it accounts for 11 percent. This could be in the form of fake reimbursements, duplicate receipts, or, altered expense reports. Everyone in the company, ranging from the new recruit in the sales team to the top management, can contribute to expense fraud - all the more reason to keep a hawk’s eye on travel and entertainment expenses.
How can you report T&E expenses?
- Using an excel sheet template for tracking expenses: Many companies start their expense tracking process on excel sheets. However, it can become cumbersome in the long run. The expense reporting process is still done on paper, which means employees have to save their paper receipts for a long time. Further, all communications happens over emails and phone calls, which adds to the delay. It is also difficult to track the audit trail when expense reporting is done on paper.
- Using travel expense management software: Travel expense management software helps in streamlining the process of expense reporting. It lets your employees submit expense report on-the-go, using the mobile app. Thanks to OCR technology, employees can now capture expenses directly from receipts, thereby eliminating the need to save paper receipts. Approvers are also notified of the submitted expenses reports and can approve/reject expenses in a single click. An expense reporting solution that supports policy compliance is a huge plus for businesses planning to scale. It can help flag policy-violated expenses in real-time, thereby making it easier for approvers to spot violated expenses. Moreover, the digital audit trail keeps track of all the changes made to a particular expense report. This helps in establishing transparency in the expense reporting process.
How does automation help in T&E expense reporting?
Creating an expense policy and implementing corporate card programs is a great start towards managing your employee expenses. However, when done manually, it becomes tiresome for the finance team to go through a multitude of expense reports. This is where automating comes in.
The finance team no longer has to go through paperwork. Policy violated expenses are often flagged, therefore making them stand out from the rest of the expenses. What’s more, with data analytics, they can analyze the spending pattern of the company in a few clicks. This will help them make changes in the expense policy and take better financial decisions.