Managing travel expenses can be one of the most complicated aspects of running a small business. Without a clear plan in place, costs can spiral out of control.
Writing a comprehensive travel and expense policy, also known as a T&E policy, is essential, making it clear what's allowed and what's not when it comes to business travel and other business expenses.
This guide will walk you through the process of creating an effective T&E policy, highlighting best practices and common pitfalls to avoid.
What is a travel and expense policy?
A travel and expense policy is a comprehensive document that outlines the rules and guidelines for employees about how they should handle their business travel costs.
It typically includes details about per diem rates, what qualifies as reimbursable expenses, reimbursement procedures, and spending limits.
A clear T&E policy ensures that both the business and the employee are protected, aligning their priorities while minimizing misunderstandings.
Why businesses should have a travel expense policy
Implementing a travel expense policy is important for several reasons. First, it helps control costs by providing guidance ahead of time about which expenses are covered and which aren't when your employees are on a business trip.
This also reduces questions about reimbursements. Clear rules can help prevent conflicts over what counts as a reimbursable expense, like business meals, incidental expenses, or flight upgrades to business class.
By setting clear guidelines, a T&E policy makes it easier to budget and helps ensure tax compliance.
T&E policy example (with template)
Here's a simple T&E policy example along with essential instructions for drafting each part. The sections don't need to be very long—it's far more important to be clear.
Dates
The top of your policy should include the date the policy goes into effect as well as the date it was most recently revised. This helps employees know that they're looking at the right version, and it helps the team responsible for these types of policies be aware of when it needs to be updated.
Effective Date: [Insert Date]
Last Revised: [Insert Date]
Purpose
Lay out the purpose of your policy so employees know why it's there and when they might need to consult it. Again, it doesn't need to be long:
- This policy provides guidelines for employees incurring travel and business-related expenses on behalf of the company. The goal is to ensure these expenses are necessary, documented, and reimbursable.
Scope
Does the policy apply to everyone? If you have a policy that's limited in some way, it's important to make that clear. If you do not have such limitations, a broad policy is a great place to start.
- Applies to all employees traveling for business or incurring work-related expenses.
Travel authorization
Does travel need to be approved in advance? Lay out those rules briefly here.
- All travel must be pre-approved by supervisors. International travel requires [Manager/Executive/CEO] approval. Use [designated travel platform] for bookings.
Eligible expenses
A list can make your reimbursable expenses more scannable, making your policy easier to use.
- Transportation: Economy airfare, rental cars, public transit, etc.
- Accommodation: Standard hotel rooms or equivalent.
- Meals: Actual cost or per diem (up to $50/day).
- Miscellaneous: Business-related calls, internet, parking.
Non-reimbursable expenses
If there are specific expenses you won't reimburse, it's best to list those too.
- Personal items, family-related costs, travel upgrades (unless justified), fines, and personal entertainment are considered personal expenses and will not be reimbursed.
Expense reporting
Let employees know when and how to file reimbursement requests, as well as any requirements about receipts or other documentation for expenses incurred.
- Submit expense reports within 30 days. Receipts are required for all expenses over $25. Use [expense system] for submissions.
Policy violations
If there will be consequences for violating your policy, make those clear too.
- Non-compliance may result in delays or denial of reimbursement.
Review and exceptions
Let your employees know how often the policy is updated—this helps the employees know whether the version they're reading is still in effect. If you want to allow exceptions, lay out the policy for that, too.
- This policy should be reviewed annually. Exceptions to the policy require written approval from [Executive/Finance].
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How to write a travel and expense policy
Creating a T&E policy involves several steps.
1. Assess your current practices
Evaluate your existing travel reimbursement processes to identify gaps and areas for improvement. Make sure key stakeholders have approved any changes, as well as the team that should be involved, before you start drafting your new policy.
2. Define your goals
Determine what you hope to achieve with your T&E policy, such as cost control, compliance, or employee satisfaction. Are you capturing an existing policy in writing, or are you making policy changes? You'll want to be clear about that, too. If you are making policy changes, you may need to adhere to any requirements around notice to employees of material changes.
3. Draft the policy
Collaborate with key stakeholders, including finance and HR, to draft a policy that addresses the needs of the business and its employees. If you have a corporate lawyer, be sure to involve them in the process.
4. Solicit feedback
Share the draft with employees and other stakeholders for input, ensuring it meets their needs while balancing the business's objectives.
5. Finalize and distribute
Once feedback is incorporated, finalize the document and distribute it to all employees, ensuring it's easily accessible.
6. Review regularly
Schedule periodic reviews of the policy to ensure it remains relevant and compliant with any changes in laws, regulations, or business practices.
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Travel and expense policy best practices
These best practices for your travel and expense policy can help streamline the process and minimize headaches.
Keep it simple
Design your travel and expense policy to be clear and straightforward, so every employee can understand it without any trouble.
Avoid complicated jargon. Instead, choose wording that's simple and easy to understand, even for employees who might not travel very often.
Ensure consistency
Your policy should be enforced consistently, and your expense reimbursement guidelines should be consistent too. This helps manage costs while ensuring fairness.
Written policies reinforce trust and morale among employees by minimizing favoritism as well as disputes, and having a uniform policy makes budget planning easier too!
Highlight key points
Do your employees have to book business-related travel through a specific provider? Do airline tickets, hotel reservations, or car rentals need to be pre-approved? Format your policy in a way that draws attention to these key elements so they don't take employees by surprise.
Educate employees
Make sure your teams understand the policy and know where to find it. Uploading it to an employee portal or wiki gives employees access to it 24/7.
That way, they can consult it even if they're making travel arrangements in their off-hours when you're not there to answer questions.
Make the process easy
Don't bog your employees down in lengthy approval processes or old-school spreadsheets, especially when they're using their own personal money to pay for work expenses and waiting to be reimbursed.
Streamlining the process can help keep everyone happy—your travelers as well as your finance team.
Use technology
Automated tools simplify travel and expense claims, saving time for all your employees, including your finance team.
The easier you make the process, the less time you'll spend waiting on expense reports and receipts, and the sooner you'll be able to close your books every month—with the documentation you need to prove those deductible expenses.
Book your travel with the BILL Divvy Card¹
What's even easier than automating your reimbursement process? Not having to reimburse your team in the first place. When you give your employees the BILL Divvy Card powered by Visa, you can set pre-approved budget limits and include spending policies that help stop overspending before it happens.
Plus, the card comes with a TravelPerks partnership to help you save money on travel, and up to 5x points on hotels and 7x points on restaurants to make the most of your rewards.
What our customers have to say
“It’s the accountability of the card holders. That’s the biggest advantage of BILL Spend & Expense, the instant access to budgets that fosters accountability.” - Stevens Trucking
"I think BILL Spend & Expense is the best expense tracking system I have ever used. It makes assigning spend to categories fun (if you can believe it!) and easy. I've used a few very tedious systems in my past and it took hours to finish an expense report. I would dread the deadline every time. But with BILL Spend & Expense, the way it prompts you to categorize as you go and take a quick photo of a receipt allows you to complete your expense report on the fly." - Vermont Flannel
T&E policy FAQs
Below, you'll find quick, easy answers to the most frequently asked questions about T&E policies.
Who is responsible for drafting a T&E policy?
Typically, the responsibility falls to finance or HR departments, often involving consultation with the legal team (or outside attorneys), management and input from employees to ensure the policy meets everyone’s needs.
How should you communicate the T&E policy?
Communicate your policy clearly through company-wide channels like Slack, email, and employee training, and by including it in your employee onboarding process. It's also important to include it in your internal documentation where employees can look it up when they need it.
Regular reminders, such as asking employees to acknowledge the new policy through a company portal, can remind them where to find it and reinforce its importance.
What are common errors in a T&E policy?
Two of the most common mistakes to watch out for are vague language and overly restrictive policies that frustrate employees. Reviewing and adjusting your policy on a regular basis can help mitigate these issues.
¹The BILL Divvy Card is issued by Cross River Bank, Member FDIC, and is not a deposit product.