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Business travel means more than just meetings. For employees travelling nationwide – or even internationally – to meet partners or potential clients, it means transport, a place to stay, meals and more.
Some of this will be arranged in advance by the finance team or a corporate travel management (CTM) provider, while other costs will be covered by the employee while they’re there – using a company card or paid for out of their own pocket and reimbursed by the business.
But there are rules around what exactly is deemed a reasonable business travel expense – designed to make sure companies meet financial reporting and tax regulations, and that any employee benefits or rewards are recorded.
So, which expenses are reimbursable? And how can businesses handling regular corporate travel manage the process to keep employees happy and the business compliant? Our corporate travel experts explain all…
What are reimbursable expenses?
Reimbursable expenses are the business transactions paid for by employees to cover corporate activities, which are then paid back by the business later.
The term specifically refers to costs associated with products and services purchased for business reasons – such as corporate travel, accommodation, meals and meetings.
It covers activities that wouldn’t otherwise have been enjoyed without a business justification, and therefore, does not include personal entertainment or unreasonable luxuries.
While company cards are increasingly used to cover these types of expenses, it is still common for employees to use personal payment to cover them – providing receipts to their corporate finance team to reimburse at a later date.
What expenses can be reimbursed?
To keep businesses compliant with financial and tax regulations – and maintain fairness within employee benefits and rewards – only certain items or activities can be expensed. And it’s important for businesses to keep a paper trail of all expenses to make sure they are:
- Recording all financial transactions.
- Not claiming tax deductions against excluded or unreasonable items.
- Treating all staff fairly when it comes to non-salary benefits and rewards.
With this in mind, let’s look at some of the common business expenses* that employees may be reimbursed for:
- Travel – all reasonable journeys and expenses – including flight or train tickets, petrol or mileage claims and even parking – for business trips.
- Accommodation – including appropriate overnight stays for nationwide or international travel.
- Food and drink – reasonable meals, snacks and refreshments – for example, breakfast, lunch and dinner and a snack.
- Business meetings – covering the costs associated with hiring an appropriate venue, meeting room or similar to host business gatherings.
- Staff or client entertainment – within reasonable limits, staff may be able to enjoy evening activities, along with clients.
- Reasonable and relevant extras – may include miscellaneous expenses such as business supplies, service charges or tips and more.
*Note – there is no single framework for defining exactly which expenses can be reimbursed – and in what amount – and this will come down to the company’s unique expensing policy, in line with tax regulations and best practices.
Examples of non-reimbursable expenses
To remain compliant with financial regulations, businesses must only reimburse employee expenses that cover legitimate business activities.
This means certain products and services simply cannot be afforded to staff through reimbursement, including:
- Personal activities – leisure and personal entertainment expenses, for example, sports tickets, may not be deemed reimbursable, as they do not directly relate to a business purpose.
- Expenses for significant others – costs, such as accommodation or meals, for friends and family beyond the contracted employee are not deemed a legitimate reimbursable expense.
- Unnecessary upgrades – extravagant facilities or upgrades, such as luxury services above standard, may not be deemed necessary for business.
Managing expenses
For businesses managing regular or high-volume corporate travel events, it’s important to have an effective expense management process in place.
Without it, businesses risk missing or inaccurately reporting their finances or even missing reimbursement payments and negatively impacting their team.
An expensing process may include:
- Using expense management software to automate the submission and reporting process. This makes it easier for employees to expense receipts – encouraging compliance – and track the reimbursement status of each claim. Software should also integrate with accounting systems to automate accurate reporting and reduce errors.
- Introducing corporate payment methods for regular travellers – for example, company cards or direct billing – to streamline the expensing process and ease the reimbursement burden.
- Implementing pre-approval processes – for example, travel allowances or per diem rates – aligning employees with the company’s expensing process and preventing unexpected transactions or overspending.
- Educating employees on the company’s expenses policy – both in terms of what is deemed a reasonable expense and any relevant limitations, as well as how to submit receipts. This includes requiring employees to obtain a receipt for every transaction, itemising each expense and cost to ensure accurate financial records and reimbursements.
- Setting submission deadlines for expenses – making sure financial records are updated and accurate and employees receive timely reimbursement.
The role of corporate travel management
CTM experts support your finance team by streamlining the management of reimbursable expenses – unlocking savings and driving greater efficiency, compliance and cost control through a complete business travel package.
Here, we take a look at the link between CTM providers and an effortless employee expenses process:
- Organising regular travel or trips for large groups through the same operator consolidates the expensing process by offering time-saving packages that ensure cost control and advanced purchasing targets.
- CTM providers help build comprehensive travel policy frameworks and business travel plans, including clear processes for expense reporting and reimbursement, so both the traveller and finance team are aligned on costs, responsibilities and reporting.
- By executing cost-effective travel, CTM providers minimise the volume of high-value expenses that require additional approval processes.
- Working with CTM experts to plan business travel in advance supports finance teams in establishing pre-approval for expenses – streamlining the reimbursement process by rolling out direct billing methods and minimising the volume of backdated expenses and receipts.
Good Travel Management is your trusted partner in SME business travel. Our corporate travel experts analyse your business travel expenditure and booking trends to identify opportunities for cost reduction and efficiency.
Learn more about our Levers – designed to deliver a powerful, data-driven travel strategy for cost-efficient travel – and how we can transform your corporate travel framework today!
About the Author
Laura Busby, Commercial Director of Good Travel Management, has a profound appreciation for leading the sales and account management teams to retain and grow our customer portfolio. She has people, planet and performance at the heart of everything she does and
Frequently Asked Questions (FAQs)
- How do businesses account for reimbursable expenses?
Businesses account for reimbursable expenses by recording the employee expense and creating a liability on the balance sheet. Once reimbursements are paid to the employee, the cost is reclassified, reducing the liability to zero. It is then reported in the company’s financial statements.
- Do you have to declare reimbursed expenses?
No, corporate travellers are not required to declare reimbursed expenses, as they are not considered to be taxable income for employees. There are regulations around what expenses can be legitimately reimbursed to employees, designed to make sure they are not gaining unfair rewards. Therefore, any legitimate expenses are deemed to be work-related costs, rather than rewards for which they should be taxed.
- Are reimbursable expenses considered revenue?
No, reimbursable expenses are not considered revenue. They are simply pass-through costs that are recorded as liabilities until they are reimbursed. Therefore, reimbursable expenses do not generate revenue for the business but rather reflect the reimbursement of costs incurred in providing services or conducting business activities.
- Is reimbursement an expense or liability?
Reimbursed expenses for corporate travel represent a liability for businesses – until they are repaid to the employee, when they become an expense. Once the reimbursement has been issued, the liability is extinguished and the resulting expense is recognised on the business’ income statement.
- What is a non-reimbursable expense?
Non-reimbursable expenses are simply costs paid by employees that are not eligible for reimbursement by their company. There are rules around what can be viably expensed by employees – designed to promote financial compliance and fairness between employees – and therefore, certain products or services cannot be compensated to employees on behalf of their employer. These may include personal or non-business-related expenditures, such as entertainment events.
- What is the difference between refundable and reimbursable?
While the terms ‘refund’ and ‘reimbursement’ are often used interchangeably among consumers, they do not have the same meaning when it comes to employee expenses. In the context of business travel, a reimbursable expense refers to a product or service, paid for by an employee out of their own pocket, for which they are then compensated or ‘reimbursed’ by their employer. A refund, on the other hand, refers to a product or service which is not delivered or which does not meet the expected standard, for which the seller recompensates the buyer.
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