Business travel is an important aspect of any company, however it doesn’t come for free. When you or your employees travel to meet clients or close a deal, there are several costs you need to account for before you jet off. These are things such as flights, accommodation, food, and insurance.
Travel expenses are something you need to work into a business budget, and it is better to figure out how much you’re willing to spend ahead of time. But how are you able to do this? There are actually quite a few things you should consider.
However, don’t worry; we’ve put together the ultimate guide on business travel expenses to help ensure you figure everything out before you go away.
What are business travel expenses?
Business travel expenses are exactly what they sound like. They are anything you spend money on regarding travelling for your company outside of the office. The most important expenses will include your method of travel (plane, car, train), accommodation, meals, and any other form of public transportation when you get to your destination.
These things are often spent on employees but can also count towards freelance contractors or anyone else working for your business. As a business owner, you often have an obligation to fund these expenses, which is why employees will often get reimbursed for any business travel purchases. However, most of the time, you will pay for things like flights and accommodation beforehand using vendors such as TrustedStays.
Examples of business travel expenses employees can claim
Alongside the big things like flights and hotels, employees can claim other smaller expenses when travelling for business. However, just because an employee spends money while away doesn’t mean it counts as a business expense. As a company, you only have to pay for costs related to your employee's welfare and any actions that will help them effectively perform work.
You can put a policy in place that determines what you are willing to fund as a business travel expense to make it easy for employees to get reimbursed for costs. The best things to consider are eligible expenses for tax deductions which include things such as:
- Any form of transportation (flights, train, bus, etc.)
- Accommodation (hotel, short-term rental, etc.)
- Business supplies and stationery
- Parking fees/Road tolls
- International calls (for business)
Ensure you know exactly what your employees are spending during any business trips so you can accurately report your expenses when completing your taxes. This allows you to claim any tax benefits and reduce your overall bill for the year.
How to manage business travel expenses
So, how do you ensure all important business travel expenses are accounted for before your employees set off, and how do you guarantee they will report all their spending while away? Here are a few ways you can manage your business travel expenses:
Choose the expense method
Your expense method is how you decide to pay for the business travel expenses. There are two ways you can handle this. The first is that your employees will pay for all their flights, accommodation, and food, and then they are reimbursed afterwards. However, you have to rely on them only to claim back what they actually spent and stay on top of receipts.
The second expense method is that you pay the vendors directly. For example, you will book the flights and accommodation through platforms like TrustedStays, so you know your employees are taken care of before they leave. You may also opt to provide them with a prepaid card or credit card to pay for things like meals and business supplies.
Implement an expense claim procedure
If you want more insight into what your employees are spending while they are on business trips, you will want to put together a smart expense claim procedure. This process will help ensure employees stay on top of logging their expenses while also helping you improve business budgets in the future.
Some of the things to include in your expense claim procedure include the following:
- Receipts: Ask your employees to save all receipts and also find a smart way to log them so you can access their spending.
- Software: Using expense management software allows you to see all expense information on one database.
- Deadlines: Provide your employees with deadlines when submitting receipts and any other relevant paperwork.
- Reimbursement dates: Have a set date available that reassures your employees when they’ll be reimbursed for their travel expenses.
Communicate your expense policy
Once you know your expense method and put together an expense claim procedure, you must ensure all your employees are on the same page. You will have to brief your current workforce on your expense process to ensure they know what to do when they leave for business. There should also be a policy available for them to read to refresh their memory at any time.
In the case of new employees joining your company, you will also want to include the expense policy as part of the onboarding process. This protects your business from any confusion, especially if an employee ever wants reimbursement for an expense you clearly state you don’t cover in your policy.
How to calculate business travel expenses
We’ve already mentioned that you should put together an expense process that provides insights into what your employees are spending, but how can you calculate your business travel expenses? Here are a few things you should consider adding to your process:
Keep track of everything
When calculating your business travel expenses, it is essential to have every piece of information possible. That’s why you want every receipt, claim, and amount placed in some form of system for you to review.
You can either manually keep records or use expense management software, but either way, it needs to be organised and kept up to date. It will significantly impact your tax deductions at the end of the year, so this is a crucial aspect of your process.
These are some things you should keep track of:
- Purpose of spending
- Type of claim
Make sure every element of the trip is accounted for
After looking at previous trips and any insights you’ve received while tracking all business expenses, you can start putting together a budget for each trip. You will have to figure out the average cost of every business trip your employees go on and ensure that everything they need will be accounted for within the business travel expenses budget.
You won’t have to stick to a singular budget for every trip. There is leeway for change, especially if one destination is further away or has more expensive accommodation than others. However, you will need to ensure you have considered the following whenever you do set a budget:
- Business supplies
Categorise your spend
The last thing you’ll need to do when calculating business travel expenses is categorising them. This is a crucial step that will help the entire process in the future, especially if you are tracking all expenses manually. If you use an expense management system, most of this will be done automatically, so you won’t have to worry about it as much.
Before you get started, you need to determine your categories. These will be things such as travel, meals, accommodation, and miscellaneous. Then, each time you track an expense, you will need to place it into one of these categories. It will help provide you with insights and help determine future trip budgets.
How to reduce business travel expenses
Travelling for business isn’t always the cheapest spend for your company, but it doesn’t always have to be ridiculously expensive either. Here are some of the top ways you can reduce your business travel expenses:
Is staying overnight a must?
Most of the time, businesses will provide their employees with accommodation, even if the travel is in the same country or not that far away. However, this isn’t always necessary, and it is sometimes better for your budget if you ensure your employees travel and get back home on the same day.
You won’t have to spend money on accommodation, which will save your business money in the long run. However, only do this if it is in the best interest of both your company and your employees. You don’t want to overwork your workforce and get them to do too much in one day. If the travel is long and tiring, it may be better to consider overnight accommodation.
Negotiate corporate rates
They don’t always advertise it, but some hotels and travel chains will offer you a corporate discount. These rates are set aside for businesses, especially if you frequently book through these companies. You may have to do a bit of negotiating and promise you’ll book with them a specific number of times per year, but they should come back with a reasonable offer that will save you money on your business travel expenses.
The best thing to do when negotiating corporate rates is to show the hotel or travel chain data on how much your employees travel for business or how many times you have used them in the past year.
Recover the tax
Most of the reasons why we have mentioned documenting every aspect of your business travel expenses are to ensure you get the most out of your taxes. Unfortunately, too many businesses do not report their travel spending accurately, which means they lose out on tax deductions.
If you spend wisely when travelling for business and track everything, you will most likely be able to recover VAT when you do your taxes at the end of the year. This is much easier for travel that is done in the same country as the business, however, you can still recover VAT for expenses that have been incurred overseas.
Compare costs from multiple vendors
The worst thing you can do as a business when planning a corporate trip is to spend money on the first flight or hotel you find. This could mean you are spending a lot more than you need to, and your business travel budget may be costing your company. The best thing you should do instead is compare the costs from multiple vendors in one place.
For example, TrustedStays allows you to browse multiple forms of corporate accommodation. You can filter it down and see only houses/apartments that fit into your budget and ensure you aren’t spending more than you need to. Other sites can do the same for other vendors, such as travel.
Get the per diem correct
If your employee is going away for multiple days, they will most likely need a per diem. These are the daily allowances you pay them to cover any costs for the business trip. However, you don’t want to give them access to tons of money they don’t need because then you may end up spending more on business travel expenses than you need.
Instead, calculate the per diem correctly by looking at past business trips and the average transport cost and meals at the travel destination. You can then load the amount up on a prepaid card or give your employee a credit card with a specific limit.
Business travel expenses are a part of most companies and shouldn’t be overlooked. There are so many things you need to actually consider to ensure you are spending the right amount and keeping your employees comfortable while they are away.
If you want the best way to spend your business travel money without costing your company too much, head over to TrustedStays. You can find the ideal accommodation for your employees that fits your budget.
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