Unfortunately, it is still widely common in many small businesses for employees to fill in travel expense reports manually, sometimes waiting months for their claims to be processed.
These delays may cause employees to struggle with cash flow issues due to inefficient claims reimbursements, potentially leading to tension and dissatisfaction with employers.
Meanwhile, it can also be an unnecessary burden on HR and Finance who are tasked with poring over receipts and travel expense reports to validate and process employee claims.
Travel expenses are essentially costs which are claimable by an employee in a company for business expenses during a work trip overseas.
However, not all expenses are claimable and this is where it can get tricky in terms of processing claims applications.
HR and Finance departments typically have to sift through dozens to hundreds of claim applications to ensure employee claims can be validated by receipts.
Examples of claimable expenses include:
Examples of non-claimable expenses may include (depending on the organization):
Typically, these expenses are charged to an employee’s personal credit card or purchased with their own cash. Once they return, the standard process in most companies is to fill up a travel expense report, submit it to HR for validation, who then submit it to Finance for processing before reimbursements are finally made to employees.
An alternative to this rather tedious process is to use company-issued credit or spending cards. These corporate cards can be issued to employees with pre-set limits on expenses in order to prevent overspending on non-claimable or extravagant expenses.
The other perk of these virtual corporate cards is that it is linked to your company’s bank account, eliminating the need for travel expense reports and saving HR and Finance time by automating claims processing for travel expenses entirely.
Through a central dashboard, management and the Finance team can immediately have an overview of spending instantly as a payment is made. Every payment by an employee can be tracked through these virtual cards with unique tracking codes in real-time and is automatically updated into the centralized expense tracking system.
This saves your employees time wasted filling in travel expense reports each time they return from trips, allowing them more time to focus on meaningful work.
Tracking travel expenses isn’t just important for claim reimbursements but is also a very important process to streamline tax reporting when the time comes.
Each company has its own limit for per diem allowance, or a daily travel allowance, for employees travelling for business purposes. This usually includes living expenses such as costs of meals, transport and incidental expenses such as laundry.
As of 2005, the Inland Revenue Authority of Singapore (IRAS), requires businesses to report amounts of per diem allowance made for an employee travelling out of Singapore which exceed ‘acceptable rates’.
These acceptable rates are set by IRAS for each country and when exceeded by an organization need to be reported to IRAS every tax year in the Return of Employee’s Remuneration Form (Form IR8A).
For employees, amounts that exceed the per diem allowance as set by these acceptable standards by country are taxable.
For instance, Tan Limited pays an employee travelling to Australia S$120 per day for four days. This exceeds the acceptable rate of $116 per day in Australia as set by IRAS.
Hence, the amount of excess per day would be S$4 per day, and over four days the total excess would amount to S$16. Hence, the taxable amount to be reported in Form IR8A would be $16.
However, certain expenses fall outside of per diem allowance and are not taxable, including:
Failing to track these travel expenses can have huge consequences on an organization when they fail to report these expenses accurately to IRAS.
The consequences for failing to report expenses accurately can result in huge fines of up to S$1000 or for defaulting on this payment, a jail term of up to 6 months under Section 94 of the Income Tax Act.
The likelihood of fraud is also higher when travel expenses are not tracked meticulously, allowing employees to claim expenses not made using fabricated receipts, for example.
But apart from these huge legal consequences, companies may also take a hit in terms of productivity and employee satisfaction. Efficient reimbursements for claims can encourage more positive feelings they have towards an organization, with late reimbursements having the opposite, negative effect.
Meanwhile, productivity and motivation can improve overall once the time is freed up for employees who no longer need to fill up manual travel expense reports. For Finance departments, the need to validate receipts individually is removed and they can then focus on more strategic tasks which involve your organization’s growth.
There are a few ways to ensure that travel expenses are managed effectively in order to keep your employees feeling positively for your organization.
Unless organizations communicate clearly to employees on travel expense policies, overspending is bound to happen. Many assumptions can be made in terms of what is a claimable expense and what isn’t, leading to overspending and, in the employee’s position, a feeling of being duped or led on.
To avoid these situations, it’s important to clearly set a policy for travel expenses including claimable and non-claimable expenses, documents required for claims, spending limitations in a specific currency (accounting for exchange rates) and realistic but strict timelines for claim submissions.
Employees need to be onboard with the claims applications process, or else there are bound to be errors, disputes and delays in reimbursements.
Travel expense reports, if they have to be used, need to be clear and straightforward for employees to fill up easily. The time required for processing and reimbursement should be communicated clearly to employees to avoid overpromising and late payments.
READ: How to Reimburse Employees for Expenses
Setting projections or budget estimations for how much is required on a trip in your travel expense policy can be helpful in helping employees understand the limitations of claimable expenses.
This allows better planning of their travel budgets prior to arriving at their destination and can prevent overspending due to miscalculations in amounts they actually need on the trip.
For example, based on a trip to a specific destination, for employees staying at a specific hotel in a particular area of the city, HR can set up an estimated amount the employee will need for meals and other living expenses.
Be sure to factor in ancillary fees, otherwise known as hidden fees, such as surcharges and service fees. According to the Global Business Travel Association, ancillary fees make up 8% of the total expenses involved in a business trip.
These hidden fees can be a huge point of contention between employers and employees and should therefore always be included in travel expense policies, projections and budgeting for a trip beforehand.
With an expense tracking system, companies can automate the entire claims and reimbursement process for travel. By automating the tracking of expenses through a centralized dashboard, an organization can view all expenses made through virtual corporate cards without needing to verify each receipt and travel expense report.
Limits can also be set for every employee trip by management, preventing overspending and setting clear boundaries for employees in terms of their trip budgets.
A travel expense tracker app lets receipts be scanned and stored efficiently in a central repository instead of physical cabinets. This allows easier retrieval for tax purposes at a later time when needed, and less time required to file them away one at a time.
Receipts submitted must be valid before being processed in order to avoid fraudulent travel expense claims.
Errors can also be made by employees such as submitting the wrong receipt accidentally, which can lead to delays in the reimbursement process and more time spent resubmitting the travel expense report.
According to the Global Business Travel Association, a single correction in a travel expense report costs a company $52 on average. Add this up and over time, this can eat into a huge chunk of your company’s profits.
It is often difficult to write off employees’ overspending when they dispute that travel expense policies were not effectively shared with them before a trip.
While simply rejecting claims applications above-set limits is an option, employees may feel cheated if they feel policies are not explicitly communicated beforehand. This can lead to dissatisfaction over time and eventually a high turnover when the reimbursement process is continuously delayed, overly-complicated or ineffective.
When organizing trips for employees, employers can leverage corporate rates for expenses such as accommodation. Choose hotels which have corporate deals and discount pricing or explore options to see if any of them offer membership benefits for repeat stays.
Recovering taxes for deductible expenses is so important for businesses to save on costs. A meticulous tracking of receipts and company expenses is so crucial for this and where an expense tracking system can truly save the day.
With an expense tracking system such as Spenmo’s which easily links with accounting systems such as Xero, organizations can worry less about having their receipts in order for tax season.
Most expense frauds happen during business-related travel and travel expense reports can be a huge time-suck on employee productivity. It is helpful for businesses to have a centralized, automated travel expense tracker to prevent this.
Spenmo is the best expense tracking app available on both ios App Store and Google Play on Android to streamline travel expense reporting and tracking.
