Key Takeaways

• T&E refers to Travel & Expense or Travel & Entertainment (client entertainment costs)
• Some T&E are tax-deductible
• Meal expenses are 50% deductible under IRS guidelines
• Invoice and receipts are supporting documents to monitor T and E expenses
• Companies can easily do cost optimization

What Is a T&E Expense?

T&E stands for Travel & Expenses or Travel & Entertainment. It refers to all the expenses incurred by the company while traveling on business or entertaining clients. The major expenditures are related to meals, hotel stays, flight or train tickets, and cab rides.

Is T&E an Operating Expense?

T&E is also referred to as operating expenses because it covers costs like entertainment and business travel expenses. Operating expenses are crucial in accounting operations. Therefore, the accounting team should record these expenses and consider them part of the company’s operating costs.

What Comes Under T&E Expenses?

So far, we have defined the answer to the question, “What are T&E expenses? ” Now, let us see what comes under T&E expenditure.

Any business travel expenditure includes the following expenses:

• Meal: Expenses spent on food and meals during travel fall under this category.
• Hotel booking: Expenditure related to the hotel room refers to this expense.
• Flight ticket: Cost related to the flight ticket fare comes under this category.
• Entertainment for clients: This category refers to the expenditure spent on client’s entertainment.
• Miscellaneous expenses: Parking fee, toll fee, conference cost, trips and gratitude.

What Is T&E Policy, and What Does It Include?

T&E policy is a set of guidelines that a company generates to ensure proper management of T&E expenses. These guidelines guide employees in managing and controlling expenses and submitting claims. A typical T&E policy includes the following details:

Reimbursable Expenses

You must clearly define the types of expenses that are subject to reimbursement. Meals, travel expenses, lodging, and other miscellaneous expenses fall into this category.

Spending Limits

The policy should define spending limits. This will help the employees be aware of the expense limit and plan their expenses accordingly.

Process of Approval

• Pre-approval: Define the situations where pre-approval is compulsory.
• Approval authority: It reflects the person who approves expense reports on the basis of amount or expense type.

Expense Reporting

• Type of receipt: Inform your employees of the type of receipt they need to submit. It can be either an original or a digital form.
• Deadline: Set up clear deadlines for submitting expense reports after the trip.

Reimbursement

Define the required information related to the reimbursement process. You must state the expected timeframe for reimbursement to the employee.

What Are IRS T&E Expense Rules?

There are some rules defined for T&E expenses that are as follows:

• T&E expenses are subject to solely for business travel, which includes traveling meals and lodging.
• Local transportation is considered in T&E expenses only if it includes traveling between workplaces and client visits.
• The allowable expenses for business-related gifts are limited up to $25 per person annually.
• Entertainment expenses should meet IRS requirements.
• Meals and entertainment costs are subject to a 50% deductible instead of 100%.
• A detailed log of expenses includes the date, amount, attendees’ names, and business relationships. It should also include receipts for all expenses over $75.

Expense Management Process

Expense management depends upon the company’s size and budget and covers five stages:

1. Submitting Claim

When an employee submits an expense claim, the company or authorized department checks the T&E policy. Once they find the claim adhering to the terms, they proceed with the process. This submission is in the form of a receipt or invoice.

2. Review and Approval

The team reviews the invoice or receipt and ensures it is aligned with the company policies and budget. The reviewer also ensures that the expenses are meant for business purposes only.

3. Reimbursement

The finance department processes employee reimbursements. This could be done manually or through automation that commits to speed and accuracy. Additionally, the standard expense reimbursement process should be on time.

4. Expense Reporting

Once the reimbursement process is completed, the team further categorizes the expenses for better recording and financial analysis.

5. Auditing

Regular auditing is good for detecting fraud, identifying errors, and tracking expenses. Therefore, professionals should perform the same for perfect financial regulations. Using expense management tools is the best way to ease this process.

Why Is T&E Expense Management Valuable for the Business?

T&E expense management is a valuable process for those businesses that often involve business traveling and client meetings. Good management of this operation is essential for good capital management. The listed points showcase the significance of T&E expense management:

Unexpected Costs Prevention

An effective T&E expense management system offers lucid visibility over spending, enabling professionals to make firm decisions about controlling expenses.

Helps to Lower Tax Issues

T&E costs are always tax-deductible as they can easily span a wide range of business expense categories. A well-structured workflow for managing receipts significantly streamlines the reporting process.

Cost Control & Budgeting

Proper T&E expense management helps control costs, and good T&E budget management is also necessary. It prevents overspending and corresponding business financial losses. Thus, T&E expense management is necessary for the company’s financial health.

Fraud Prevention

Good T&E expense management helps prevent fraud. When the company has clear reimbursement policies, the chances of fraud are very low. The automation process and real-time tracking make the process simple and helps to identify fraudulent claims.

Enhance Decision Making

A well-managed T&E is very helpful in making the right decision on future financial planning. This is because business professionals have a better understanding of spending patterns. The use of automation tools adds an extra positive impact to the expense process. Professionals can easily view, edit, and speed up the overall operation.

Common T&E Challenges

Certain challenges are involved in T&E expenses, which are as follows:

1. Expense Policies Are Unclear

T&E policies are necessary for properly managing the T&E budget, but unfortunately, many companies fail to create or maintain them efficiently, resulting in mismanagement of business capital.

However, companies can prevent this situation by implementing clear guidelines and maintaining financial transparency. Additionally, every employee should be made aware of these guidelines. This not only prevents mismanagement but also helps to overcome confusion during reimbursement. Hence, it keeps the employee-employer relationship healthy.

2. Delay in Reimbursement

A complicated reimbursement process will definitely lead to delays, which ultimately affects employees’ trust in your company. The best solution is to use expense management software and automate things. This will prevent confusion and keep the process smooth and error-free.

3. Lacking of Receipts

Sometimes, employees never care about receipts. The missing receipts lead to delays in the reimbursement process. However, companies can overcome this problem by using expense tracking software that includes a receipt scanner feature.

4. Data Entry Process

Still, in this digital world, many companies opt for manual data entry, which can cause errors. Ultimately, mistakes lead to mismanagement of the whole process. By incorporating the automation concept, it is possible to prevent such issues.

Managing Your T&E Expenses With Moon Invoice

Moon Invoice provides the easiest way to manage your T&E expenses. After defining T&E expense policies, you can use this platform to streamline your expenditures. The platform’s automation concept eases the overall operation.

What Makes Moon Invoice the Best Option to Choose?

Default Tax: Moon Invoice offers a default tax option. Its automation process automatically calculates the tax in the total amount. Thus, there is no chance of errors.

Recurring Option: Set your recurring expenses easily by enabling a recurring check box.

Attachment Option: Attach important documents easily by uploading files from your documents section or directly from the computer.

Duplicate as Option: This option allows you to create duplicate copies of your expenses easily. With a few clicks, you can make a duplicate copy of your expense.

Share via Email: Moon Invoice provides an email option. You can easily send and share your expenses with the desired person through email.

Sort By: Expense lists can be sorted easily by name, first name, last name, expense number, and category.

Create Invoice: Users can easily create invoices directly for a particular expense.

Final Touch

Managing T&E expenses is an important part of your business expenses. Therefore, you must manage it efficiently while setting up proper guidelines. You must also maintain financial transparency.

Remember, on-time reimbursements to your employees can improve your relations with workers while gaining their trust. However, you should also be aware of proper evidence before making repayment.

Set up the right policies and choose the right automation tool or expense management software to ensure a smooth process flow without errors.

Frequently Asked Questions