Travel expense reimbursement: A guide for businesses

Managing travel expenses can be a challenge. When employees are out closing deals or attending a conference on a business trip, those business-related travel expenses and reimbursements can become a daunting task for your back-office staff.

This guide offers a comprehensive overview of business travel expenses and travel expense reimbursements, so you and your team can handle them efficiently.

What is travel expense reimbursement?

Travel expense reimbursement just means paying employees back for costs they incur while traveling for your business.

This can include transportation (such as car rental, car expenses, and business-related tolls), lodging expenses, business meals, entertainment expenses, and other business-related expenses that business travelers pay for out of pocket while performing their job duties away from their usual work location.

Companies usually have travel expense policies in place that outline which employee travel expenses are reimbursable, any limits on the amounts that will be reimbursed, the required documentation (such as receipts), and the timeline for submitting reimbursement requests.

By reimbursing employees for these expenses, employers support their teams in fulfilling work-related responsibilities while also maintaining financial fairness and transparency within the organization.

Do employers have to reimburse travel expenses?

While many employers choose to reimburse travel expenses, they are not legally obligated to unless it's stipulated in an employment contract or company policy. However, providing reimbursement is a common practice that helps maintain employee satisfaction and loyalty.

On the one hand, it seems only fair to pay employees back if they buy a plane ticket for a work conference. But what if they spend over $300 on dinner every night?

To strike a good balance, companies typically outline the rules in a reimbursement policy, setting limits for things like food or lodging per day.

Reimbursement policies vary by company, so it's important to make your specific policies clear and easily accessible, reminding employees of what those policies are, where to find them, and how to submit expenses for reimbursement.

Creating and distributing a clear travel reimbursement policy helps ensure that employees are fairly compensated for their travel-related costs while also setting reasonable limits to protect your budget.

IRS rules for travel expense reimbursement

The Internal Revenue Service (IRS) provides clear guidelines regarding travel reimbursements. According to the federal government, to qualify as tax-deductible (or even partially tax-deductible), expenses must be "ordinary and necessary" for business. This means that they should be common and accepted expenses in your industry.

Employees should keep meticulous records to substantiate their claims while also providing the documentation the company needs in case it's ever audited—including receipts and invoices.

And employers should familiarize themselves with IRS regulations on travel expenses to ensure compliance.

Employee travel expense reimbursement guidelines

The travel expense reimbursement guidelines included in your policy should include:

• The categories of expenses that are eligible for reimbursement (e.g., meal expenses, lodging expenses, transportation, mileage on employee vehicles, and other business-related expenses) vs. other miscellaneous expenses that count as personal expenses, making them non-reimbursable.
• The documentation your company requires for reimbursement (e.g. receipts to prove actual expenses), and any minimal expenses for which you don't require documentation.
• The processes and deadlines for submitting expenses for reimbursement.
• Any limits on expenses, such as per diem rates or maximum lodging costs.

By making travel expense reimbursement guidelines transparent and straightforward, you'll make the reimbursement request process a lot smoother and improve employee satisfaction at the same time.

Travel expense reimbursement process

Requesting reimbursement for business travel expenses (and incidental expenses incurred at a business destination for business purposes) typically involves a few key steps:

1. Gather documentation: Employees collect and save the receipts, invoices, and travel itineraries they need to prove their travel-related costs.
2. Complete a reimbursement form: Employers usually provide a form for employees to fill out, including the amount of the expense, what it was for, and a way to upload their documentation.
3. Submit for approval: Employees submit their completed form to the appropriate department, such as finance or HR.

Using expense management software can streamline the process, but employers may also want to consider assigning corporate cards with limited budgets to their employees.

This avoids the reimbursement process by giving employees a way to pay for their travel-related expenses with company funds.

Common challenges of travel expense reimbursement

Travel expense reimbursement can present several common challenges for both employees and employers.

Receipt management

One major issue is the complexity of managing receipts—employees often struggle to submit the necessary documentation in a timely manner. Either employees fail to get paid back and become disgruntled, or employers spend countless hours chasing down the documentation they need. Neither one is a great outcome.

Reimbursement delays

Delays in reimbursement can also lead to dissatisfaction among staff, especially if they've incurred significant out-of-pocket expenses during business trips. If an employee misses the monthly reimbursement window, they may have to wait another month to get paid back, long after their personal credit card bill comes due.

Tax and accounting compliance

Ensuring compliance with tax regulations and accounting standards adds another layer of complexity, making it important for organizations to code expenses correctly. This leaves back-office staff poring over receipts and checking submitted categories manually to make sure expenses are entered correctly in the company's accounting software.

Travel expense reimbursement best practices

To streamline the reimbursement process and alleviate common challenges, consider implementing these best practices:

1. Set clear policies: Develop and communicate clear guidelines on what expenses are reimbursable to avoid confusion.
2. Educate employees: Provide training on expense policies and documentation requirements to minimize errors.
3. Simplify processes: Simplify the reimbursement process by minimizing approval layers and allowing digital submissions.
4. Use technology: Leverage expense management tools like BILL Spend & Expense for real-time tracking and streamlined approvals.

Streamline travel expense reimbursement with BILL Spend & Expense

BILL Spend & Expense makes expense management easier by streamlining—or even eliminating—travel-related reimbursements.

• Approve and pay reimbursements: Get notified in the app when an employee has requested reimbursement. Review the request right in the app. If it's approved, send an automatic reimbursement straight to the employee's account via ACH.
• Apply controls: Add automatic rules to help make sure employees have included categories and receipts to their reimbursement requests, so you know you have the documentation you need.
• Corporate card: Because BILL Spend & Expense is free-to-use software that comes with the BILL Divvy Card¹, you have the option of giving your employees cards with automatic limits. So you can ditch the reimbursements and gain even more control over your budgets, booking travel through TravelPerk—for exclusive rates, real-time data, and exceptional travel rewards.

See how BILL Spend & Expense can help you streamline (or eliminate) reimbursements while boosting budget control, cost savings, and travel perks.

From our customers

“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

Travel expense reimbursement FAQ

Here are quick, easy answers to some commonly asked questions about travel expense reimbursement.

Can a company refuse to reimburse travel expenses?

Yes, companies can refuse to reimburse travel expenses if they fall outside of established policies or lack proper documentation. Familiarizing yourself with company guidelines can help prevent issues.

Are reimbursed travel expenses considered income?

Generally, travel expense reimbursements are not considered income for employees, meaning they don't create an additional tax burden. However, it's important to follow proper procedures to ensure compliance.

Are reimbursed travel expenses taxable?

Reimbursed expenses are typically not taxable if they meet the IRS criteria of being ordinary and necessary business expenses. Employees should keep detailed records to substantiate their claims, and employers should stay on top of current IRS regulations regarding which business expenses are tax-deductible, and to what degree.

¹The BILL Divvy Card is issued by Cross River Bank, Member FDIC, and is not a deposit product.