Creating and implementing a travel expense policy

Meeting discussing travel expense policies

What a good, healthy policy needs to have and do

Setting up a policy to manage the expenses associated with sending employees overseas can be a complex task. Whether you’re dealing with a single traveller or multiple, you’re a start-up or an established small business, a travel expense policy will provide your business with the guidelines it needs to manage and process business travel expenses.

The policy should reflect your current business needs, and a good one will help you reduce costs and support employees with making expense claims and budgeting.

Creating and implementing a travel expense policy simplifies the process for both your business and travellers – essentially automating and optimising expense management. For smarter travel expense management, your business needs a travel expense policy. To help you put together a comprehensive policy, consider the following a best-practice approach.

For quick reference, this article will cover:

  • What is a travel expense policy?
  • The importance of including expenses in your travel policy
  • What’s inside – components of a comprehensive travel expense policy
    • Travel-related business expenses
    • Travel and accommodation
    • Non-reimbursable expenses
  • The expense reporting and reimbursement process
  • Automating the reimbursement process
  • Best practice – policies set up for success

What is a travel expense policy?

Male reading through a travel expense policy

A travel expense policy ultimately defines how your business will reimburse its employees for travel-related expenses incurred while travelling for work.

It will also dictate how your travellers can spend business money while travelling – in other words, what is, and more importantly what isn’t, considered a work travel expense.

It’s a key component of your travel policy which outlines where and how employees can book their travel and have it approved.

A good travel expense policy will detail these key objectives:

  1. Clearly define what is considered a business trip and a business travel expense.
  2. Establish your reimbursement process including how to report expenses, what to include, and how employees will be reimbursed.
  3. Ensure your business travellers understand that correct reporting of expenses is required by law. Your employees need to understand how the policy – and their commitment to it – fits in with wider business processes for them to remain engaged.
  4. Clarify the duties and responsibilities of both travellers and their managers when it comes to managing business travel expenses. 

The importance of expenses in your travel policy

Often, businesses will struggle with or put off creating and implementing a travel expense policy, for one of three reasons. First, they simply haven’t had the time, person or function responsible for crafting one. Second, their policy is difficult to follow because it requires too much manual administration. Third, they believe a policy will negatively affect employee satisfaction.

From a business traveller’s point of view, it doesn’t matter whether the business has a travel expense policy in place or not. Without guidelines or restrictions to follow, your business travellers can – and often will – choose flights and accommodation based on preference, and potentially spend company money on unnecessary expenses. This can be disastrous for a business’s bottom line.

Here are a few reasons why it’s best practice to create and implement a travel expense policy:

  • Set employee expectations to align with the business

Like a block of chocolate, which without restrictions you could eat entirely, the same goes for what your employees spend when they travel. With a travel expense policy, you can control how much and where they spend their travel budgets – and this should be aligned with your business’s overall travel goals.

  • Get control over your bottom line

With expectations set and managed, you’ll gain better control of your bottom line, and have preventative measures in place against overspending. This will give you greater visibility of how much the business spends on travel, so you can predict future costs and make adjustments if required to stay on budget.

  • Build beneficial vendor relationships

A travel expense policy presents the opportunity for choosing and nurturing preferred travel vendor relationships, so you can then negotiate volume and spend discounts. This is especially beneficial for small businesses that travel frequently – you can save a small fortune working with one vendor exclusively.

  • Defined roles and responsibilities

Identifying key stakeholders and outlining their roles and responsibilities in your travel expense policy will ensure managers and travellers have a clear process path to follow – and can help the business pinpoint any functions that require improvement.

  • Fraud prevention

Although you hope it’s never an issue, more employees travelling for business equals an increase in expense management complexity – and therefore a higher risk of missing fraudulent behaviour. A travel expense policy will help you identify any red flags.

What’s inside – components of a comprehensive travel expense policy

Group of people meeting and reading a travel expense policy off a laptop

Now that you have a better understanding of what a travel expense policy is, and the role it plays in keeping a business on top of its total expenses, let’s take a more in-depth look at the different components of a comprehensive travel expense policy.

Travel-related business expenses

Your policy needs to define what kinds of expenses an employee can charge and be reimbursed for. Employees often assume that any expenses incurred while travelling for work will be reimbursed – but that’s not always the case.

Typically, every expense charged and claimed by employees should fall under an appropriate travel expense category and sit within a pre-agreed spend limit based on the seniority of their roles, as well as where they are geographically travelling to.

    Here are the most common expense categories you should be allocating budget for:

    • Food and meals – not only breakfast, lunch and dinner, but also snacks, refreshments, mini-bar expenses and airport food  
    • Medical and health expenditure – primarily employee health and medical insurance as part of their overall travel insurance
    • Entertainment – just as its important employees aren’t overworked on home turf, the same goes for while they’re travelling. This means budget needs to be allocated for entertainment purposes, and appropriate entertainment clearly defined.
    • Mobile and internet – costs associated with roaming and Wi-Fi so your employees have access to their phones, computers and any cloud-based applications.
    • Alcohol – often capped to a limit; anything over won’t be reimbursed.

    Travel and accommodation

    Whether you’re managing domestic or international travel, the two biggest expenses associated with business travel will be flights or mileage, and accommodation. Because of this, your policy needs to address these key areas.

    • Mileage

    Your policy should define rates for mileage across different vehicle types and distances, as well as destinations so when employees use their own vehicles for work purposes, they know what amount they’re entitled to be reimbursed.

    • Flights

    As a travel manager, it’s probably in your job description to take care of booking any domestic or international flights. However, it’s still essential your travel expense policy outlines the parameters involved – preferred airlines, ticket class, food and entertainment inclusive – as well as whether authorisation by a more senior member of the business is required.

    • Accommodation

    If employees are required to book their own lodging, they need to know what type of accommodation the business is willing to pay for, or if the business has preferred accommodation options for them to choose from. This includes everything from hotel star ratings and location, through to available amenities and facilities.

    Here’s more on the finer details of flights or mileage and accommodation that your travel expense policy should cover:

    • Mileage – include what’s expected of daily office commutes, trips to client meetings, and any long-distance car travel.
    • Ground travel – state preferences for car rentals and taxi services and be sure to account for all modes of transport, like trains and buses. You also need to consider parking expenses and any toll-road costs.
    • Domestic and international travel – establish a travel expense budget for each region or city you frequently travel to, and a preferred airline carrier and class of ticket for both domestic and international travel for all hierarchy of staff.
    • Accommodation – like flights, control how much is spent on accommodation by applying guidelines around preferred hotels, type and star-rating, and amount per night for all employees.
    • Last-minute bookings – with last-minute travel comes additional expense compared to organising travel in advance. Be prepared by planning travel itineraries ahead of time to control costs, and put aside extra in the budget for any unplanned business trips.

    Expenses that won’t be reimbursed

    This is where lines can get a little blurry – and where the true value of having a travel expense policy lies.

    First, your policy must define what your business considers to be travel for work. It’s not unusual for business travellers to extend their time overseas by a couple of days to enjoy what’s commonly known as a ‘bleisure trip’ – mixing business with pleasure. Your policy must be clear on which expenses the business will cover – usually all expenses associated with the business section of the trip. Anything else will need to be covered by the travellers themselves.

    Another scenario to consider is when you have more than one employee travelling for the same reason. In this case, expenses are often split between the employees, so your policy must include criteria for reimbursement of shared expenses.

    Then there are the travel expenses which are commonly deemed as non-reimbursable. These can include, but are not limited to:

    • Traffic fines, court costs or parking violations, or any auto repairs on personal cars
    • Any personal entertainment not included in your travel expense policy, e.g. books, magazines, any additional in-flight entertainment, hotel pay-per-view movies or social activities
    • Personal grooming including haircuts or dry-cleaning
    • Family expenses incurred while you’re travelling, for example, babysitters or kennel fees
    • Travel costs including airfares and rental car extras for spouses, partners or children accompanying you on the trip

    The expense reporting and reimbursement process

    Once you’ve established what your business considers to be reimbursable and non-reimbursable travel-related expenses, and you've worked out what your travel expenses are, you can define the reporting and reimbursement process.

    Generally, a simple version of the process can be broken down into stages:

    • Creating an expense: pre-authorisation>mode of payment
    • Reporting an expense: expense proof>timeframe
    • Approving an expense: policy compliance>pre-accounting
    • Reimbursement: audit>timeline>method of reimbursement

    Creating an expense

    Here, your employees need to know what, if any, documentation is required to create a business travel expense, and which stakeholder they require permission from.

    Then the employees need to be informed of the business’s preferred mode of payment. Should they use a personal credit card, a corporate card, and is the method of payment the same across all categories of travel expenses?

    Reporting an expense

    This will be guided by your business’s internal processes as well as government-mandated policies, and involves the documentation required for the business to reimburse its travellers, e.g. forms, receipts, invoices.

    You also need to set a cut-off period from the date of expense so an employee can claim reimbursement within the required time.

    Approving an expense

    A travel expense policy will outline the process for approving authorities like managers to approve or reject expenses reported to them. An important part of this process is communicating with your travellers whether their expenses have been approved or not.

    Based on whether an expense is approved or not, the process should account for reimbursable and non-reimbursable components in your account books.


    Employees need to know the net dollar amount they can expect to be reimbursed, by when and which payment method, e.g. via credit card or with their next pay.

    Your business should also have a process for checking approvals and any relevant documentation to ensure you’re audit-ready.

    Automating the reimbursement process

    Two males looking at iPad

    As mentioned earlier, one of the key reasons why travellers struggle to comply with travel expense policies – or there isn’t one to follow – is because the reporting and reimbursement process involves a large amount of work. The entire workflow process explored above relies heavily on manual data entry and leaves too much room for human error.

    For this reason, investing in an automation tool will transform how you manage your travel expense management.

    There is no lack of options when it comes to expense management software. Among other things, these automation tools can make implementing a travel expense policy super easy for the employer, travel manager, and employees.

      Some common features include:

      • Paperless process – say goodbye to wads of faded receipts and time-consuming expense documentation.
      • Duplicate detection – eliminate one of the most common errors in reimbursement for any business.
      • Real-time policy checks – detect and inform travellers of non-reimbursable expenses in real-time.
      • Automatic alcohol detection – detect specific expenses like liquor items in a receipt or claim.
      • Match expenses with transactionsautomatically match expense claims with related transactions on corporate cards.
      • Digital audit footprintevery movement to do with a claim is tracked digitally and can be used to justify compliance come audit time.
      • Powerful checks not possible manually accurately identify the geography of an expense item, like geotagging a mileage log.
      • Apps make travelling easier not only does travel expense management software automate business operations making them more agile, it’s one of many tools that help business travellers and managers travel smarter and more efficiently.

      Best practice – policies set up for success

      The most important thing to remember when creating and implementing a travel expense policy is one size does not fit all. You need to design a policy that aligns directly with your company’s financial and travel goals, as well as the needs of your business travellers.

      While automation in today’s world of corporate travel is a worthwhile investment, you still need to ensure the fundamentals are in place.

      Spending limits

      Benchmark the amount employees can spend across each expense category.

      Expenses and categories

      You must define what business travel expenses employees can be reimbursed for and categorise them for both employee satisfaction and good business processes.

      Method of payment

      Drive employees away from paying for business travel-related expenses with cash, as its harder to track. Instead, use a credit or corporate card.

      Easy-to-understand process

      Travel expenses can be complicated, but your process for managing them does not need to be. Implement the process, make sure your travel expense policy is readily available and ensure it’s part of the onboarding process for any new employees who will be required to travel.

      Additional tips and tricks:

      • If your travel expense policy follows your company’s organisation structure, it makes it easier for employees to understand the approval workflow.
      • Ensure a clean, bi-directional flow of information in case an expense is rejected, needs correcting, or requires additional authority.

      Comprehensive but not complicated

      Be explicit – provide as much detail as you can but don’t overwhelm your employees with information. Set expectations – make sure your business travellers know what budget they can spend.


      Implementing a travel expense policy requires all employees to be informed and understand their roles and responsibilities – and they need to be held accountable.

      Spend smarter with a good travel expense policy

      In the long run, a good travel expense policy will not only help your business control travel costs, you’ll also be able to continuously optimise your policy for the better. Business requirements evolve, expenses fluctuate, and preferences change. Be sure to review your travel expense policy often using any new travel expense information you have.

      Require more help designing a travel expense policy that’s right for your business? Professional travel management company Corporate Traveller is well-versed in travel expense policies, and can make the process simpler, faster and easier for you.

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