How to work out business travel expenses

What is considered business travel?

Before you get started calculating, it’s important to define exactly what travel is ‘business travel’. This is especially relevant in today’s corporate travel climate, where employees might extend a business trip by a couple of days for personal reasons – commonly referred to as ‘bleisure’ travel.

Generally, employees are on a business trip if they’re primarily conducting work-related tasks outside of their regular and agreed upon place of work. These tasks could be as simple as visiting a trade fair, or as complex as a two-week buying trip to China.

There are several different factors that can influence a definition of business travel and any associated expenses:

• The amount of time employees are away from home – is it substantially longer than an ordinary day’s work and are they  
• Distance travelled – number of kilometres travelled not including the distance to and from home and work
• The type of work conducted when on a business trip and away from home
• The definition of home being the regular place of work instead of a family home – unless you’re a home-based business – or if you conduct business at more than one site

When it comes to combining work with leisure – i.e. you extend a trip that is primarily for business by a few days to ‘see the sights’, the general rule is that the ‘work’ part of the trip is considered to be business travel, and therefore the ‘leisure’ part is personal, and not business travel.  

Business travel on weekends can be a little trickier to define and often comes down to what is in your business travel policy.

If employees are required to work on the weekend and away from home, they should be reimbursed accordingly, based on what their employment agreement is with the company. They might finish with their work commitments on a Friday and choose to stay for the weekend – this would then be considered as ‘bleisure’. If for some reason, they’re unable to return home because of circumstances out of their control, and must stay the weekend, that part of the trip might be covered by insurance.

What is considered a business expense?

With business-related travel come business travel expenses.

For an expense to be considered a business travel expense – and therefore tax-deductible – it needs to meet a few general criteria.

The expense needs to be what is deemed as ordinary, necessary and reasonable to operate the business and complete employment duties. Lavish or unreasonable expenses, like renting a fancy sports car instead of a comfortable sedan, is more than what’s required for a business trip – unless of course, your traveller is a sports-car racer.

The expense must be incurred for business purposes or be a cost associated with employees needing to stay overnight away from their regular place of work.

Here’s a list of expenses which are generally considered to be business travel expenses:

• Transportation costs: airfares, airport shuttles, public transport, taxi fares, rental cars or mileage if using a personal vehicle while travelling for business
• Accommodation costs: hotels, motels, bed and breakfasts
• Laundry and dry-cleaning costs
• Regular day-to-day expenses like food and drink
• Travel insurance cover
• Communication costs: mobile and roaming expenses, internet access, any rental equipment
• Costs associated with work-related tasks: conference tickets, new client acquisition expenses, business meeting expenses

There are some expenses which will not be considered business travel expenses:

• Unreasonable expenses: if an expense isn’t necessary, and business can be conducted on the trip without it, then it’s unreasonable.
• Any personal expenses: including any family travel costs incurred by spouses and children who travel with you, or entertainment costs outside of the ordinary, e.g. purchasing concert tickets because a band happens to be playing while you’re in town. 

Working out how much a trip will cost

Now it’s time to get into the nitty-gritty of business travel expenses – how to estimate the total cost of a business trip.

Calculating the required budget for a business trip is critical to keeping your organisation in the green. It’s an integral part of planning and organising business travel – but it can also become quickly overwhelming if you don’t have a smooth process in place.

Why it’s important to have a travel policy

All good business travel management starts and ends with a good corporate travel policy.

A travel policy is a set of guidelines created specifically for your business that outlines how travel managers and employees plan and organise their business travel. Having a policy in place is important for several reasons:

• Duty of care: an effective travel policy will help you keep business travellers safe and ensure they adhere to company travel guidelines.
• Makes business travel easier: simplifies the process for both your business and travellers – essentially automating and optimising expense management.
• Helps reduce travel costs: it allows you to control costs associated with business travel by clearly defining what is and isn’t a business-related travel expense.

Expenses in your travel policy
Creating and implementing a travel expense policy will provide your business with the guidelines it needs to manage and process business travel expenses.

This policy will define two things: a) the employee reimbursement process for business travel-related expenses, and b) how your travellers can spend business money while travelling, i.e. what is and isn’t a business travel expense.

Having a travel expense policy will help you set employee expectations, align with business financial goals to keep your bottom line on track, define roles and responsibilities for expense management, enable you to build reciprocal vendor relationships, and help you prevent or flag any fraudulent behaviour.

Communicating with your travellers about expenses

At the end of the day, you can do all this work on building a travel policy and estimating travel expenses, but none it will add any business value – unless you communicate it to employees who travel for work.

Employees will often turn their noses up at the word ‘policy’ so it can be a challenge sharing this type of information widely – let alone keeping track of compliance. It’s as much for their benefit as it is for your role as travel manager, and for the business.

For new employees, make sure educating them on your travel policy is part of their on-boarding process. It’s important they understand their roles and responsibilities when travelling on behalf of the company, and they need to know you have their best interests – as well as their safety – at heart. This can do wonders for employee satisfaction.

For current employees, make sure policies are up-to-date, clear and accessible. It’d be easier to teach a dog new tricks than attempt to get your employees to read a 300-page policy document.

Without a doubt, the most effective way of increasing policy compliance and automating travel expense management is by taking advantage of the technology that’s available.

Anything that can help you travel and manage associated expenses smarter is a worthwhile investment – and in the world of corporate travel today, there’s no shortage of cool travel apps and solutions to choose from.

No more surprises – estimate your travel expenses

Estimating and keeping track of business travel expenses don’t need to be mammoth tasks. With a little research and elbow grease, you can work out how much a business trip is going to cost your business – and proactively prepare for any surprise expenses you might face along the way.

From there, you can estimate travel expenses over a longer period, consider an expense management solution, and work to encourage more time and cost-efficient business travellers.

If the idea of numbers and policies still makes little beads of sweat pop up on your forehead, bring an expert on board and work with a professional travel management company like Corporate Traveller. They’ll get you on top of your business travel expenses in no time!