Travel and entertainment expenses (T&E) can give your business a competitive advantage if used wisely and effectively. Although often costly, T&E expenses can help your team meet new people, close deals, and sync with important vendors.
Many small and medium businesses (SMBs) worry about the cost of employee expenses when it comes to travel and entertainment expenses (T&E). They sometimes consider it unnecessary to send their employees on frequent trips, especially if their subsequent reimbursement processes are manual and arduous. Likewise, larger enterprise businesses get nervous about too many T&E expenses as they can be difficult to track when multiple employees travel and often use bank-held company cards and separate expense management software.
T&E is regarded as one of the biggest expenses for many businesses because it includes all travel costs. These costs include airfare, car rentals, hotel stays, meals, events, concerts, and more.
But T&E expenses are essential and can help your company in the following ways:
Business travel is often a great way to meet new people and foster relationships. Not only does this help you strengthen relationships with others in your industry, but it can also help you build new ones with vendors, leads, customers, and others.
Companies with well-developed T&E policies tend to have higher employee retention rates because they don't expect their frequent travellers to stay out of pocket and wait long periods for reimbursements. Easy expense processes save employees time (both card users and finance admins) and mean valuable team members can focus on other exciting initiatives instead of manual expense admin.
T&E expenses are the costs incurred for business travel, entertainment, and meals. And for SMEs, these expenses can be a tax deduction for your business and can reduce your taxable income to help lower your tax bill.
The HMRC defines these items as follows:
Travel expenses include any costs you incur to get from one place to another, including transportation and lodging, meals, and incidentals.
Entertainment expenses include any costs you incur for social or recreational activities; this includes food and drinks at restaurants or parties, tickets to sporting events, or other activities that help provide entertainment for employees or customers.
Meal expenses include any costs incurred when eating a meal at a restaurant or while traveling away from home on business. The most common example is meetings over meals with clients, where they can discuss business over food.
To make sure you're following the rules, you need to know exactly what to report as T&E in your business, how it will affect your bottom line, and how you can properly report and account for it according to HMRC guidelines. Taxes, expenses, and capital allowances are three concepts that often need clarification. And you need to understand the difference between them and how they affect your business tax bill.
Taxes are payments made to the government for goods or services sold to customers. If you sell coffee, for example, you will pay VAT on each cup of coffee sold (and other taxes like income tax if you're a limited company).
Expenses are costs incurred by a business during its normal operations: rent, wages, and electricity bills are all examples of expenses. Read more about mileage expenses and per diems on our travel expense management page.
Capital allowances are deductions from profits that allow businesses to claim money back from HMRC for certain purchases of fixed assets such as computers or office furniture.
It's no secret that travel and expense (T&E) make up a major spend for many businesses. The good news is that more companies are adopting new technologies to help them streamline their T&E processes. They're using platforms like Payhawk that can support spend optimisation, like integrating VAT recovery on company receipts, for instance. Which ultimately leads to lower costs and less stress during tax periods.
If you give your employees access to clever automated tools to submit receipts, receive per diems, track mileage, and all other expenses, they won't have to worry about long paper trails. So, no more filling out manual entry forms every time they want to get reimbursed for something related to work.
Utilising innovative, automated expense management software like Payhawk will not only help you streamline your business processes but also help your company save money on travel and other employee expenses. Expense reports and reimbursements are crucial parts of business travel. And the process of expense reporting and approval can be pretty tedious, especially when it involves reams of paper receipts.
As a finance manager, you want to ensure that your employees submit accurate and complete expense reports. This spend accuracy and visibility, in turn, helps you to properly manage your business costs while also helping you stay compliant with all the tax laws in your country.
Looking for a better way to manage travel and expenses for your company? Book a demo today.
Trish Toovey works across the UK and US markets to craft content at Payhawk. Covering anything from ad copy to video scripting, Trish leans on a super varied background in copy and content creation for the finance, fashion, and travel industries.