Numbers don’t lie: The IRS standard mileage rate has been on the rise recently, trending sharply upward in the last four years. In fact, in the last seven years, the mileage rate has only decreased once, between 2020 and 2021, which was quickly negated by two rate increases in 2022, to account for a sharp spike in gas prices.
These sequential rate increases may seem like a minor blip on your business expense radar. However, without proper practices in place, reimbursement costs can easily get out of hand!
How Much Has the Rate Increased?
The table below compares the standard mileage rate that was set for 2020, compared to the one the IRS set for 2024. Just four years ago, the rate was 57.5 cents per business mile. The current rate of 67 cents is almost ten cents higher, or an increase of 16.5%! This is the largest rate increase we’ve seen in a 4-year period since the 2008 recession, when the IRS standard mileage rate was increased an entire 8 cents midyear.
|Percent Increase (%)
Those small numbers can add up, big time. If an employee drove 10,000 miles in 2020, they were owed $5,750 in mileage reimbursement. In 2024, they’d be owed $6,700 for the same amount of travel, a difference of $950! And that’s just one hypothetical employee. For a business with a fleet of 300 mobile employees, that’s an increase of $285,000, just from that 9.5 cent difference.
How Are You Managing Reimbursement Costs?
Seeing how rate increases can cost your business ever-growing amounts of money, what can your organization do to manage the rising cost of mileage reimbursement for employees? Well, one simple but crucial way you can ensure costs don’t get too out of hand is by implementing better mileage tracking and reporting processes.
Think about it like this: When employees track their mileage by writing down and subtracting odometer readings – the old-fashioned way, one might call it – several issues may arise, such as:
- Estimating: Typically, people like to work with nice round numbers if they have to do math, so employees calculating mileage may round up or down to make their calculations easier.
- Padding: Employees manually using odometer readings to figure their mileage totals may be tempted to add a few extra miles to their trip, for a slightly higher reimbursement.
- Personal mileage: Let’s say an employee who uses their personal vehicle for work decides to make a quick detour for a personal errand. If they have no oversight in calculating and reporting their work travel, that personal mileage may wind up in their final mileage total.
All of these behaviors will make your total reimbursement costs creep higher and higher. Like with the effects of a rising mileage rate, the cost increase caused by these behaviors may feel insignificant on an individual level, but if all of your hundreds of employees are galvanized to engage in these behaviors, those increases will add up, fast!
A Better Way to Track Employee Mileage
Even as the standard mileage rate goes higher and higher, you can keep costs under control with CompanyMileage! Our system is designed specifically to help companies like yours manage and streamline mileage reimbursement expenses.
Our suite of mileage reimbursement software uses a unique method called point-to-point calculation, in which employees provide a starting and ending point for each work-related trip, and our system calculates the most direct route between the two points for reimbursement. This method makes odometer readings obsolete, and by eliminating manual reporting, it prevents troublesome behaviors such as mileage padding, mileage estimation, and the inclusion of personal trips or detours in mileage totals.
Automating the mileage reimbursement process doesn’t just reduce risk; it makes the process faster and easier. With CompanyMileage, employees can manage their trips right from their smartphones. At the end of each day, it only takes a few minutes to finalize and submit their trips for review. Once submitted, reimbursement claims travel quickly and efficiently through a customizable, automated workflow. Our software also integrates with major accounting and payroll software, making it easier than ever to reimburse employees once their claim has been approved.
With the recent increases to the standard mileage rate, it’s more vital than ever to get your reimbursement costs under control. Let us help! CompanyMileage customers save 20-30% on reimbursement costs. Find out how much you can save by contacting us to request a demo today!