Over the course of performing their job duties, employees spend a lot more money than you’d expect. In fact, behind labor, T&E expenses are usually a company’s second-highest indirect expense. When employees use their own money and resources to cover these expenses, they need to be reimbursed. That’s where your reimbursement program comes in. The way your program is set up and managed also impacts how much employee expenses burn a hole through your proverbial pocket. Expense processing, auditing, compliance and program management costs range from 11% to 23% of the total cost of the program. 

How can you manage the costs of your reimbursement program? With a solid reimbursement policy. Your reimbursement policy serves as the blueprint for your expense reimbursement management program, so if you’ve made any mistakes during its creation, they’ll permeate through the whole process. Not only does this let money slip through the cracks, it also creates a lot of frustrated employees who just want their expenses reimbursed. 

By reviewing your reimbursement policy to make sure you aren’t committing any of these expense faux pas, you’ll create a more efficient, reliable T&E reimbursement program.

1. Reimbursing Commuting Miles

In case you aren’t aware, commuting between home and the office or vice versa does not count as a business use, according to the IRS. If your reimbursement policy allows employees to count commuter miles as business miles, not only are you failing to comply with IRS rules, you’re also losing thousands of dollars every year. Of course, there are a few exceptions in which an employee’s commute could be tax deductible, such as when an employee travels to a temporary workplace directly from their home. It’s the job of your reimbursement policy to ensure employees understand the rare instances when reporting their commutes for reimbursement would be acceptable. 

2. Failing to Prioritize Accountability

Your T&E reimbursement program won’t be very efficient or cost effective if it’s not well regulated. Accountability needs to be baked right into the processes themselves. That means  outlining clear requirements for employees on how to record and report mileage, setting up multiple stages of review and approval and regularly performing internal audits to ensure the system is performing well. 

Think of your reimbursement policy as the foundation for all reimbursement activities that happen within your company. If you want to lay down the groundwork for a more accountable reimbursement program, it starts by setting those expectations in your policy. A good place to start is by following the rules of an IRS accountable plan: (1) expenses reimbursed under the plan must have a business connection; (2) the employee must adequately account to the employer for these expenses within a reasonable period of time; and (3) the employee must return any excess reimbursement within a reasonable period of time. 

3. Incomprehensive Reimbursement Rules

It’s very important that employees understand how to report expenses for reimbursement, or you’re likely to have expenses reported to you in a multitude of different ways. In your reimbursement policy, you should detail which documentation is required to submit expense reports, including whether you’ll accept copies or just the original receipts and if an invoice must be itemized. 

Other information employees must report should be included, too, such as the time and date of expense, the location, any other team members present and the purpose. You also need to set a deadline for submitting reimbursement requests after the expense was incurred. Typically, the standard time limit is 60 days, but there could be exceptions you’ll need to mention. 

4. Relying on Manual Mileage and Expense Reporting

When employees manually record mileage for the purpose of reimbursement, we see a lot of issues emerge. First and foremost, employees may manually inflate their trip mileage if they feel they’re being reimbursed at too low of a rate. While adding a few extra miles to their total may not seem like that big of a deal, those few extra dollars definitely add up over time. 

Let’s say an employee travels 20 miles everyday, but they report that they drive 25 miles. If you reimburse them at the 2021 IRS standard mileage rate of 56 cents per mile, these 5 miles increase the reimbursement payment from $11.20 to $14.00, a difference of $2.80. Now, if you multiply that by 261, the number of workdays on the 2021 calendar, the annual cost of one employee misreporting comes out to $730.80. That’s just the cost of one employee, too. If you have 300 employees all inflating their reported mileage by just 5 miles on a daily basis, the cost becomes $219,240.00. That’s nearly a quarter of a million dollars lost to manual mileage reporting. 

In addition to mileage inflation, employees may also include personal trips or detours they took throughout the day that the IRS would not consider to be business miles. Manual review and approval procedures may let these disallowed miles slip by, but should you ever be audited, it wouldn’t take long for auditors to figure out that the trip itinerary does not match the distance reported.

If your reimbursement policy is still centered around manual reporting procedures, not only are you wasting time and money, you could potentially be found to be in violation of IRS rules. The best solution to this is investing in automated expense management software.

Avoid Mistakes With CompanyMileage

Create a more accurate, organized and cost-efficient system for managing T&E expenses with CompanyMileage. Our expense reimbursement software, SureMileage, allows employees to quickly calculate trip mileage and submit expense reports automatically. Rather than verifying the miles driven, our software determines the mileage between the starting and ending points of a trip, eliminating occurrences of mileage inflation, side-trips and inaccurate odometer readings. 

After expenses have been submitted, CompanyMileage coordinates a straightforward, orderly approval process. Supervisors can review and approve expenses and send them to Accounting for reimbursement all within our system; once one reviewer has approved, the report is automatically sent to the next person in the sequence. When payment is ready to be issued, it’s a seamless process thanks to our ability to integrate with your payroll software. 

Other features that employees and administrators will love include integrated Address Books, one-touch check-ins at each service location, automatic flagging of certain behaviors in the system and a user-friendly interface. It only takes employees about two minutes each day to submit expenses, and saves employers up to 30% on their reimbursement costs, so if you’re looking for ways to improve your reimbursement program, look no further. CompanyMileage will put your reimbursement policy into action. Request a demo today to learn more!