Reconciling Travel Expenses: A Step-By-Step Guide To Accuracy

Reconciling travel expenses is an important process for businesses to ensure accuracy and compliance. It involves checking that expenses are compliant with company policies, categorised correctly, and charged to the right budget lines. For example, when reviewing employee expenses, companies need to ensure that expenses such as air travel, hotel stays, transportation and meals are filed under the appropriate categories and charged to the right accounts. This process helps businesses balance their books and make informed decisions about spending, budgets, priorities and needs. It also helps to identify suspicious activity and prevent fraud.

Implement automated expense management software

Travel expense reconciliation is a critical financial process for businesses. It involves checking submitted expenses to ensure they comply with company policies, are entered in the correct categories, and are charged to the proper budget lines.

Implementing automated expense management software can greatly assist in this process, offering benefits such as:

Streamlined Data Collection

Automated software can help to streamline the collection and management of data, which is often time-intensive and challenging when kept on paper records or multiple spreadsheets. With such a diverse range of data sources, from purchase orders to invoices, credit card statements, and approval forms, automation can help to quickly match records, identify gaps, and free up time for more critical tasks.

Improved Accuracy

The software replaces manual paperwork with an automated workflow, reducing potential errors and inconsistencies that can occur during data entry. It also ensures that expenses are accurately categorised and charged to the correct budget lines, which is essential for maintaining proper financial management.

Enhanced Visibility and Tracking

Expense management software provides administrators with complete visibility and tracking capabilities for employee expenses. This allows for better control over excessive spending and helps identify cost-saving opportunities. The software can also integrate with other systems such as time-tracking software, travel management software, and payroll software for a more comprehensive overview.

Efficient Reimbursement

By automating the reimbursement process, the software speeds up the approval and payment process. It also ensures that reimbursements are accurate and compliant with business policies, reducing the risk of unauthorised spending.

Customisable Workflows

Automation tools can be tailored to align with specific travel booking requirements and company policies. This includes customisable forms, approval processes, and automated notifications to relevant stakeholders, making it easier to manage travel requests and expense reports.

Overall, implementing automated expense management software can greatly assist in reconciling travel expenses, providing improved accuracy, streamlined data management, enhanced visibility, and efficient reimbursement processes.

Establish clear expense policies

Establishing clear expense policies is a crucial aspect of effective travel expense management. Clear guidelines ensure that employees understand what expenses are reimbursable, promote responsible spending habits, and help to eliminate confusion and errors. Here are some key considerations for creating comprehensive and transparent expense policies:

Define Eligible Expenses

Clearly outline the types of expenses that are eligible for reimbursement. This includes expenses such as air travel, hotel accommodations, ground transportation, business meals, car rentals, entertainment expenses, and professional development fees. Be explicit about any expenses that are not eligible for reimbursement, such as personal leisure activities or upgrades beyond the allowed standard. Providing this clarity upfront empowers employees to make informed spending decisions.

Booking and Approval Process

Provide detailed instructions on the booking process, including the use of preferred vendors and any negotiated corporate rates. Outline the approval process for certain business expenses, such as the requirement to use a designated travel agency or corporate booking tool. This ensures employees follow consistent procedures and helps maintain control over business spending.

Expense Submission and Reimbursement

Specify the required documentation, timelines, and approval workflows for submitting and processing expense reports. Define the types of receipts or supporting documents needed, the deadlines for submitting these reports, and the reimbursement process. This includes clarifying the reimbursement timeline and acceptable payment methods, such as direct deposit or corporate credit cards.

Credit Card and Corporate Card Usage

If your company provides credit cards or corporate cards, outline the rules for their usage. Define the acceptable uses of these cards, the requirements for timely expense reporting, and the consequences of misuse. Also, provide guidelines on obtaining and maintaining these cards, as well as instructions for reconciling card statements.

Per Diem Rates and Incidental Expenses

Determine the daily allowance for meals and minor expenses during business travel, known as per diem rates. These rates may vary based on location or role. Define the types of incidental expenses that are reimbursable, such as local transportation, tips, and internet access.

Insurance and Liability

Outline the travel insurance coverage provided by your company, such as emergency medical, medical evacuation, and lost baggage. Specify any requirements for employees to purchase supplemental insurance when travelling to higher-risk destinations. Provide clear instructions on how to file claims, submit documentation, and report any covered incidents during business trips.

Ground Transportation

Establish policies and procedures related to rental car usage, including mileage reimbursement rates and documentation requirements if employees use their personal vehicles for business travel. Set spending limits for ground transportation costs to keep expenses reasonable, and consider partnering with preferred rental car vendors to take advantage of pre-negotiated corporate rates.

Use corporate credit cards

Corporate credit cards are a convenient way to manage travel expenses, but they require diligent reconciliation to ensure accurate financial reporting. Here are some detailed steps and best practices for reconciling corporate card travel expenses:

Collecting and Sorting Receipts

This is the first step in the reconciliation process. Receipts are proof of expenses, and they come in various forms, such as invoices, bills, or handwritten notes. Companies should collect and store these receipts from cardholders, either manually using spreadsheets or through automation tools like expense management software. This step ensures that there is evidence of all expenses incurred.

Matching Expenses to Transactions

Finance teams should then match the credit card statements to the reported business expenses, including travel costs such as air travel, hotel stays, transportation, and meals. It is important to ensure that there are no unmarked items in the credit card statement besides fees and interest charges. This step helps identify any discrepancies between the expenses and the transactions in the card statement.

Notifying the Bank of Errors

In case of any errors or discrepancies, it is crucial to notify the bank authorities promptly. Finance teams should be vigilant in identifying and reporting any unauthorized activities or fraudulent behaviour. Common errors include refund issues, duplicate charges, or charges for failed transactions. Addressing these issues in a timely manner protects the company from financial losses.

Best Practices for Corporate Card Reconciliation

To streamline the reconciliation process and improve efficiency, consider implementing the following best practices:

• Automated Reconciliations: Using automation tools can significantly ease the reconciliation burden. Automated systems match card transactions to accounting entries, identify discrepancies, and provide real-time data access. This saves time and reduces the risk of human errors.
• Separate Cards for Individual Users: Issuing individual corporate cards to employees eliminates the complexity of multiple users per card. It also enhances control over expenses, as responsibility can be pinned to a single person, reducing the risk of fraud.
• Automatic Capture of Proof of Expenses: Utilising OCR technology, expense management systems can capture and process proof of expenses (receipts, bills, etc.) immediately. This simplifies the reconciliation process for employees, managers, and finance teams.
• Real-time Access to Card Statements: Automated systems can sync card statements with accounting systems, ensuring that all relevant data is readily available on a customised dashboard. This real-time access simplifies the reconciliation process and enables efficient expense management.

By following these steps and best practices, organisations can effectively reconcile corporate card travel expenses, ensuring accurate financial reporting and compliance.

Provide comprehensive training for employees

Providing comprehensive training for employees on expense reconciliation is essential to ensure accurate, timely, and policy-compliant expense submissions. Without proper training, employees may struggle with the tools or misunderstand policies, which can delay the business spend reconciliation process.

Training should cover the following areas:

Using Expense Management Software

Employees should be trained on how to effectively use expense management software, including navigating the interface, submitting expense reports, and utilizing mobile apps for on-the-go expense tracking. They should be taught how to capture expenses by photographing receipts with their smartphones, which the software can then automatically process and categorize.

Understanding Company Expense Policies

It is crucial that employees have a thorough understanding of company expense policies. They need to know what expenses are allowable, spending limits, and reimbursement processes. Use practical examples to clarify policy guidelines and provide easily accessible policy documents on the company intranet, employee handbook, or directly within the software.

Documenting Expenses Accurately

Employees should be instructed on how to accurately document expenses. Emphasize the importance of detailed reporting and provide support on submitting valid receipts and invoices. Explain the types of expenses that are reimbursable, such as transportation, accommodation, meals, client gifts, and other business-related expenses. Also, clarify which expenses are non-reimbursable, such as personal expenses or travel upgrades outside of the initial budget.

Compliance and Fraud Prevention

Training should include information on fraud prevention and policy compliance. Employees should be made aware of the consequences of deviating from the policy or attempting fraud. They should also be informed about the process for identifying and addressing suspicious activity or questionable transactions.

Pre-Travel Approval and Planning

Employees should be instructed on the process for submitting pre-travel approval requests, including all relevant details such as place, time, dates, purpose, and expense budget requirements. This ensures that employees have a clear understanding of the approval process and expense policy limits before incurring any expenses.

Conduct regular audits and reviews

Conducting regular audits and reviews is essential for accuracy and compliance in corporate travel expense management. This process involves systematically examining expense reports and financial records to ensure that all expenses are legitimate, documented, and adhere to company policies.

Pick a Representative Sample of Expense Reports

The first step is to select a sample of expense reports to review. The sample size and criteria may vary depending on the audit scope, organization size, and expense volume. It is important to have an organized expense system to ensure a smooth process.

Evaluate Compliance with Company Policies

Auditors should thoroughly review the selected expense reports to ensure compliance with company policies. This includes verifying that expense amounts do not exceed policy limits and that there are no duplicate claims or violations of travel expense policies.

Check for Discrepancies

Auditors need to look for discrepancies, such as missing receipts, incorrect amounts, or unauthorized expenses. Any anomalies or suspicious activities should be flagged for further investigation. This step helps identify errors, potential fraud, or non-compliance with company policies.

Interview Employees or Request Additional Information

If there are any uncertainties or ambiguous expenses, auditors may interview employees or request additional information. This step provides context and helps resolve any questions or concerns about certain expenses.

Compile and Report Findings

After completing the review, auditors should compile a report outlining any issues identified, including policy violations, errors, or potential fraud. This report should also include recommendations for corrective actions and process improvements.

Automate the Process

Using automated expense management software can significantly streamline the audit process. It reduces the need for manual data entry, accelerates expense submission and review, and helps in accurately tracking and managing expenses.

Establish Clear Expense Policies

Clear and concise expense policies are crucial for effective audits and overall travel expense management. These policies should outline allowable expenses, spending limits, and required documentation for reimbursement. Regularly review and update these policies to ensure they remain relevant and effective.

Conducting regular audits and reviews helps maintain the accuracy and integrity of financial records, detects discrepancies, and prevents fraud. It also allows companies to benchmark their performance and track improvements in expense management practices.

Frequently asked questions