Advice, Preparation . . . Results™

Business Travel: Automation Can Minimize the Administrative Headache

We regularly provide our clients business growth consulting, and a key element of growth often involves travel. But business travel usually proves costly for both the employer and employee. Moreover, when either party fails to follow all the rules, detrimental tax implications may result for the employee.

“Business travel” comprises:

  • Trips taken solely or primarily for ordinary and necessary business reasons;
  • Temporary travel (one year or less);
  • Travel away from an employee’s tax home; and
  • An overnight stay.

When these conditions are met, the entire cost of lodging and incidental expenses, and half of meal expenses are deductible by the business. Reimbursements made to traveling staff under an accountable plan don’t result in additional taxable income to the employee.

The key word is “accountable.” The plan qualifies as accountable if:

  • You reimburse or provide an advance for deductible business expenses incurred while employees performed services for the company.
  • You require employees to return any excess reimbursement or advance within a reasonable time.
  • You require timely receipts from employees for expenses.

Many employees save hard copies of receipts and turn them in, but that can be problematic. Paper gets lost or misplaced and may not be submitted promptly.

Implementing an automated expense management system may resolve the late or lost paperwork problem and address several other issues as well. Consider the following:

  • Employees can simply take a picture of each receipt and send it directly to your expense management system. With optical character recognition (OCR), it can be read, entered into the system and submitted for reimbursement before the traveler returns.
  • Getting receipts into the system quickly enables your employee to easily comply with “timely submission” of receipts—and gets them reimbursed faster, a definite morale booster.
  • Using an automated system reduces administrative costs, eliminating the process of manual tallying, submission, verification, approval, and entries into the general ledger.
  • The possibility of keying errors is eliminated, making expense records easier to audit should a discrepancy occur.
  • Using an automated system simplifies the mileage and receipt verification process, which decreases the possibility of unintentional errors and intentional fraud.

Considering its significant advantages, investing in an expense management system may prove a win-win decision for your business and employees alike. And remember, whether using your own system or an automated system to document travel expenses, always remain diligent in your record-keeping.

For other small business services, including CFO services, cash flow, budget forecasting and business consulting, contact the experienced accountants at Patrick & Robinson CPAs: Office@CPAsite.com or 904-396-5400.

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