How to Manage T&E Expenses

Travel and expense (T&E) processes are necessary in any business in which employees may spend on allowable business expenses, which need to be recorded, categorised and reimbursed. T&E expenses cover a wide range of things from the costs of business travel, through to client entertainment and other common requirements for any company dealing with suppliers, customers and contractors day to day.

This guide looks at options for T&E expense management including the Wise Business expense card, which offers an expense management solution with low cost for spending across currencies, with the mid-market exchange rate and no foreign transaction fees.

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What is T&E? 

T&E usually stands for travel and expense, although sometimes it’s thought of as travel and entertainment. T&E expenses could be any expense incurred in the course of work when you’re not working from your normal office or location.

T&E expenses could include things like an employee paying for a train ticket to a client meeting, and the costs of taking the client out for lunch as part of a negotiation, for example. If the employee needed to stay overnight as part of this process, they would also usually need to be reimbursed for hotel and evening meal costs according to your business expense management policy.

Some T&E expenses are allowable business expenses in most businesses - that is, an expense that the employee should be reimbursed for, as it was incurred as a necessary part of doing their job. This guide walks through how to manage T&E expenses and the reimbursement process and options.

How does T&E expense management work?

The T&E process covers the point at which an employee is requested to travel, entertain or incur another cost on behalf of the business, through booking and arrangements, and the expense reimbursement process if any costs were paid for by the employee out of pocket. 

Generally businesses will have a thorough expense and travel policy which sets out clearly the process which must be followed, and which allows for business controls on employee initiated spending. Having a well documented policy which explains what expenses are allowable, how to get approval, spend and reclaim, is an important way of avoiding misunderstandings and issues.

It’s worth noting that as an employer you may need to report and pay national insurance, or withhold tax, on some employee expenses. The rules here vary depending on the type of expense, when and why it was incurre¹. 

Before you start to manage the T&E process you’ll want to make sure you thoroughly understand the legal and tax implications - or you may consider outsourcing this to a third party expert. We’ll feature a few options a little later, but using a specialist expense management company can help streamline the T&E process and may be a useful source of advice where tax and legal matters are concerned.

How to manage T&E expenses?

To manage T&E expenses your business will need an expense policy, and a process for employee claims for any out of pocket expenses. You’ll then need a formal process to repay any expense incurred to the employee. 

Different companies will have their own expense policies which depend on the needs of the business and the types of expense incurred. You’ll normally find that allowable expenses are clearly explained, and all expense claims have a pre-approval stage where the employee asks a manager before incurring a business expense. 

Let’s look at how the T&E expense management process might work in a quick example. In this case let’s imagine that an employee is required to travel to meet a client, which is within the expense policy:

1. Employee asks for approval for travel or anticipated expenses - while not all expenses can be anticipated, it’s normal for an employee to get permission before travel, entertaining a client or incurring other expenses. Sign off processes are set out in the expense policy, and may require line management permissions.
2. Once approval is granted, the employee books travel and other arrangements - the expense policy will cover what travel is allowable, including class of flights or train tickets. Some businesses use a travel agent to arrange travel and pay centrally, but in other cases the employee will pay out of pocket for pre-booked travel.
3. At the point of incurring an expense, the employee retains records like receipts - allowable expenses like travel, food, entertainment, hotels and incidentals must be recorded and evidenced, usually with receipts, invoices or similar - these documents are needed to reclaim payment, and may be required in an HMRC audit.
4. Employee submits categorised receipts to reclaim the money - employee submits images or hard copies of the receipts they want to reclaim. Many third party providers allow this to be done easily with a smartphone for a quicker process.
5. Receipts and spending is reviewed to ensure it’s in policy - checks and balances will be set out in the expense policy, to ensure that expense spending is authorised and used correctly. This will often require line manager or finance sign off, although some providers offer some automated sign off options. 
6. On approval, the money spent is repaid to the employee - when an expense has been approved the money is paid back to the employee, ideally as a separate payment rather than as part of the normal pay run.
7. Finance teams will log the spending as part of the accounting process - tax and national insurance may also need to be paid at this stage.

How to manage international travel expenses?

Many businesses operate in more than one country. Perhaps you have teams or offices in several countries, or you may work with suppliers or specific clients overseas. In either case, international business travel becomes inevitable, and can make managing travel expenses more complicated and expensive.

Aside from the relatively high costs of international flights, and the potential need for extended hotel stays, one other key cost comes in currency conversion. If you have a team member visiting a client overseas and spending with their personal bank card, there’s a good chance that their bank will add a foreign transaction fee every time they use it. This is normally around 3%. It doesn’t sound like a lot, but it can mount up quickly. It’s also a fee you can avoid with travel optimised products like the Wise Business expense card.

If you issue your team member a Wise card, they’ll be able to spend with the mid-market exchange rate, low conversion fees and no foreign transaction fees. Spending is deducted from your Wise Business account, which means the employee does not need to be reimbursed to their personal account, but Wise still offers ways for you to stay in control of overall spending, and easy expense management processes. This can cut costs and administration when dealing with international business travel.

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T&E expense tools

There’s a good range of tools and providers available in the UK that help with T&E expenses management. Some you might want to consider include:

Expensify² - simple receipt upload processes and mileage tracking tools, as well as corporate cards which come with customisable spend limits and tools for spending reconciliation.

Spendesk³ - approval workflows for travel booking, expense cards with custom budgets and spending limits, and options for instant reimbursement of approved travel through the app. 

Pleo⁴ - employee cards for spending and easy reconciliation, as well as expense reimbursement features which include employee activated reimbursements as well as payments which have to be triggered by fiance

Wise Business - if some or all of your business spending will be in foreign currencies - either when traveling or spending online with retailers overseas - you may also want to consider the Wise Business expense card. Cards offer global spending with the mid-market exchange rate, low fees and no foreign transaction fees.

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FAQs - T&E expense

What is the accounting treatment for travelling expenses?

The accounting treatment for T&E expenses depends on the type of expense and the business entity you have, among other things. It’s important that records are kept of all business spending, particularly if you intend to deduct these costs from your profits before filing for tax. 

Many businesses take professional advice or use expense management software which makes the process easier and reduces some of the inherent risks around compliance.

What is the difference between T&E and other business expenses?

Travel and entertainment expenses can be incurred by many businesses, and as this is a commonly employee initiated expense, T&E expenses need different controls compared to other business expenses. Businesses should have a robust expense management policy and reimbursement process, to protect the employer and employee, making sure that spending is properly controlled and employees are quickly paid back for allowable out of pocket expenses.

How should employees report T&E expenses for reimbursement?

The process for employees to report T&E expenses for reimbursement should be set out clearly in your expense policy. In all cases, employees will need to retain evidence of spending, such as receipts or invoices, and spending should be checked before reimbursement. Many companies allow employees to digitally report spending by submitting images of receipts rather than hard copies for convenience.

How can a company create an effective T&E policy?

The easiest way to write an effective T&E policy is to use a template. Expense policy templates are available from expense management companies and also online, and let you customise your policy to suit your own business needs using the guidelines provided.

Wise Business expense cards: international expenses made easy

If your business operates internationally and your employees are regularly spending time abroad for work, Wise Business expense cards could be the ideal solution. 

These contactless international debit cards work for spending and cash withdrawals in  150+ countries worldwide, with no foreign transaction fees or monthly subscription fees. 

Whenever someone spends or withdraws cash overseas, the currency is converted at the mid-market exchange rate, with just a small conversion fee to pay. 

There’s also 0.5% cashback paid on all eligible spending. 

Once you have a Wise Business account, you can order unlimited expense cards for just a one-off fee of £3 a card. You can add employees to your account, with controlled access - and you get full control over spending their limits. 

What’s more, it’s easy to integrate Wise with your accounting tools, and your accountant can view team spending for smarter collaboration.

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Managing T&E does need some thought. You’ll need to set out a thorough expense policy before you allow expense claims, to ensure proper spending controls are in place. 

Sources used in this article:

Sources last checked December 13, 2024