What is Travel and Expense Management?
What is Travel and Expense Management?
Often referred to as T&E, travel and expense management is the process in which the company manages the travel and related expenses of the business travelers such as airfare, lodging, meals, etc.
Most companies consider T&E as part of “the cost of sale.” It could be the cost incurred by your sales team traveling for sales meetings, product demos, or account managers visiting your customers to maintain and nurture the relationships to upsell, cross-sell or to successfully renew contracts and retain the customers.
Why is T&E important?
World over corporates spend a whopping $30 billion on business travel expenses annually, and with the amount set to soar up to $1.7 trillion globally by 2022, it’s time to work on strategizing your travel expenses.
Travel and Expense is one of the most backbreaking operating costs for finance teams to control. With various systems for travel-booking, different payment methods (corporate or personal cards), and accounting, employees and finance teams get bogged down in receipts, expense reports, and multiple follow-ups after every trip.
With T&E being considered the second-most highest operational expense, and consuming anywhere between 6-12% of the company’s budget, streamlining T&E processes and improving controls can have an outsized impact on financial performance as well as enhance the employee experience.
As Uttam Gujrati, the VP of Finance at Onward Technologies succinctly puts it:
T&E is a major expense item for any services company after payroll. It’s roughly in the range of 5-8% of the total cost. So, it has to be looked into very carefully in the process. Even a 0.5% improvement can have a clear direct impact on your bottom line. So, it’s a very high-value item and CFOs should not turn a blind eye to it.

T & E Management: Practices, Pain Points, and Productivity
A comprehensive travel and expense management process should encapsulate the T&E lifecycle, from the beginning of a business trip to the post-trip spend analytics stage. An ideal T&E management (TEM) solution handles the complete expense reporting workflow, right from the uploading of a receipt, to its approval and reimbursement. With advanced features like auto scan for receipts, your TEM solution should stand out as a simple, yet efficient solution to manage and optimize your organization’s expenditures.
To get a fair idea of what businesses use when it comes to travel & expense management, let’s look at the common practices, the pain points businesses experience, and how having the correct systems in place can improve productivity.
How businesses decide their Travel & Expense Budget
Travel and entertainment (T&E) is one of the most difficult of all expense categories for which to budget. Not only is overall travel volume unpredictable, but the cost of any given trip is also highly variable based on market rates and demand. Moreover, the amount a company spends on travel depends on thousands of purchasing decisions made by individual employees. T&E isn’t just a complex expense, it’s a significant one.
Though it’s challenging to forecast travel expenses on an annual basis, it’s not impossible. Formally analyzing how employees are spending on their business trips will allow for more accurate estimates of the company’s overall cost structures.
How businesses Spend The Expense Budget
Not surprisingly, business travel spend differs based on an organization’s size. Larger enterprises spend more than one-third of their T&E budgets on air travel—more than either the large or middle-market sectors.
For large companies, air travel represents 31% of their budget, while in the middle market, airfares (which might skew more toward domestic vs. international travel) represent only 24% of the budget. Government and non-profit organizations show a different balance. Understandably, restaurant and entertainment spend is relatively low, totaling only 13% of their budgets, as compared with mid-sized companies that designate a total of 20% for meals and entertainment.
What happens when businesses cut down on the T&E budget?
While optimizing your T&E cost is essential, cutting down the T&E budget might not necessarily yield favorable results. Meeting your prospects and customers in-person is crucial to the success of your business
A study conducted by Oxford Economics found that reduction of travel budget had no effect in 66% of the companies, positive results in 2% of the companies and yielded negative results in 32% of the companies.
In fact the study found that business would lose 28% of its customers could be lost without in-person meetings.
Similarly, other elements of business travel such as trade shows, internal company meetings, etc had overwhelmingly positive ROI.
Corporate Executives : ROI of Business Travel
Source: Oxford Economics
On the other hand, the T&E expenses increase every year by an average of 3%. While it is important to keep your OPEX under control, it would be safe to say that cutting down your T&E budget is not the best way to go about it.
Jason M. Lemkin, trusted advisor of SaaStr— the world’s leading community for business software, explains in this post how by his business lost a 6 figure customer, while doing everything right.
Losing a 6 Figure customer
I remember first time I lost a 6 figure customer, It was a surprise
- They were using the product everyday and constantly
- They had done a case study for us, It was in our Homepage
- They had renewed the contract and added additional seats
And one day, we got a call. Our competitor was there, on site. And convinced them they had a better solution for a few critical 10x features.
And then he goes on to explain, what should they have done in hindsight to have avoided this.
We should have
Visited the Customer : At least twice a year. We never did. Its all done over the phone.
Source: Quora
How businesses manage their T&E
The T&E management process can broadly be divided into three parts.
Mode of Spending
Expense Reporting
Expense verification
and settlement
1. How payments are made
The mode of payment for travel and related business expenses varies greatly from company to company. Majority of the companies use one of these 5 solutions along with cash advances.
(i) Corporate Credit Cards
The corporate credit card is a widely used solution, especially by large companies. There are two types of corporate credit cards.
Company-held credit cards: The bills have to be settled by the company.
Personal-held company credit cards: The employee is responsible for paying the card issuer while getting the business expenses reimbursed from the company by submitting expense reports.
Disadvantages of corporate credit cards
- The policies are not automatically enforced. It is on the employees to adhere to the company policies.
- Mixing personal and business expenses
- High probability of policy violation and misuse.
- Any unapproved charges can end up as liability for the employee
- Employees are responsible for paying the bills. It can become challenging especially when managing a large traveling workforce.
- Education and training on the proper use of the corporate card is necessary
- It is comparatively an expensive option.
- Employees might have to wait up to 10 days to get a replacement if the card is lost or stolen.
(ii) Central Traveller Account & Single-use virtual accounts
While both these solutions come in handy for companies with a separate travel desk that manage all business travel booking. They are full-fledged travel expense solution and it is not a great option to be used by the employees.
(iii) Personal credit cards
Here the burden is on the employees to manage the business expenses. It is never a good idea and affects the morale of the employees especially the reimbursement is not done on time.
(iv) Prepaid corporate cards/Travel Card
A powerful alternative to cash advances, corporate debit or credit cards.
Here's how it works
- Each employee gets their Prepaid Corporate Card, pre-loaded with money
- They can use the card for a variety of business expenses - travel, food, hotel, etc.
- These cards are accepted everywhere — at any online or in-store VISA/ Master merchant and any ATM.
It is by far the best solution for making business travel expenses and here’s why,
- It gives companies complete control over business expenses and ensures 100% compliance.
- Ability to be remotely controlled by company administrators from a mobile or web interface.
- The company can fund cards, track expenses, set limits and approve expenses in real-time, on the go.
- Add or remove funds with a tap of a button.
Learn more corporate prepaid cards here >>
2. Expense reporting process
The second step in the process is expense reporting. Once the expenses are made, the employees (business travellers) report their expenses to their managers and the finance department along with the receipts.
Traditional pen and paper (Vouchers & PRNs)
Excel and Spreadsheets
Roughly 23% of the companies use Excel and spreadsheets and other semi- automated systems to expense reports
Expense management solution
Over 70% of companies worldwide have adopted a dedicated expense management solution. However, this number is much less in the east, where more than 65% of the Indian companies still use a manual or semi-automated system.
Expense verification, processing, and settlement
(i) Manual expense processing
The finance team manually reviews, verifies each claim of the expense report and makes the settlement. Each expense report can take anywhere between 20 to 60 minutes to process.
Approximately 30% of the companies globally and 65% of the Indian companies still process their T&E manually.
From lack of visibility, expense fraud, lengthy reimbursement process, inability to enforce travel policies to poor employee productivity the inadequacies of manual expense processing is inefficient, outdated and comes with clear disadvantages.
Cost of manual processing and impact on the bottom line
While manual processing of expenses has been the norm for centuries, it does come with some serious disadvantages—the first and foremost being the hidden costs.
According to a study by the GBTA, the average cost of manually processing an expense claim ranges between $43 to $58. It does not end here. On average there is at least an 18% error associated with it and 3000 hours are spent on correcting these errors which again costs $52 per report. Here is an infographic that illustrates the hidden cost of manual expense management.
In contrast, the cost of automated or electronic expense management is 58% cheaper.
Here is a mock calculation that compares the cost difference between manual and automated processing in a Fortune 500 company.
The average number of employees in a Fortune 500 company is 30,000. According to a JPM study, 18.4% of the total workforce travels on business every month in a Fortune 500 company.
Cumbersome and error-prone process
Apart from the cost to the company mentioned above, which can be avoided, the manual paper-based expense management is a cumbersome process that is prone to human error. Here is an infographic that depicts the traditional expense-management process in detail.

Here is how the process can be simplified with automation.

Lack of visibility and control
Majority of the Indian companies use ERP, HRMS, or some custom software. However, the data is maintained in silos and are not completely integrated.
According to the aforementioned benchmark study, 82% of the companies do not have an automated process for travel and expense management. Lots of companies even struggle to revisit the expenses of the previous year. Analytics and deriving insights are therefore not possible. The CFO has very little actionable insight to be able to optimize the cost.
With automation, you not only get real-time expense tracking and analytics. It allows companies to extract insights and further optimize costs. Companies also get to benefit by partnering with commonly-used suppliers and vendors.
For example, Uber for business can now be integrated with most of the leading automated travel-expense management solutions in the industry. There is no need for a receipt, spreadsheets, and paperwork. The employee’s UBER expenses are automatically integrated with your accounting software such as Quickbooks, Tally, etc.
T&E automation software seamlessly integrates with hundreds of other vendors and allows you to negotiate better corporate discounts.
“65% of travel cardholders negotiate discounts on travel, lodging, and auto rentals,'' says the JPM study.
(ii) Limitations of ERPs for expense management
While the mode processing and settlement is slightly less complicated with ERP software compared to manual processing, the mode of payment i.e. how the end-users spend is not easy to use.
Good Read: Why legacy ERP modules don’t cut it for modern-day expense management
Automation
What is T&E automation?
T&E automation is the process using specialized (Expense Management) software to capture, report, process and reimburse employee travel and related expenses to increase productivity, ensure compliance and streamline the process end-to-end.
Why you need T&E automation?
If your company has a significant chunk of employees taking frequent business trips and facing one or more of the following problems, then you should consider buying an expense management solution.
If your company manages travel expenses manually, here’s an eye-opener for you: a study conducted by the Global Business Travel Association (GBTA) found that processing one expense report costs $58 on an average. Let’s say that your firm has 10 employees away on business trips, who will later submit 10 expense reports. Statistically, you would have to spend $580 to process these reports. Also, if a significant chunk of your employees take frequent business trips and face one or more of the following problems, then you should consider buying an expense management solution.
Why you need T&E automation?
If your company has a significant chunk of employees taking frequent business trips and facing one or more of the following problems, then you should consider buying an expense management solution.
If your company manages travel expenses manually, here’s an eye-opener for you: a study conducted by the Global Business Travel Association (GBTA) found that processing one expense report costs $58 on an average. Let’s say that your firm has 10 employees away on business trips, who will later submit 10 expense reports. Statistically, you would have to spend $580 to process these reports. Also, if a significant chunk of your employees take frequent business trips and face one or more of the following problems, then you should consider buying an expense management solution.
1. Compliance
The biggest advantage of using automated expense management software is 100% compliance. Once the policy and rules are applied, the software automatically ensures to alert the stakeholders of the violation. It also makes the policy easy to access for employees. When your compliance is 100%, the additional expenses incurred from violation and fraud are eliminated. So, your financial forecasting is more accurate.
2. Faster reimbursements and reconciliation
With an expense management solution in place, all the components of an expense report such as advance, receipts, compliance information are available are tagged to that particular report and available in one place. Hence reimbursements can be made with the click of a button. Whenever clarification is required, the complete expense trail is visible to the employees as well as the approvers. The finance team and other approvers can seek further clarification on the same trail to reconcile faster.
3. Pre-authorized travel booking portals
Fully automated expense management solutions such as Happay comes with inbuilt travel booking portals that work in conjunction with the leading travel booking companies. The portal fetches the best available travel option at the best possible rates for the proposed itinerary in compliance with the employee’s travel policies and limits. The system allows companies to encode detailed configuration based on travel policies such as,
Ex: All air travel bookings have to be done before 15 days. This allows companies to avoid expenses incurred due to last-minute travel bookings.
4. Single point visibility into all expenses
Real-time visibility offers the finance team a huge advantage. It allows companies to consider the total expenses to date before committing to future purchases. It allows to better control the cash flow and increases the accuracy of forecasting expenses. With automated expense management tools, the entire spectrum of your company’s expenses is available on the dashboard in real-time.
5. Advanced analytics
A sophisticated expense management system can convert your spend data into crucial insights that you can use to negotiate better deals, drive cost savings, improve compliance and optimize internal processes. Here a few questions, T&E software can help you answer.
- Airfare
- Lodging
- Meals
- Car Rental
- Others
6. Storage and Auditing
Storage of mountains of receipts and expense reports which fade out over time is
a painful and inefficient process. This makes revisiting or auditing past expenses even harder. It is one
of the reasons why it takes companies such a long time to uncover fraud. With an automated expense
management solution, the receipts are reports are digitized allowing you to revisit a particular expense
nested under a report at any point in time.
Online expense management solutions also offer 10 years of
data backup thereby allowing meet the standards of the regulatory body. Solutions such as Happay also has
provision to allow access to external auditors.
Drafting A Corporate Travel Policy
Occupational fraud in T&E management
Expense reimbursement is the 3rd biggest occupational fraud in the APAC region. Together with cash in hand, they account for 30% of all expense fraud. Industry reports claim 14.5% of reimbursements made are either misappropriation or fraud. If an equal value is assumed for every claim, then for every $100 reimbursed $14.5 is fraudulent.
What is even more shocking is that 48% of CFOs cannot validate if the metric holds for their company due to the lack of visibility and control. Here is a cautionary tale from Wells Fargo,
The Fake Dinner Receipt Scandal
Wells Fargo has a policy on after-hours meals i.e. employees working late are eligible for getting their meal expenses reimbursed. However, it turned out dozens of employees from analysts to managing directors had forged the time stamp on receipts to avail free meals. Eventually Wells Fargo fired them for violation of company's expense policy.
Source: Wall Street Journal
Most companies have a well defined T&E policy. But the real challenge lies in compliance. Manually auditing all these expenses is not feasible. Even if it is possible, it is not very effective as it is more of a remedial measure than prevention. It takes an average of 24 months to identify fraud and non-compliance.
However, this is not the case with automated T&S management. Automated T&E software can help employees comply with policies, raise red flags when a policy is violated, and alert the management when the violation is repeated. It makes the enforcement of these policies automatically, prevents fraud, and enables 100% compliance.
Crafting an effective T&E policy
Your travel policy lays the foundation for your travel system. It’s important to adopt an effective travel policy to cut overspending at the source.
Let’s discuss the best practices to formulate, communicate, and enforce a travel policy that will encourage your employees to adhere to the rules while ensuring their productivity and satisfaction.
The role of a T&E policy is to,
Formulating the policy
It is impossible to foresee and define every aspect of T&E. Hence it is good to
treat T&E policy as a continuously evolving framework.
Make the T&E policy as comprehensive as
possible, describing all conceivable scenarios.
Here is an outline
TRANSPORTATION
Air Transportation
Ground Transportation
Rail, bus
LODGING
OTHERS
Clearly, list the types of reimbursable and non-reimbursable expenses. Miscellaneous expenses is often a grey area, hence it is better to list it down and add it to the policy. Here is a list of most common miscellaneous reimbursable and non-reimbursable expenses. This list is not all-inclusive and there may be additional or similar reimbursable and non-reimbursable expenses that are not listed.
Miscellaneous Reimbursable Expenses
Non-Reimbursable Expenses
A couple more tips
To increase employee compliance, don’t limit your travel policy to just dos and don’ts. Instead, explain why these particular rules have been laid down and how they align with your organization’s objectives. If your policy just lists rules without any corresponding reasoning, it might confuse the employees more.
Communicating the policy
So the travel policy is ready. However, your employees are still unaware. The key to complete compliance is to educate, communicate, and update.
Sometimes, travel managers just e-mail a copy of the travel policy to their employees and call it a day. But how would you, as a travel manager know if the policy has been read? How could you be confident that it will be followed?
Here’s where travel managers can take charge. Using multiple channels to educate employees - for instance, setting up workshops before business trips, or arranging one-on-one sessions where the travel team can explain the basis of the policy. These meetings also act as a platform for employees to raise questions about the travel policy and ask for clarification.
Your travel policy should be easily accessible. Employees should receive it in their emails before booking for travel, and it should also be a part of the ticket booking and expense management tool. Every time an update is made in the policy, employees should be informed at the earliest. These are some ways employees can access the policy easily and stay compliant.
Employees should also have a definite say in the travel policy. After all, they experience how the policy affects on a first-hand basis. To gather feedback, various online survey tools or ad-hoc methods like emails and meetings can be used to get an idea of the traveler’s preferences. The feedback obtained can help in formulating a better policy for the organization.
Implementing the policy
A healthy practice to increase compliance is getting the senior
management to mandate the travel policy.
To maintain further compliance, decide who
will be in the driving seat of enforcing the policy
if there is an internal travel team, they can take up this responsibility. Educate your travel team or if
you’ve partnered with a Travel Management Company (TMC), the policy as well as the steps to be taken in
case of non-compliance.
Apart from executing these options, many firms are moving
towards online to automate policy enforcement.
Implement an online expense management system
As the organization scales, good technology helps improve compliance
rates by simultaneously reducing manual work. Having the travel team memorize the policy to discover
non-compliance is not a practical approach!
Step up the compliance of your business
by automating your travel policy with the help of an expense management system. A study by Aberdeen Group
states, the biggest factor driving business to invest in an online expense management system, is an effort
to improve compliance within company policies on T&E. Another study by Levvel Research states expense
management systems improve the ability to implement travel policies by 59% and improve user satisfaction
by 37%.
Choosing The Right Expense Management Software
How to choose the right expense management software?
When it comes to choosing the right expense management solution, there are 6 major parameters to consider.
Compliance & Control
Different stakeholders within an organization have different requirements. In case of an expense management solution the finance team, the employees and the CIO/ IT team are the major stakeholders with different requirements. Hence it is important to evaluate the product fit through the lens of the respective stakeholders.
Requirements of a CFOs/ Finance Team
Policy & Compliance
Expense approvals
Visibility and Control
Requirements of an employee/ business traveler
Requirements of a manager
The requirements of a manager are slightly different. The software should facilitate easy review and approval of their team’s expenses while providing visibility.
Requirements of a CIO
What do businesses using expense management software have to say?
42% of businesses admit that automation aids in reducing the time spent in
creating and approving expenses. An astounding 92% of the companies are achieving a full return on
investment in two years or less. This only goes to show that the system you are investing in should be
worth the resources you put into it.
Although businesses are gradually embracing automation in
expense management, the real potential can be unlocked only when you prepare your business for automation.
Let’s take a look at what Mr. Shankar J, Sr. Manager, Commercials, V-Guard had to say about Happay.
Expense Management is one of the toughest things, I would say, at any organization. Our company has
employees touring – and at a point like this – verification and approval of these expenses become
critical. Every expense report had at least one policy violation. We had to be extra careful, and this
required more man-hours, endless emails, and couriers for reconciliation. We were looking out for a
process for a long time. In fact, we had a discussion with our systems team. They told us that such a
complex solution would take time to be developed and was sure to have hiccups. As a safe and easy-to-use
solution, Happay helped set this process in place.