With fewer trips than their corporate counterparts, do SMEs need a travel and expense policy?
Without an appropriate policy in place, the cost of travel for small businesses can quickly spiral. It’s clear that SMEs derive value from company travel. In fact, a Confederation of British Industry (CBI) report found that nearly as many SMEs (94%) took part in business travel as their larger, corporate counterparts (97%), many noting the importance of face-to-face interaction in winning new clients.
Whatever the reason for business travel, companies of any size must find a consistent way to control costs, track expenses and manage duty of care. For small businesses, efficient policy is essential not only as they’re working with smaller budget sizes and teams but also may not have the dedicated resources that a larger company would have.
A travel policy makes expectations clear for all stakeholders. In this guide, we’ll go over the answer to what is a travel policy as it applies to SMEs, along with the pros and cons of using a small business travel policy template. We’ll also offer some useful tips for encouraging compliance across your organization.
A travel and expense policy is a set of guidelines detailing how employees should handle travel expenses. This starts with rules for booking business flights, hotel rooms, and car rentals, including preferred platforms and vendors.
It also clarifies which travel expenses will be paid for by the company, including applicable per diem rates, so that employees know just how much they can spend while traveling. Beyond expenses and approvals, a comprehensive travel policy focuses on employee safety and comfort for more productive and sustainable business travel.
So, what is a travel policy for SMEs compared to larger businesses?
Where global organizations might send several employees on a business trip at the same time, SMEs may only send one or two. Larger companies not only spend more with a bigger budget and travel scope, but they also tend to book corporate travel more frequently. more on risk management and might use a dedicated travel manager or corporate travel agency to book their business trips. Along with this increased travel scope comes the corresponding need for stricter rules and heightened approval levels.
Working with smaller budgets, it’s more important than ever for small businesses to use an SME travel management tool to save money and time spent on booking and managing business trips.
There’s no one-size-fits-all template for every business, and smaller businesses may also prefer to take a more flexible, less structured approach than larger corporations. You’ll need to consider your employee needs and take your travel budget into consideration.
Flexible travel policies give employees some degree of autonomy. They may be able to choose their preferred airlines or hotels, provided it fits within a pricing framework. A flexible travel policy may leave space for ‘bleisure’, where the employee can extend their plans to include leisure time at the beginning or end of the business trip.
By contrast, traditional travel policies include a fixed set of rules for booking travel. For example, travelers might be bound to booking flights with a specific airline will be more rigid.
Flexible or rigid, there are clear benefits to implementing a small business travel policy. Positive business travel experiences are linked with employee engagement. This holds true across the globe, with 79% of North American, 83% of European, and up to 96% of Asian Pacific business travelers reporting that business travel impacts their overall job satisfaction.
How does a small business travel policy contribute to these positive experiences?
Without a clear travel expense policy, employees won’t know what’s covered and will need to check with finance before making any booking or payment. With a list of approved business travel expenses, they can make preapproved purchases with confidence. This also clarifies approval levels and responsibilities to prevent misunderstandings.
Margins are often tight for small and medium enterprises, so when employees go over budget on a business trip it can have a direct impact on the monthly bottom line. Employee spending is more predictable when you have accommodation guidelines and meal per diems in place.
Using a free travel management tool like Tripeden.com for Business saves time and employees won’t waste time trying to find the right rates. Instead, the tool will incorporate your travel policies and show options that fit into your company’s budget and travel needs.
With a travel expense policy for small business, you can rest assured that approved expenses and payments meet government standards for tax compliance.
A comprehensive business travel policy will outline who the employee can contact when they need assistance. This keeps the lines of communication open for improved traveler safety. At the same time, a centralized booking system enables your team to keep track of traveler locations in real time, and they’ll be able to help if there are unexpected cancellations, delays, or other travel safety issues.
Finally, providing an approved list of booking services ensures your employees will only book travel through trusted, verified sources.
While there are numerous benefits to creating a travel expense policy for your small business, this action comes with associated challenges.
The very smallest businesses may not have a dedicated HR or finance team, so a rigidly structured corporate travel plan may add layers of unnecessary approval. If you’re still manually filing expense claims, the associated paperwork will cost you in time. In fact, paper expense claims take an average of 20 minutes to process individually, all of which adds up to lost productivity.
One of the primary benefits of using a business travel policy is spend management, but this may come at the cost of employee satisfaction. An overly rigid set of rules could prevent employees from feeling cared for and comfortable while traveling.
In the interest of flexibility, small businesses often make the mistake of not being clear enough with their policies. Loosely following a small business travel policy template will help you include all relevant information.
While it may not be as extensive as a corporate policy, a small business travel policy template should cover essential components like the following:
A large corporate travel plan might need to include per diems for major cities around the world. With SME travel budgets, rates are more targeted to the company’s main routes. State the maximum spend for categories including flights, accommodation, ground transportation, and rental cars.
Which booking tools or platforms should the employees use? How far in advance must arrangements be made, and how are travel plans approved? Using a free travel management platform like Tripeden.com for Business helps streamline business trip booking and management workflow with a single tool.
How will employees be expected to pay for business travel? Will you provide company credit cards or virtual payment methods?
Examples could include:
This is one of the most important sections of any small business travel policy, listing which business expenses are covered, and which are not. This prevents overspending in grey areas like entertaining clients. Examples of typical covered expenses include:
Examples of items that may not be approved include things like:
There should be a section that states how staff should file expenses and what documentation should be submitted. Make clear the timeframe for submitting reimbursement claims and state when and how business travel payments are made.
As with corporations, small businesses hold a duty of care for their employees. You should include all relevant safety information in the business travel policy, such as emergency contact details and travel insurance details.
Large corporations sometimes struggle with widespread compliance. One of the benefits of SMEs is that with fewer employees, you’ll be better poised to communicate your policy clearly.
Make sure that the policy is written in clear language to avoid miscommunication, free from unnecessary legal terms and jargon. When it comes to personal vs official business expenses, use bullet points and lists for visual appeal.
Then, make sure all stakeholders, including full-time employees as well as contractors, understand the new guidelines. The document should apply to employees at all levels for best results. For example, if upper management have a different set of rules to contractors, this creates confusion.
Finally, use automation where possible to streamline your approval processes. Integrate expense tracking apps and virtual payment platforms into your booking processes for a cohesive workflow.
Once you’ve crafted a travel and expense policy, writing a business travel plan should be straightforward.
Use policy guidelines to search for appropriate flights and hotels available on your travel dates. Then, write an itinerary that lists:
Cross-check with your travel policy to ensure your itinerary is fully compliant, and share with the team.
Yes, traveling is considered a legitimate business expense, which means small businesses may be able to claim tax relief on these costs. This is one of the reasons why accurate expense tracking and accounting is a key component of any travel policy.
For small business owners, the lines between personal and business travel can sometimes become blurred. What’s important to remember is that whether reporting to the IRS, HMRC, or other tax body, travel expenses are only eligible if they are incurred during necessary business travel.
So, while your normal commute to and from the workplace would not qualify as a business travel expense, driving to another country for a trade show would qualify.
The personal nature of small businesses can make writing formal travel policies seem daunting. Yet setting clear guidelines right from the start helps keep employee expectations, and corresponding costs, in line as your business grows. Take the time to revisit your policy to fine-tune it as necessary for better flexibility and compliance.
With today’s booking tools and automated expense management systems, it’s easier than ever to create a travel expense policy for small business that meets your team’s needs.
The following guide will serve as your complete step-by-step manual to travel policies.
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