What Is an T&E Expense Report?
A travel and entertainment expense report, also known as a T&E report, details the expenses incurred when employees travel for work and companies host events. Employees might submit T&E reports to get reimbursed for items such as business meals with clients or airfare to attend an industry conference. The business can use expense reports to track how much it’s spending on travel and entertainment.
What’s an Expense?
“Expense” is a broad term that encompasses any type of business cost. Travel and entertainment costs are one category of expenses. Typical travel and entertainment expenses can include the costs of taking business education classes, attending conferences, traveling to meet with clients or customers, and organizing a company picnic to reward employees.
A business lists all its expenses on its income statement (also known as a profit & loss statement).
Types of Expense Reports
T&E expense reports are just one of the many types of expense reports. In general, all expense reports aim to help the company better track and analyze spending. T&E expense reports can help identify areas where businesses may be overspending; some reports are also important for tax purposes.
For T&E expenses, employees typically submit weekly expense reports detailing out-of-pocket expenses for activities or purchases, such as client meals or mileage incurred driving to customer sites. With the right expense management software, businesses can generate reports that analyze the aggregated data from employees’ expense reports to track expenditures and help develop a corporate travel management policy.
Businesses use other types of expense reports to track different categories of spending, including overhead like salaries and rent.
Monthly Expense Report
Monthly expense reports help a company track and analyze all expenses involved in running the business. This helps the company monitor expense trends, determine whether current spending matches forecasts and find ways to reduce costs.
Long-term Expense Reports
Long-term expense reports typically cover quarters or years, and are another way to gauge a business’s spending patterns. Companies can also use annual expense reports to identify tax deductions for use in annual tax filings.
Recurring Expense Reports
Recurring expense reports typically analyze fixed regular expenses, such as rent, payroll and utilities, that the company must cover every month. They can make it easier to spot any significant increases in this spending that could quietly hurt the bottom line.
What Does an Expense Report Look Like?
Depending on the company, an expense report can be as simple as a spreadsheet with a few columns for essential information or as complex as a multi-page document with numerous columns, categories and codes for a wide variety of expenses. Many small businesses rely upon basic forms and spreadsheets instead of expense management software. Larger enterprises are more likely to use expense numeric codes and purchase order numbers for some expenses.
What Is Included in an Expense Report?
An expense report typically includes several columns:
- The date an expense was incurred.
- A description of the expense, which usually details what was purchased, or, in the case of meals, who attended the event.
- The expense category, such as meals or transportation.
- The amount of the expense.
- The department the employee works in and their manager.
Expense Report Example
Here’s an example of entries in a simple T&E expense report.
|10/20/20||Lunch with J. Smith
|10/21/20||Registration fee for
online sales seminar
T&E Expense Report Categories
Categorizing T&E expenses is important both for tracking spending in more detail and for tax purposes. Common categories for T&E reports include:
- Auto mileage
- Travel (airfare, lodging, taxis/Uber/Lyft)
- Business meals
- Office expenses (e.g., reimbursement for home internet service for remote employees)
- Other expenses (as allowed under policy)
Expense reporting categories help businesses group their expenses for tax reporting and compliance. The IRS establishes which expenses are tax-deductible, typically expenses that fall into the “ordinary and necessary” costs of doing business. Due to the U.S. 2017 Tax Cuts and Jobs Act (TCJA), most entertainment expenses, such as taking a client to the theater, are not tax deductible. There are some exceptions, such as costs incurred to throw a holiday party for employees or certain expenses related to attending business meetings and conferences.
Importance of Expense Reporting in Business
Expenses related to driving to multiple client sites, reimbursing employees for home office expenses and paying for conferences can add up quickly. T&E expense reporting lets businesses track where their money goes and helps companies keep these expenses under control.
How Is T&E Expense Reporting Different for Small Businesses vs. Enterprises?
At small businesses, the expense reporting process is generally straightforward: an employee submits a T&E expense report for approval, and once the report is approved, someone from accounting sends them an electronic payment, cuts them a check or issues a payment to a corporate credit card account.
For larger companies, expense reporting helps identify expenditures by department, location and other categories. Enterprise expense reports tend to be highly detailed. Enterprises can process hundreds or even thousands of employee reports each month, covering everything from the legal department’s continuing education courses to the sales team’s travel to customer sites.
Creating a Tailored T&E Expense Report for Your Business
While T&E expense reports for different organizations have much in common, each company will likely have some unique requirements. That creates the need for custom expense reports tailored to an individual company’s business requirements.
To create these reports, companies can either customize a premade template or build an expense report from scratch. More sophisticated expense management software enables businesses to tailor reports to their specific needs and build custom workflows that will expedite the approval process.
How Frequently Should Expense Reports be Filed?
It depends. For T&E reports, employees may prefer to submit reports weekly, so they can be reimbursed quickly for out-of-pocket expenses. However, this could take up a lot of the staff’s time. If employees exclusively use corporate credit cards for T&E expenses, submitting reports less frequently can cut down on administrative costs. A common practice is to submit the report within the same accounting period the expenses are incurred.
How to Automate T&E Expense Reporting
T&E expense reporting can be time-consuming and a hassle both for the employees who fill out expense forms and for the accounting team. This is especially true as the volume of reports increases, which can also make it more challenging to report on spending by category and department.
Many companies use software to automate parts of the expense reporting process, making it more efficient to fill out, review and approve reports. A system can reduce the burden on individual employees, managers and the accounting team while automatically producing detailed reports for company leaders to analyze. Expense reporting software can also flag items that may not conform to company policy and submit the expense to the proper staff for review.
T&E Expense Report Software and Tools
Software can reduce the time required to prepare and process expense reports. Expense reporting software can also automatically generate monthly or quarterly reports that analyze spending, helping companies gain valuable insights into the costs incurred by different departments and business units.
Software can make it easier to capture and categorize expenses, automating parts of the process. For example, it can use the text on a receipt to automatically populate the expense category, business name and amount after an employee takes a picture of it. These solutions can improve reporting accuracy as well, by allowing companies to create and use custom business rules.
Businesses can customize workflows so that reports are automatically routed to the correct managers for approval. Software can also track employee T&E reports through the approval and reimbursement cycle and send out alerts if an expense report isn’t approved by a specific time. This ensures that employees get reimbursed promptly.