Four simple steps to control your travel and entertainment expense.
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By Marilou Vroman, CPA, CFE
In many years working as a dealership controller and as an internal auditor, I’ve unfortunately seen frequent cases where employees have taken excessive advantage of a dealership’s travel and entertainment policy. Travel and entertainment normally are common business expenses for dealers, such meetings with manufacturers, conferences, technician training, and travel between multiple rooftops. While travel may be viewed as an inconvenience to some employees, others view travel and entertainment as an opportunity for enrichment. The question becomes, at what point do business travel expenses go from necessary and reasonable to an abuse of privilege and self-enrichment at the detriment of the dealer?
You’ve probably seen it or even experienced it – lavish dinners with expensive cocktails and wine, the five-star hotel room and “resort” fees to cover the golf cart and 18 holes, the first-class tickets to Europe, an occasional spa treatment or luxury rental cars. Some dealers may choose to provide luxurious and travel conditions to their managers and staff and that is perfectly acceptable if that is what the dealer wants. However, most dealers I know have policies in place and expectations of reasonable business travel expenditures such as economy airfare, mainstream hotels and standard rental cars. Assuming you’re that dealer, how do you control the spending?
I’ve found one of the simplest ways to control abuse is to control the process. A few simple solutions that will ensure your T&E policy is followed:
- Communicate and consistently enforce a well-defined travel and entertainment policy.
- Provide a per diem allowance – the employee is responsible for managing their budget.
- Charge travel advances or expenses to employee A/R until validated – the only way to clear the A/R is for the employee to provide a receipt. No receipt = payroll deduction.
- Centralize responsibility for travel arrangements – an extra layer of control to ensure compliance.
Just a few simple steps can increase controls and reduce expense while still gaining the good return on the T&E investment.