How to map out a better mileage reimbursement process.
Today’s vehicles can drive themselves, tell you when they need maintenance work, and alert you if an upcoming vehicle means a lane change is a bad idea. But one thing they can’t do — yet — is make sure their owners are reimbursed for work-related driving expenses. And, many employee expense platforms remain in the slow lane when it comes to streamlined mileage reimbursements that are easy for both employees and the finance team.
Mileage reimbursement is a notoriously difficult process. Employees often resort to convoluted workarounds using handwritten mileage logs, manual calculations, and a collection of receipts (if they even remembered to keep them). Then, they have to fill out a request for reimbursement and wait (and often wait some more) to see the money hit their bank account. With the price of gas these days, mileage reimbursement costs can impact employees’ personal finances if they aren’t processed quickly,
Mileage reimbursement is also tricky for finance departments. Discrepancies are one of the most common IRS audit triggers, and auditors will review the proof that each request is related to business and check the accompanying documentation. And resolving any uncertainties when a reimbursement request comes in can delay the movement of cash back to the employee even further.
When mileage reimbursement is built into an automated reimbursement process, in the same system as all other expenses, requesting and processing requests can be done in a matter of clicks. The finance team can set a policy, and let the system do the work. Here’s a roadmap for a better system:
1. An administrator creates the mileage reimbursement policy, including mileage rates.
Every year, the IRS determines standard mileage rates for business travel based on studies regarding the costs of driving. Employers are free to set their own reimbursement rates, but they should be aware of the tax implications:
- If a company’s reimbursement rate is less than the IRS rate, the difference can be deducted from the employee’s taxable income.
- If a company’s reimbursement rate is greater than the IRS rate, the difference is added to the employee’s taxable income.
In addition to the mileage rates, the administrator adds any relevant parameters to the policy, such as timeframe limits or a maximum reimbursable dollar amount. These could be configured to either block a request or give a warning to the employee.
2. The employee submits the request.
When submitting the reimbursement request, the employee simply:
- Clicks on their starting point and their destination and chooses the route, if there is more than one.
- Specifies if the request applies to a round trip or a one-way. A well-designed system will do the calculations from that point.
- Completes the fields regarding date, category, and purpose of their trip.
3. The manager reviews the request and approves or denies.
Mileage requests should follow the same process as all other requests, including automated approval workflows so the request is routed to the correct destination. To make things even simpler, an auto-generated map gives the approver an easy visual of the trip.
4. Accounting receives the spend information.
In a consolidated spend management platform, like Airbase, the transaction syncs directly to the general ledger, marked Mileage as the merchant name. The distance, mileage rate, and purpose as provided by the employee are also included in the transaction record.
5. The employee receives the reimbursement.
If the employee has provided their banking information, the reimbursement will go directly to their bank account once it’s approved, without having to wait for month end, and without further involvement from the finance department.
Mileage reimbursements don’t have to be complicated. When an automated reimbursement platform processes all reimbursement requests, including mileage, employees and finance team members have less work, faster reimbursements, and improved visibility. When it is part of a full spend management system, it fits neatly into the consistent workflows for all company spending.
Airbase offers a one platform solution to manage all non-payroll spend. It provides oversight and control over spending with real-time reporting and automatic syncing directly to your general ledger. Control all payments – physical cards, virtual cards, ACH, and checks – from one place. Close faster. Empower employees. Control spend.
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