Travel and Entertainment expenses (T&E) are costs incurred for business travel and client entertainment, requiring careful management and clear policies to ensure they remain within acceptable limits and contribute to business growth.

Primary Implication

T&E expenses need to be for business development purposes.  This is not where the owner should bury personal expenses they have the business pay for that have nothing to do with the business.  Those costs should be reflected in an appropriate expense category within Owners Compensation.  Do this to know your true Operating Income before interest, taxes, depreciation expense and your own compensation.

Overview

Travel and Entertainment expenses, often referred to as T&E, are those costs of doing business incurred by sales, management, and office employees while traveling for business purposes or entertaining a business customer or client.

Examples of traveling expenses include money spent on lodging, transportation, and meals. Entertainment expenses include taking a client to dinner, theater, show, concert, or a sporting event.

Any meal, lodging, and travel expenses directly assigned to a job are included in COGS and should not be accounted for here.

Remember, T&E expenses are for business development purposes.  This is not where the owner should bury personal expenses they have the business pay for that have nothing to do with the business.  Those costs should be reflected in an appropriate expense category within Owners Compensation.  Do this to know your true Operating Income before interest, taxes, depreciation expense, and your own compensation.

If your Travel and Entertainment Expenses represent a large amount, the key question is, do you have a travel expense policy in place?  Answering no to this question is only acceptable if T&E is a small expense.  You best manage T&E by creating clarity on what is acceptable and unacceptable items for reimbursement in service to the business.

The next step to managing a high T&E expense amount is to create related categories of expense that can be linked to an individual in your Chart of Accounts to improve your ability to manage these expenses cost-effectively and their impact on sales.