You run a good business and want to be fair to your employees. Running your business well includes tracking your financial picture carefully. Therefore, it’s essential to keep an eye on both your revenue and expenses in order to maintain profitability. If you run a service business and pay employee mileage and drive time, that is an expense that can quickly add up.
In today’s business world, with the ease and availability of technology, you can track, document, and then evaluate expenses easily. It can take time to set up the correct systems in order to accurately track the wide variety of expenses incurred by your business, but once you do you’ll have a much better sense of how your business is doing.
For many small businesses, tracking employee travel expenses is an important aspect of expense management. To do this well, you’ll need to know how much time your employees are spending driving for work, their mileage and the associated reimbursement costs. It’s important to also understand the rules of mileage reimbursement, then regularly collect the information you need to implement a successful business driving policy for your company.
The good news is that technology can help you collect and analyze the information you need to help control your employee mileage costs. Accurate electronic documentation, along with knowledge about regulation and fair work practices, function together to protect you and your company. In fact, fair reimbursement acts as a way to shield your operations from fraud and abuse while also ensuring that your company is compliant with federal and state laws.
What Driving Expenses Should be Reimbursed?
An easy way to think about employee driving time is to ask if the driving is a “principal activity” or “incidental” to work. Driving expenses that are part of the job should be reimbursed however, driving that accompanies the work day but is not necessary for work itself does not have to be reimbursed.
For example, driving from one jobsite to another, while on the clock, would be a work expense. Commuting to work is not part of the work day, so it would not be reimbursed. What about picking up bagels or donuts for everyone on the way to work? Not part of the work day. On the other hand, going to pick up supplies for work during the workday would be a work expense.
Other examples of when you should reimburse employee mileage include medical workers travelling from site to site as part of the workday, yard care workers travelling from one side of town to the other throughout a normal workday, and employees driving to attend job training activities for your business or industry.
It is important to point out that to reimburse driving miles, your business must have already authorized that mileage be reimbursed and you should follow the guidelines for covering driving expenses for your state. Some states have reimbursement requirements which differ from those of the IRS.
To be on the safe side, it is better to reimburse using a mileage log than to risk a lawsuit or an audit by the IRS. Unfortunately, employees can sometimes be unscrupulous when it comes to claiming mileage reimbursement. They may add miles on a tracking form, claim they must have additional car repairs, or that they are driving for work when they are actually off the clock.
An employee can claim that they are owed additional reimbursement through a lawyer. But fortunately, technology like a mileage tracking app will provide accurate records so that you can review recorded mileage and reimbursements on an ongoing basis. These practices will help you protect your business should a dispute ever arise.
When You Can Use a Mileage Tracking App
Business owners know that accurate record keeping can be difficult. If you have accounting, payroll, HR or spreadsheet software, you can integrate a mileage tracking app to ensure employee miles are tracked correctly. Tracking apps can:
- Track mileage automatically
- Record associated expenses
- Create reports and store historical data
Mileage tracking apps are very easy to use. Your employees simply turn the app on, then GPS technology records mileage. According to the IRS, the federal reimbursement rate is currently 53.5 cents per mile and a good mileage tracking app can calculate that automatically. Some states have their own reimbursement rates which differ from the federal rate. Once mileage is tracked, this information can be sent to your office computer directly from the app so that you know where your employees are and how much time was spent on the road.
Employees can record active work time driving for your business simply by starting the app. For example,
- Cleaning service workers can track mileage between job locations throughout a normal workday.
- Lawn care service employees can record driving miles between the job at the office building in one location and the park on the other side of town.
- Electricians can include the travel miles from the job at the new housing development to the remodel project a few miles away.
- Home care nurses can record the driving miles from each patient’s home or care center they travel to throughout a the workday.
What Business Driving Policy Options Do You Have?
You have two options when setting up a business driving policy: 1) a fleet program or 2) use of employee-owned vehicles. A fleet program is when you purchase vehicles that fit your business needs such as vans, delivery trucks or cars. The alternative is to have employees drive their own cars during working hours and use mileage tracking to get reimbursed. Both types of business driving policies have their advantages and disadvantages. Why choose a fleet program or reimbursement program?
A fleet program has several advantages including
- Control and oversight over the vehicles, their insurance and upkeep
- Ability to add safety elements or extra features
- Track vehicles using internal sensors
- Ability to brand the vehicles with your logo for marketing purposes
A reimbursement program has other advantages including
- Avoid upfront costs and administration of company cars
- Have more employee choice and flexibility
- Save on maintenance and repair costs
What to Look for in a Mileage Tracking App
If you opt for having employees use their own vehicles for work, there are several good mileage apps to choose from. Take time to compare features and costs so that you get the right app for your business. A good app will have the features any business needs. These include the ability to
- Track mileage and expenses
- Monitor the location of employees
- Capture receipts
- Create reports
- Automatically email the reports on a regular basis
There are several very good mileage tracking apps available for both iOS and Android. A simple search will show you a variety of good options, some designed for specific industries or companies of a certain size. The one app that stands out in the category and has been consistently rated the top mobile product for mileage tracking is MileIQ, though others are available that might be a better fit for your needs.
It can also be valuable to have your employees use a mobile time tracking app in tandem with a mileage tracker. This way, employees can track the time they spend driving along with their mileage. Boomr’s time tracking app allows employees to track work time and location in real-time. It also easily calculates expenses, produces financial reports and is a great option for businesses that have many employees working on-the-go.
Protect your business and keep expenses in check by setting up a driving policy, which can include apps for both mileage tracking and mobile time tracking.
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