Fixed Per Diem & Actual Expenses: What to Consider?

Controlling expenses is very important in any company. It would be easy for you to go beyond spending limits if you don’t follow certain regulations. There are two methods to choose from while reporting expenses: fixed per diem or actual expenses. Business travelers can submit receipts to report the incurred cost of the expense. Let’s check how per diem differs from actual expenses when it comes to reporting your expenses.

Pros and cons of per diem

As every method comes with advantages and disadvantages, having a per diem rate does not require employees to collect a number of receipts. As long as the expense does not exceed the per diem rate, employees are not required to submit any proof. Also, it gives business owners an idea of the various travel costs. This makes it easy for you to budget travel costs within the company.

On the flip side, per diem can pose some disadvantages. For instance, it would be difficult to set a fixed per diem rate for travel as the prices for similar services may vary for various places across the globe. This requires you to adjust your per diem rates accordingly, which is not an easy job. Sometimes, this requires you to limit your options, which does not work for business clients. In cases like these, per diem rates would pose more challenges rather than simplifying the process.

What to decide?

Considering a per diem approach is best for regular traveler scenarios. Nonetheless, actual expenses work best for special travel cases. As this approach requires you to submit documentation, it is a more time-consuming and labor intensive process for employees. Your employees are required to maintain receipts and your accountants take more time to review travel costs. This would result in discrepancies that take time to resolve. An automated expense report solution can avoid these by allowing employees to save their receipts into the system. This would alleviate all the problems that are associated with maintaining piles of receipts.