Practical Travel and Entertainment Cost Control to Protect Your Runway: Policy and Tools

Foundational Understanding: The T&E Tipping Point for Startups

Knowing when to formalize your approach to travel and entertainment spending is crucial. The tipping point arrives sooner than most founders expect, driven by team growth, spending frequency, and investor expectations. A scenario we repeatedly see is a SaaS company, fresh off a Series A, struggling to model future cash flow. Their T&E spend, once negligible, had become a volatile five-figure monthly line item that made forecasting unreliable and board conversations tense.

The lack of a formal policy meant every trip was a unique negotiation, consuming founder time and creating friction between employees. This is a common trigger for creating a policy. In practice, a T&E policy becomes essential when a team grows to 10 or more people, or when more than two or three team members are traveling or expensing costs regularly each month. Furthermore, investors expect to see formal employee expense controls after a seed or Series A round. Moving from verbal agreements to a written policy is a sign of operational maturity that investors look for as you scale.

How to Set Travel and Entertainment Expense Policies: A 3-Level Framework

Implementing the right level of control over employee expenses is about matching process to scale. Over-engineering a policy for a five-person team creates unnecessary friction, while under-managing it for a fifty-person team creates significant financial risk. What founders find actually works is a staged approach that evolves with the company.

Level 1: The 'Be Reasonable' Guideline (Good for Pre-Seed)

For pre-seed startups with fewer than 10 employees, a verbal or one-sentence guideline often suffices: “Spend company money as you would your own.” This high-trust model works when the founder has direct visibility into all spending and the team is small and cohesive. It is simple, free to implement, and maintains a culture of autonomy.

However, its core weakness is a lack of predictability. What one person considers reasonable, another may see as extravagant. This subjectivity leads to inconsistent spending that complicates cash flow management and can create resentment if spending habits differ widely across the team. It is a fragile system that breaks down quickly with scale.

Level 2: The One-Page Policy (Better for Seed and Series A)

This is the sweet spot for most seed and Series A startups. As the team grows and travel becomes more frequent, a simple, written document provides essential clarity and predictability. The primary goal here is financial predictability for forecasting, not just cost-cutting. A clear policy sets guardrails, answers the most common employee questions, and establishes a basic approval workflow.

This approach balances trust with structure, empowering employees to make decisions within defined boundaries without needing to ask for permission for every expense. It provides psychological safety for the team, as they know exactly what is expected of them. For leadership, it transforms T&E from a source of financial uncertainty into a predictable operational cost that can be confidently modeled.

Level 3: The Automated System (Best for Series B and Beyond)

As a company scales past Series B and departments become more defined, a one-page policy managed manually can become an administrative burden. At this stage, integrating a spend management platform becomes effective. These systems embed policy rules directly into corporate cards and software, automatically flagging or declining out-of-policy spend. This is the ultimate form of managing team travel costs proactively.

This level provides maximum control and real-time visibility into T&E spend, but it comes with the cost and implementation overhead of a dedicated software platform. An automated system is often necessary for companies in R&D-heavy industries like Biotech or Deeptech that need meticulous cost tracking for grants, R&D tax credits, or other compliance purposes.

What a 'Good Enough' Startup Business Travel Policy Says

A great early-stage business travel policy prioritizes clarity over exhaustive detail. Your goal is to create a document that fits on a single page and is written in plain language, not legalese. It should answer the 80% of questions your team will have, not account for every possible edge case. A robust policy contains three core components: spending guardrails, submission rules, and a clear approval workflow.

1. Spending Guardrails and Entertainment Expense Guidelines

This section defines what is and is not a reasonable expense. The key is to provide price ceilings and principles rather than restrictive lists of approved vendors, which empowers employees to find value. For example, dictating a maximum nightly hotel rate is more flexible and often more cost-effective than mandating a specific, and potentially overpriced, hotel chain.

• Air Travel: All domestic flights and international flights under seven hours are to be booked in economy class. Aim for booking at least 14 days in advance to secure better pricing. Business class may be approved for longer international flights with executive approval.
• Accommodation: Book standard rooms in mid-range hotels. We provide a guideline of keeping costs under $350 per night in major US cities or £250 per night in London. Use your best judgment for other locations and seek approval if you expect to exceed these amounts.
• Meals: Employees will be reimbursed for actual meal costs up to a reasonable daily limit (e.g., $75 per person per day). Alcohol is generally not a reimbursable expense unless for approved client entertainment. Submit itemized receipts for all meals.
• Ground Transport: Use ride-sharing services, public transit, or standard taxis for transport. Rental cars require manager pre-approval and should only be used when it is the most cost-effective option for multiple trips.
• Client & Team Entertainment: Client meals and entertainment are reimbursable with prior manager approval. For internal events, team dinners should be kept under approximately $100 per person.

2. Compliance and Submission Rules

This section outlines the non-negotiable administrative requirements for getting reimbursed. Clarity here prevents administrative headaches and ensures the company has the records it needs for tax and audit purposes.

• Receipts: All expenses must be submitted with a clear, itemized receipt. This is a critical point for compliance. For US companies, the IRS requires itemized receipts for any expense over $75 to be considered deductible. In the UK, HMRC has its own specific requirements for record-keeping that must be followed to ensure VAT can be reclaimed where applicable.
• Submission Timeline: Expense reports must be submitted for approval within 30 days of the expense being incurred. This ensures costs are reflected in the correct accounting period, which is vital for accurate financial reporting. Late submissions may not be reimbursed.

3. Approval Workflow

Keep the approval chain simple and clear to avoid delays. The goal is a fast and transparent process for reimbursement.

• Standard Expenses: The employee submits their expense report to their direct manager for approval.
• Manager Expenses: Managers submit their expenses to the department head or a founder for approval.
• Final Processing: Once approved by a manager, the report is sent to the individual running finance (often a founder or office manager) for final review and payment processing through your accounting system, whether that is QuickBooks or Xero.

Choosing Your T&E Stack: From Spreadsheets to Spend Management

Your technology stack for managing T&E should evolve with your company's complexity, aligning with the three-level framework. The reality for most early-stage startups is a pragmatic journey from free, manual tools to more sophisticated platforms as the administrative burden grows.

Level 1 Tools (Manual)

For the 'Be Reasonable' stage, a simple Google Sheet or Airtable template is sufficient. Employees list their expenses, attach photos of receipts in a shared folder, and a founder manually processes the reimbursement via bank transfer. This approach is free but carries a high administrative cost in terms of time. It offers no real-time visibility and makes month-end closing in QuickBooks or Xero a painful, data-entry-heavy process.

Level 2 Tools (Expense Management)

As you adopt a one-page policy, dedicated expense management tools like Expensify or Zoho Expense become valuable. They allow employees to snap photos of receipts with their phones, auto-populate expense lines, and submit digital reports that follow the approval workflow. These tools streamline reimbursement and sync with accounting software. However, they are reactive; they report on spend after it has happened, rather than controlling it upfront. Consider process automation to reduce this manual overhead.

Level 3 Tools (Spend Management)

For a fully automated system, modern spend management platforms like Ramp, Brex, Pleo (popular in the UK), or Navan are the gold standard. These platforms combine corporate cards with powerful software. You can embed your policy rules directly into the cards, so an out-of-policy transaction is automatically flagged or declined at the point of sale. This provides unparalleled real-time visibility and control, drastically reducing administrative work and closing the books faster. For an e-commerce startup with tight margins, this real-time control over marketing and travel spend can be critical for maintaining healthy cash flow.

Practical Takeaways for Reducing T&E Spend

Effectively managing startup travel budgeting is an exercise in scaling process at the right time. Your first step is to recognize where your company is today. If unpredictable expenses are making your cash forecasts unreliable, you have likely reached your tipping point and need to add structure.

From there, choose the right-sized solution. For most startups in the seed to Series A stage, a simple one-page policy is the most effective tool for gaining control. Focus on creating clear spending guardrails that prioritize predictability and enable your team to make smart decisions. Communicate to your team that the goal is not to micromanage, but to protect the company's most vital resource: its runway.

Finally, align your tools with your process. A spreadsheet may work for a team of five, but a team of twenty-five will save significant administrative time and reduce errors with an expense management tool. By taking these measured steps, you can transform T&E from a source of financial anxiety into a predictable and well-managed part of your growth story. Continue at the Cost Control hub for more guides and next steps.

Frequently Asked Questions

Q: How do we introduce a new T&E policy without upsetting the team?

A: Frame the policy as a tool for clarity and fairness, not restriction. Explain that its primary purpose is to make spending predictable to protect runway and jobs. Involve team leads in drafting the policy to build buy-in, and emphasize that the goal is to provide clear guardrails so they can spend confidently.

Q: Should our business travel policy be the same for executives and other employees?

A: For early-stage startups, it is generally best to have one policy that applies to everyone, including founders. This builds a culture of fairness and cost-consciousness. While some exceptions for executives might be necessary later (e.g., business class for frequent international travel), starting with a single standard sets the right tone.

Q: How often should we review and update our startup’s travel and entertainment expense policies?

A: A good practice is to review your T&E policy annually or after a significant event like a new funding round or a major expansion in headcount. This ensures your guidelines keep pace with your company’s scale, inflation, and changing travel costs, keeping the policy relevant and fair for your team.