Travel Expenses

Travel Expenses

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Hello, 

I am looking for some guidance, please, on travel and accommodation expenses.  If my director travels to a site in Canada to install the kit that we have sold to the client, I would class the flight and accommodation as a direct expense of delivering the product/service on that particular job - goes to a 6900 code in sage. 

What's confusing me are the travel and accommodation codes in the 7000 overheads range - please can someone explain to me when travel/accommodation would be considered an overhead?  If the travel is being claimed against the business then it must be business travel, and staff generally only travel for business relative to a particular job, so it's an expense of delivering that job?  Am I missing something?

Many thanks for any advice

EM

Replies (6)

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By johngroganjga
18th Nov 2015 17:37

I am not sure that it matters very much, but examples of two different reasons for travelling on business for you to compare and contrast would be:

Travelling to a customer's premises to perform a service to the customer (i.e. your example);Travelling to attend a training course.

​Many businesses would not think that the distinction was worth making in their record keeping, but for those who did the first example would naturally be a direct cost (as you say) while the second would naturally be an overhead.

I hope that helps.

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By Ellemme
18th Nov 2015 17:46

Hi John, 

Hi John, 

Thank you very much for your response.  The training example is very helpful, thank you.  However, you say that it doesn't matter very much - but I don't understand why it doesn't matter.  

Lets say I travel to site, job no. 525, and the next day I go on a training course.  I spend £50 travelling to job 525, and £20 travelling to the training course.  

I charge the client £1000 for job 525, and I have other direct costs to that job of £125.  If I assign all the travel expenses to the overhead code, then the cost vs sales analysis of job no. 525 will not include the £50 travel, and will therefore be £50 'out'.  

I now realise as I type this that perhaps it makes no difference from an accounting point of view, but what I am doing is in fact job costing, which would require the split into direct expense and overheads, however my accountant won't care either way.  Am I getting close?

Hope that's not too much of a ramble.

Thanks again for your earlier reply.

EM

 

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By Anne Robinson
18th Nov 2015 18:30

If the travelling can be connect entirely to a specific job then you would call it a direct cost but lots of business travel "generally" to see prospects, go to the bank or suppliers, go to their accountants, etc etc which are an overhead not to a specific job.

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By johngroganjga
19th Nov 2015 09:10

Yes it matters for job costing. What I meant was that for general accounting / financial reporting purposes it's usually not a major issue worth over-elaborating over.

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By Ellemme
19th Nov 2015 11:56

Hello Anne and John, 

Hello Anne and John, 

Many thanks for your replies and advice, it's a lot clearer to me now.

EM

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By accountaholic
19th Nov 2015 13:30

interesting

I've come across this with a client with a strict cost control expenses policy on hotel accommodation, something like no more than £65 per night, BUT if being charged explicitly to the client anything goes, moreover staff are encouraged to use the hotels the client usually uses.

 

From an accounting point of view if they code the costs which are being directly and explicitly recharged as an overhead, then the overheads start going up, but the gross margin also goes up. My advice is to code rechargeable stuff as a "cost of sale", to keep it in the gross margin, and only use overheads if it's not directly attributable to one job.

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