Brandon,

I don’t have any case study but have 20 years of experience doing
it both ways.

The government per diem rates are generally between $40-60/day,
depending on the location. We use actual expenses and usually the
consultant’s actual total weekly meals expense is less than the
per diem would be.

As for the overhead of actual expenses, we don’t require receipts
for any meal under $15, so there is no reconciliation, just a quick entry
in the expense report. With per diem rates, you would incur the
overhead of looking up what the allowance is for each location and you
need to make adjustments in a per diem allowance for meals that were
already specifically expensed (such as when a customer is taken out to
lunch or dinner). It also is a pain when two or more consultants are
traveling (and eating) together as some restaurants don’t split checks.

From what I’ve seen, there is no savings in overhead using per diem rates.

Hope this helps.

Rick

Do you not currently have a policy of not requiring receipts under
a certain amount?

I’d be surprised (not the first time) if there was a study that showed
the savings of one process over the other.  Seems reasonable to place
an amount someone can spend without receipt - regardless of the type
of transaction - and having an approving authority say it’s reasonable. 
With regards to meals you can use the govt’s per diem rate chart that’s
available on the web or simply set a flat rate.

Don

Hi Brandon,

in addition to the simplified admin costs on our(company’s side), I have
found Consultants as well to prefer the per-diem route, since it makes
their overall compensation tax efficient. Of course, you should run it by
your CPA, but there may be more benefits if the per diem is defined as
a separate line item.

hope this helps.

-Neel

I’d be surprised if there was any research that would provide practical
results in making this decision. I agree that it would be very hard to
quantify. But here, FWIW, is my own 2c based on personal experience.

First, although my company, like yours, is not be under regulation as to
which style (per diem or actual) to use, there certainly were government
rules to bear in mind once we decided to go down the per diem route.
Despite those rules/annoyances, although we ran with actual expenses
for years, we moved to per diems precisely for the reason you mention
- ease of life for the consultants. Obviously it makes back office life
easier too. That subjective ease of life more than offset the government
stuff.

The issues I had to consider included:

1. In the UK, we could find no precise government guidelines covering
per diems. All we got was a recommendation from the local tax office
that we send them a proposal, with evidence from our actual
meal-expenses data that the per diem amount we were proposing was
reasonable. And by “reasonable” they meant,” no more than they would
have spent on actual meals in the first place”. So the point here is, there
is no worry about per diems being more expensive than real expenses.
The Revenue is effectively saying that per diems *must not* be more
than what the real ones would have been.

2. In the US, there are precise guidelines, but they don’t always make
sense (in the context of what does it cost to eat/live in any given place).
However, we reckoned someone would grumble no matter which of the
two basic per diem methods we chose, so we just went for the easier
(on the backoffice) method (the one with the fewest number of rates
and city groups).

3. Consultants, especially smart techy programmer consultants, are a
form of criminal genius and they’ll always figure out a way of arguing
that “expense item X” should fall outside the per diem allowance and
so must be claimable in addition to their per diem. So try to make the
per diem arrangement as clean and tight as possible, tell everyone
about them and make sure they understand, and then prepare
yourself for them being tested to breaking point.

Tommy

I totally agree with your thoughts on this, but we still collect actuals
because a significant percentage of our customers require actual
receipts for all expenses on demand. If it weren’t for this
requirement, we would do per diems as well.

We bill all T&E including food based on actuals.

Brandon,

In the professional services realm, most of the expenses
incurred by our consultants while working on site on T&E
projects are client re-billable. Our invoices to our client would
detail out the expenses (Lodging, Car Rentals, Airfare, Meals) by
each consultant, and they had to conform to a Expenses Policies
Guideline that each consultant had to be familiar with.

An unstated guideline was that you could expense $10 for Breakfast,
$20 for Lunch and $30 for Dinner, and they would not have to turn
in any receipts for any meals since the threshold for turning in actual
expense receipts was set at $75. This gave a lot of latitude to our
consultants, and they were expected to be fair. Also, if anyone in
the approval chain say saw a consultant expense items that looked
out of the ordinary, the consultant could expect to receive a phone
call and resetting of expectations that you could play the system.

In those instances where our clients requested to see actual receipts
for meals - over say a set amount ($25 for instance) - the consultants
were asked to comply, and we have not had any issues with compliance.

For the most part this works, and most of the consultants don’t gripe at
having to enter 3 lines items for every day. And, as you said, Accounts
Payable had less to worry about and reconcile since the receipt
threshold was $75 per item.

I have only seen one solitary instance when one client in a remote
location had sought to override our internal policy and set a per diem
($75 per day), because they felt that doing so would attract some
consultants to work at their location. The CIO knew that it could be
way to attract and retain talent in that remote place.

Ash M.

We do the same - collect actuals with no receipts required
for anything under $25.00. Some customers breeze through
the invoicing process, and others occasionally push back for
documentation.

My experience is twofold

If expenses are incurred while on a customer billable project
where the customer is re-imbursing expenses, they typically
require actual with receipts.

When on company internal business - e.g. business development,
training etc then typically in the past I have used per diems.
Incidentally, tax guidelines for per diems (in Australia anyway)
are maximums allowable, and in my experience I have very
rarely seen organisations that pay up to that level for per diems.

Regards,

Kevin

Brandon,
As others are stating, actual is the primary approach to reimburse
expenses.  In my previous company, I led a group of over 200, and
I did conduct an informal analysis of what works best.  In the end,
as one other respondent stated, it is the clients who are requiring
actuals - with receipts.  I found that the admin time to enter the
info was nominal.

Bill D.

I believe the IRS only requires receipt for $25 and above.

I think you will find that the receipt requirement from the IRS is
$75.00 and up and for lesser amounts an accurate chronology via
a spreadsheet or note book noting event, date, purpose, attendees,
etc. However with all such comments your accountant’s input should
be the guiding principle.

While I agree that per diem’s aren’t admin-free, they have proven
in my experience to be much simpler to administer than using
actuals, and my consultants seem much happier with them as well.
Looking up per diem limits per locale is not much different from looking
up customer limits per contract, and in fact is much simpler than having
to abide by specific customer requirements for “all"receipts, individual
meal caps for breakfast, lunch, and dinner, weekly caps, and restrictions
on meals for travel days.  Similarly, while most restaurants will split
checks, those that won’t at worst inconvenience per diem and actuals
equally, though informal “I’ll get this one and you get the next one”
agreements give the simplicity nod once again to per diem.

Finally, some companies are very conservative with how they invoice
for expenses, and will withhold doing so until all expense lines are fully
vetted internally.  I work for one now.  Missing receipts and inadequate
documentation (ie, who was at dinner and what was it for) can hold up
an entire expense invoice, and affect timely reconciliation on the customer
side (comparing billing days to hotel nights expensed and meals, for
instance). This is at best a customer sat issue and at worst crosses
accounting periods and delays/imperils payment both to the company
and the individual consultant. 

If there’s a choice and the per diem is reasonable, I’d opt for it every time.

Thanks,

Don S.