On December 14, 2018, the Internal Revenue Service (IRS) issued its annual guidance on the business mileage reimbursement rate effective January 1, 2019. With a suggested rate increase from 54.5 to 58 cents per mile year over year (representing a 6.4% increase), this year’s guidance is the highest rate per mile in over 10 years. Similar increases have occurred throughout the globe. So, how can you measure and mitigate the potential impact to your business?
As a cloud solution with thousands of data inputs for every customer we serve, SAP Concur’s value proposition often hinges on the increased spend visibility and compliance our customers will gain. Too often, however, organizations find it difficult to take full advantage of their data in order to solve complex business challenges. In my experience as a customer and now at SAP Concur itself, I’ve found that breaking down this barrier with the data is best done one business challenge at a time. The new mileage rate increase offers a fantastic opportunity for customers of all sizes to dust off your data and put it to work to positively influence your financial success:
Step 1: Determine just how much domestic U.S. mileage you had in 2018. This is most easily accomplished through reporting. Regardless of the SAP Concur analytics solution your organization is using, this spend data is available to you. Calculate your total U.S. mileage spend in 2018, multiply that amount by 106.4%, and determine an estimate of your increased costs for 2019. Follow the same approach for the mileage spend and reimbursement guidance for other countries in which your organization operates, and you will be able to put together a total impact study that your entire organization will benefit from seeing. If you need help on the analytics component, reach out to a member of your account team. We are here to help.
Step 2: Update your mileage reimbursement rate within SAP Concur. This is actually a task most organizations can accomplish themselves within the Expense Configuration, but if you have questions or need help, be sure to reach out to us. While adherence to the IRS guidance is optional, many organizations that choose not to reimburse at the full amount run the risk of alienating employees. This can result in employees padding their mileage claims to make up the difference, or in extreme situations, negatively impact the organization’s ability to attract and retain talent. Typically, these outcomes are much more expensive and problematic than simply adhering to the IRS guidance in the first place.
Step 3: Establish a mileage reimbursement strategy that boosts your employees’ experience while protecting your organization’s assets. As you are evaluating your mileage spend, explore your options for mitigating against waste and fraud, unfortunate biproducts that often accompany mileage reimbursement programs. For some organizations, simply establishing thresholds for when a personal vehicle is permissible vs. leveraging a corporate fleet vehicle or renting a car can save thousands, if not millions, in mileage reimbursements year over year. Fixed and Variable Rate (FAVR) programs are another great option for delivering fair and accurate reimbursements to your frequent drivers (5,000 miles or more per year). Finally, GPS mileage tracking can save your employees time in entering in their routes while also improving the accuracy of their claims and reducing padding. Mileage padding, whether intentional or not, costs your organization money on its own; when combined with this reimbursement rate increase, the costs begin to snowball.
This is not a strategy that can be determined overnight. However, with the right analysis and some thoughtful collaboration between your internal teams, you can harness the new IRS mileage reimbursement rate as a business improvement opportunity, rather than a costly change. As always, your SAP Concur account team and our vast ecosystem of partners are here to help.