For companies whose operations depend on employee travel, efficient mileage tracking and charging are crucial. How you calculate and set mileage rates determines your financial success.
If your company requires staff to travel for work, appropriately billing clients for mileage ensures that your team is adequately reimbursed. As a result, figuring out how to charge for miles is critical.
In this article, we’ll look at why charging mileage to customers is important, the challenges you might face while doing so, and the different approaches to doing it. We’ll also cover how Timeero’s features can simplify tracking and charging mileage, saving your company both time and money.
Every mile matters when it comes to operating a business. The significance of charging mileage goes beyond a collection of numbers on a receipt. Here are some reasons why this is a necessity for companies with employees on the move:
1. Fair Compensation
A fair way of compensating staff members for using their personal cars for business travel is to charge mileage to clients.
Expenses associated with fuel, maintenance, and vehicle wear and tear are incurred by employees who travel for work. Accurately billing customers ensures these mileage expenses are covered, eliminating disputes.
2. Accurate Cost Recovery
Accurate mileage billing enables precise recovery of costs for companies with field-based teams. It guarantees that the organization is accounting for indirect expenses such as vehicle depreciation.
This is in addition to the direct costs related to travel. In order to avoid financial losses, accuracy is essential.
3. Compliance and Tax Benefits
Compliance with tax requirements requires accurate mileage recording and billing. The ability to offer precise mileage records can assist organizations in taking advantage of tax deductions for business travel.
Challenges Businesses Face in Charging Mileage
While charging mileage to customers is fairly simple, it comes with its own set of challenges.
1. Transparency Is Lacking
Workers may feel that their actual expenses are not being compensated appropriately if no unified and transparent process is in place. The working relationship between employers and employees may suffer as a result of this lack of transparency.
To ensure everyone agrees, you can create a policy to improve accountability. Use our free mileage reimbursement policy template to safeguard both your interests as a small business and those of your staff.
2. Inaccurate Record-Keeping
Errors and disputes can arise from the use of paper records, manual tracking, and complicated reimbursement methods. This could be the result of accidental human error, deliberate manipulation, or just wrong estimations.
Undependable records can lead to disagreements between employees and employers.
3. Time-Consuming Processes
Traditional methods of tracking and charging mileage are time-consuming. Employees spend valuable time manually logging their travel details.
Managers must then review and process these records, which eats up even more time. This can result in increased labor costs and decreased productivity.
What Is the Best Way to Calculate and Charge Customers for Mileage?
Using the conventional odometer is no longer sufficient for calculating mileage costs for businesses. Developing an elaborate and practical mileage-based pricing strategy is the only viable solution.
When deciding how to charge clients for business mileage, you have a few methods to choose from:
Charging a Flat Rate
Charging a flat rate for miles entails charging a set cost for each business trip, regardless of distance or time spent. This strategy provides both businesses and customers with a sense of predictability. It is ideal for companies with standardized services or consistent travel patterns.
Pros
Flat rate charging is simple and uncomplicated for both businesses and clients.
Clients know exactly what prices to expect, allowing them to budget more accurately.
Cons
Flat rates may not correctly represent real mileage expenses, resulting in either undercharging or overcharging.
Per Mile Charging
This method involves assigning a specific cost for each mile traveled. It aims to directly correlate charges with the actual distance covered, more accurately reflecting the travel costs incurred.
It’s most suitable for businesses with variable travel distances or those where the actual distance traveled is a key factor in determining costs. In order to charge your customers fairly, don't forget to keep track of your miles. Consider your car expenses and industry when determining your rate.
Pros
Charging per mile is more precise, aligning charges with the actual distance traveled.
Employees are compensated based on the actual usage of their vehicles, promoting fairness.
Cons
Calculating mileage charges might be more difficult than using a fixed rate.
Clients may find it difficult to forecast prices, especially if mileage varies significantly.
Charging Per Hour
When you charge by the hour, you have to figure out how much each hour of travel for work costs. This method considers time rather than distance traveled, providing an alternate viewpoint on payment.
Assume your employee travels for two hours to a customer location. If you charge $25 per hour, the client would be charged $50 for travel time.
Pros
This method offers simplicity for clients who may find it easier to budget based on time.
Cons
It does not directly account for the distance traveled, which may lead to overcharging or undercharging.
Managing and explaining hourly charges may be more complex than other methods.
Hybrid Approach
This method combines aspects of flat rate, per mile, and per hour charging to create a customized and flexible pricing structure. It enables companies to tailor charges according to project specifications or customer agreements.
Pros
It offers businesses the flexibility to charge based on the unique needs of each client or project.
This approach can adapt to different scenarios, allowing businesses to use a combination of methods.
Cons
This strategy may be more difficult for business owners to understand than the others.
How to Charge for Mileage Using The IRS Rate
Charging at the IRS mileage rate entails applying the Internal Revenue Service's (IRS) standard mileage rate for business-related travel. You can utilize the CRA mileage rate if you are in Canada.
For 2024, the IRS standard mileage rate is 67 cents. For instance, if an employee drives 100 miles for work, the company can charge $67 (100 miles x 67 cents).
Customers are likely to accept charging mileage at the IRS standard rate since it is not too expensive. However, please note that it may not cover all of your travel expenses. This is particularly true if your business incurs additional charges such as tolls or parking fees. This mileage rate is optional; you may choose to use it or another alternative rate.
While the IRS rate provides a helpful baseline, it's essential to consider your actual costs and adjust your charges accordingly. Our free IRS mileage reimbursement calculator can help you estimate your true costs and ensure you're charging clients fairly.
How Does Mileage Tracking and Charging Work on Timeero?
On Timeero, your employees' mileage tracking begins the moment they clock in. It continues up until they clock out.
When an employee moves above a set speed threshold, the motion-based mileage tracker app perceives it as driving. The software has a breadcrumbs feature that offers a comprehensive breakdown of the employee's journey. Each breadcrumb serves as a location marker and when you hover over it, you will see a timestamp and the speed at that particular point.
The Timeero breadcrumbs feature.
This offers insights into an employee's movements throughout the workday. The visual representation allows employers to track the exact path or route taken by the worker and verify mileage.
When determining mileage, any speed exceeding 4.5 miles per hour is taken into consideration. This guarantees that walking or time spent stuck in traffic won't be factored into mileage estimates. Administrators can also set the desired speed threshold in their accounts because it is customizable.
The mileage speed threshold is customizable.
If an employee forgets to track mileage, they can manually enter their travel distance. You’ll just have to enable this functionality in your company account settings.
It’s clear that Timeero makes tracking mileage for work a breeze, but what about charging for these business miles?
Timeero allows you to set a mileage cost per mile in your account settings. This per-mile charging method simplifies the process, as you don’t have to carry out any extra mileage calculations. The app takes care of that for you. Even better, by selecting the currency in your area, you may adapt this to your company's exact location.
Setting mileage cost per mile on Timeero saves you time.
Benefits of Using Timeero for Mileage Charging
Timeero offers a range of features that simplify mileage tracking for business purposes and enhance efficiency in charging customers. Let’s explore the benefits of using Timeero for mileage charging.
Automated Mileage Tracking and Charging
Timeero's automated mileage tracking feature eliminates the need for manual entry. The software uses GPS technology to precisely record and compute mileage based on real distance traveled.
You can avoid manually calculating mileage expenses at the end of each journey by setting the cost per mile in your account. This decreases the possibility of mistakes. It also saves both employees and administrators time. You won't have to worry about how to charge for mileage anymore.
Mileage tracking on Timeero.
Real-Time Visibility
With Timeero, businesses gain real-time visibility into their employees' travel activities, whether they are driving to client meetings, making deliveries, or attending offsite events. You'll be able to monitor your team members' movements as they drive from one site to the next.
This openness guarantees that mileage records are error-free. Employees and employers may get the correct information at any moment, promoting confidence and responsibility inside the business.
Time and Attendance Information
Every employer's desire is for operations to run as smoothly as possible, and Timeero strives to make that a reality. Mileage tracking, as well as time and attendance functions, are smoothly incorporated into the software.
This enables businesses to link mileage data directly with employee work hours, providing a holistic view of work-related activities. Each timesheet has information about the times the employee clocked in and out, total hours worked, breaks taken, overtime, and covered mileage.
An employee timesheet on Timeero.
You get an overview of how the employee spent their workday. This ensures that mileage charges are associated with the appropriate work hours, enhancing accuracy in compensation.
Customizable Mileage Rates
Timeero allows businesses to customize mileage rates based on their preferred rate. Once you enter your preferred cost per mile, the app will calculate total costs for you.
This guarantees that businesses can appropriately charge clients, reflecting the actual costs of travel. This comes in handy when independent contractors and self-employed individuals are charging travel expenses for their own vehicles for business use.
Mobile Accessibility
Timeero's mobile app allows employees to track their mileage on the go. This mobile accessibility guarantees that no trips are missed, which is especially important for staff that's outside the office.
It also makes it quick for employees to claim mileage and managers to review and process it, simplifying the whole process even more.
The Timeero mobile app.
Reporting
All mileage records are centralized by Timeero on a secure, user-friendly platform. Due to this record-keeping, admins can review, approve, and process mileage claims more easily.
A historical record of all travel-related activities is also provided. In addition to timesheets, you receive mileage tracking reports and other valuable reports for your company.
These reports can also be exported in PDF, Excel, or CSV format. Businesses can get the particular information they want owing to the option to build customizable reports. This is very helpful for internal audits or external reporting for mileage deductions.
Timeero mileage reports.
Integrations
Once you get the total mileage cost for your customers, the next step is to reimburse your employees for their business expenses. With Timeero, you can eliminate time-consuming, repetitive tasks by automating employee mileage reimbursement.
The software simplifies payroll calculations by integrating multiple payroll and invoicing platforms. These include Paychex, Gusto, Xero, ADP, Rippling, Zapier, Vieventium, and Paylocity.
Timeero integrates with various payroll software.
Use Timeero to Simplify Charging Mileage
Transforming how to charge for mileage allows you to stay competitive in today's market and get compensated fairly for your incurred expenses. The traditional way of doing it is time-consuming and, without a doubt, highly prone to errors.
Choosing the right charging method can significantly impact cost recovery and client satisfaction. Using Timeero’s mileage tracking features can be a game changer for your company. The app's flexibility in customization allows businesses to implement a straightforward charging method.
Adopt Timeero today to streamline your mileage charging processes.
Timeero: Your Solution for Accurately Tracking and Charging Mileage
Emily Maina is a tech-savvy writer with a passion for creating content. With years of experience in the industry, she is well-versed in the latest trends and developments in the tech industry. When she’s not working, Emily enjoys exploring the great outdoors or watching her favorite shows.
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