Mileage Tracking 101: The Art of Efficient Record-Keeping for Maximum Savings
Last update on:
July 28, 2023 6:53 AM
If you rely on a mobile workforce, you know how important it is to have an accurate system for tracking business miles. A mileage tracker can save you time, money, and headaches even if you only have a few company cars.
With a mileage tracker, you can easily capture mileage logs that accurately document the date, destination, purpose, and total mileage for each trip taken in a particular vehicle.
But if you're still unsure about investing in a reliable mileage tracker, fear not!
We're here to guide you through the world of mileage tracking 101.
We'll discuss why mileage tracking is important, who can benefit from it, and how to do it effectively. We'll also answer some common questions decision-makers or small business owners may have about mileage tracking, such as:
Mileage tracking for work is the process of recording and monitoring the miles traveled by a vehicle for business. Its primary purpose is to track and manage business travel costs, including mileage reimbursement and tax deductions.
By accurately documenting business mileage, companies can improve their financial reporting, reduce tax liabilities, ensure compliance with legal requirements, and cut costs.
Although there are numerous benefits to using a mileage tracker, many companies are still lagging in adopting this technology. Therefore, it's crucial to compare the advantages and disadvantages of using a mileage tracker versus traditional methods like pen and paper or spreadsheets.
To help you make an informed decision, we've listed each method's main pros and cons.
Paper Mileage Logs
As the name suggests, this type of mileage log is recorded in your regular paper logbook. They should include the date, time, business purpose, odometer readings, miles driven, the starting point, and trip destination.
Paper mileage logs may look simple and cheap because they don’t need technology. But this method has many problems and is actually more costly because it’s easy to make mistakes. For example, employees must record all the trip details by hand, wasting their time. The records can also be wrong or dishonest, leading to higher payments. So, tracking mileage manually may not save you money as you think.
In addition to that, paper logs can’t be easily searched, meaning specific entries can be hard to locate.
Furthermore, paper logs are easily damaged, while the handwriting can be illegible. All this makes the audit process long and complicated.
Using Excel or Google Spreadsheets can simplify capturing and recording mileage logs. While you still need to enter the same information as in a paper log manually, spreadsheets benefit from using formulas and functions to calculate your deductions and totals. This method can be more accurate, organized, and secure than a paper log.
Additionally, spreadsheets make it easier to search your entries and eliminate the need to decode difficult handwriting. The odds of lost logs are also reduced when using spreadsheets.
However, the main issues associated with paper logs persist. This method is still tedious and time-consuming, and there is a risk of human error and mileage estimates.
Mileage Tracking Devices
Dedicated mileage tracking devices involve using a specific device that plugs into your car's OBD-II port or cigarette lighter and automatically tracks your mileage. You must pair the device with an app or web portal to access your mileage data. The device will record and upload your mileage data to the cloud via cellular or Wi-Fi connection.
Some devices may offer additional features like trip classification, expense tracking, vehicle diagnostics, and theft protection. Although reliable, accurate, and hassle-free, this method can be pricey - you must pay for both the hardware and the service.
Additionally, not all cars may be compatible with these devices, and some employees may have concerns regarding privacy violations.
With added features like expense tracking and vehicle diagnostics, these devices can provide more comprehensive insights into travel expenses and vehicle maintenance needs.
Mileage Tracking Apps
A mileage tracker eliminates all the issues that plague paper or Excel logs. At the same time, as the technology relies on the mobile devices your employees already own, it does not require additional hardware, making it more affordable than installing a dedicated mileage-tracking device.
If you opt for a solution like Timeero, you can rest assured that it will:
Accurately track mileage
Eliminate the need for manual data entry.
You don't need an intricate, robust, expensive solution for running a small business, construction, home health care, retail, or field service company. Timeero offers exactly the features you need to stay on top of your expenses and allows you to get the most bang for your buck.
Benefits of Tracking Business Mileage
Using a mileage tracker for your business can have many advantages. Here are some key benefits of having a mileage tracker for any company that relies on vehicles for business activities.
1. Qualify for a Mileage Tax Deduction With IRS-Compliant Logs.
If you or your employees use a personal vehicle for business, your company is eligible for significant tax deductions. We’re talking about hundreds or even thousands of dollars a year that you’d otherwise leave lying on the road.
At the same time, the personal use of company-owned vehicles is considered a taxable fringe benefit for you or your employees.
Therefore, in either case, it’s necessary to create IRS-compliant logs so that you can substantiate the business use of a vehicle and qualify for a tax write-off.
What are IRS-compliant mileage logs?
To create IRS-compliant logs with a mileage tracker, you need to follow these guidelines:
Every mileage log has to be up to date. You should record it on the day of the business trip or, at most, 3 months later. Otherwise, the IRS won’t accept it.
It’s your responsibility as an employer to keep track of mileage and not your employees’
You must keep the records for five years after filing a tax deduction claim.
A valid mileage log must contain the exact date of the trip, the mileage for each business use, the destination, and the purpose.
The point of all this is to prove to the IRS that payments your employee receives from you on account of company gas cards, car allowance, or mileage reimbursement don’t constitute taxable income or compensation but business expenses.
That’s why these payments should match the expenses your employees or you incur while using a vehicle for business purposes.
The savings from tracking mileage may seem insignificant initially, but they can accumulate quickly. For instance, if an employee drives 100 miles per week at the 2023 standard mileage rate of 65.5 cents per mile, the employee would receive $65.50 per week in reimbursement. That may add up to $3,406 in annual savings for you.
Tracking mileage accurately can clearly benefit your business, and Timeero is a user-friendly and reliable solution that will simplify this tedious process.
2. Easily Calculate Reimbursements Using the Accounting Software Integration
Adopting a mileage tracker will facilitate the reimbursement procedure and ensure that all mileage expenses are covered accurately.
An app like Timeero can integrate with payroll and accounting software such as QuickBooks, Gusto, Xero, ADP, and Paychex.
This way, the entire process will be automated and streamlined at all times, as you can export mileage records easily exported to the payroll and bookkeeping software of your choice.
Needless to say, it will be infinitely easier for you to calculate and manage reimbursement.
3. Optimize Your Expenses
To illustrate the importance of mileage tracking and expense management, we must distinguish between delivery and transportation companies, such as Uber, Lyft, or DHL, and other field businesses, such as real estate, construction, home health, or cleaning.
Delivery and transportation companies have different sets of expenses than other field businesses. For example, they may focus primarily on tracking mileage expenses. At the same time, other field businesses have to monitor not only mileage but also other expenses carefully.
That’s why opting for a mileage tracker with additional features will facilitate expense management and allow you to cut costs, optimize your spending, and always be in the know regarding the performance of your entire team.
Having all these metrics in the same place will allow you to monitor your business expenses, stay IRS and EVV-compliant, and prevent potential fraud.
4. Prevent Fraudulent Expense Reimbursements and Save 5% of Your Annual Revenue
Although most of your employees likely don’t resort to dishonest practices, the truth is that 5% of an average organization’s annual revenue is lost to fraud. Of course, this doesn’t mean your employees wait for every opportunity to rip you off, but some preventive measures are welcome.
According to surveys, almost 35% of employees overstate mileage before claiming reimbursements. As a result of expense fraud, U.S. employers lose $2.8 billion annually. The factor that enables this kind of fraudulent behavior is the process of manually reporting business travel expenses.
A mileage tracking app will put the brakes on expense fraud and help you control and optimize your mileage spend. And if we bear in mind that inaccurate reporting can ultimately interfere with IRS compliance and affect your bottom line, it’s clear how crucial implementing a solution like Timeero is for your business.
4. Ditch Bulky and Expensive Hardware in Favor of a User-Friendly App
The days when tracking mileage required sturdy hardware and laptops for keeping mileage records are luckily behind us.
A mobile app GPS-powered mileage tracker is an easy-to-use solution since all it takes is for your employees to install it on their mobile devices. It allows you to track your entire team’s mileage accurately and get a breadcrumb trail of their trips.
Timeero, for example, comes with automatic mileage tracking. The app recognizes the driving speed, and if the mileage tracking option is turned on for the employee and the job they’re logged in to, it automatically starts to track miles.
5. Audit-Proof Your Business
In the event of an IRS audit, having a detailed and accurate mileage log is essential for proving your business mileage expenses and avoiding penalties or additional taxes. You should regularly update a mileage log, including each trip's date, destination, purpose, and mileage.
Fortunately, mileage-tracking apps can help you automate this process, minimizing the risk of errors. When tax time arrives, or in the case of an audit, the best mileage tracking apps will ensure that your records are accurate, up-to-date, easily searchable, and accessible.
A reliable and detailed mileage log can provide valuable protection and peace of mind for business owners and employees for audit-proof tax returns.
When Should an Employer Reimburse for Mileage?
When discussing mileage reimbursement policies, the first thing to mention is that no federal law requires employers to reimburse employees when using their personal vehicles for business-related purposes.
However, federal law requires all employees to get at least the federal minimum wage. Therefore, if work-related mileage or vehicle expenses lower an employee’s salary below the minimum, employers who fail to reimburse them can be penalized and sued.
You should notie that in some states, such as California, Illinois, and Massachusetts, there are labor codes according to which employers must reimburse all work-related expenses.
Regarding commuting mileage reimbursement, these expenses aren’t tax-deductible, even if you or your employees live far from the office. According to the IRS, where you live is your personal choice, and therefore it’s considered a personal expense.
All this brings us to an important question:
Should You Reimburse Mileage If You Don’t Have To?
Even in states other than the employee-friendly ones we mentioned above, many employers reimburse employees for business-related expenses, although the law doesn’t bind them to do so.
The explanation for this is straightforward - they want to be fair to their employees and ensure their workforce gets the entire salary specified in the contract. Even if these business expenses don’t reduce their compensation below the minimum wage level, fuel and other travel costs eat into their take-home pay.
If you pay your employees properly, they will be happy and motivated, which will, in turn, reduce your turnover rate and improve productivity. In addition, this perk will show your employees that you value and respect them, and that’s a worthwhile investment that will pay off.
Another reason you should decide to reimburse mileage is that you’ll make your benefits package competitive and help you attract and keep top talent.
To learn more about the best practices, tips, and methods for employee mileage reimbursement, check out our pieces:
How Do I Choose the Best Mileage Tracker Apps for My Business?
With so many mileage-tracking apps available, choosing the one that best suits your needs can be daunting.
While pricing is a significant deciding factor, you should consider other important factors.
Here’s what you should pay attention to when shopping for a mileage tracker. Some of these features are essential for every mileage tracking app. Some of these features are essential for every mileage tracking app, while others are excellent additions that may or may not fit your business needs.
Mileage tracking is a core feature you will be looking for. However, since not all mileage-tracking apps are the same, you should know what to look for.
To make your employees’ lives easier, opting for an app with an automatic mileage tracker functionality is best. In addition, the best mileage tracking apps have safeguards to ensure employees are not tracking miles when they’re in the cab or the passenger seat, for example.
For maximum benefits, the app should also be able to track your employees’ every drive in real-time, records the breadcrumb trail path using GPS, and capture the exact time of each trip.
Apart from these solutions, Timeero, for example, provides a great additional functionality - it can suggest the shortest route to an employee’s destination to save time and mileage costs.
Furthermore, Timeero can compare your employee's actual path with the suggested one to determine how many miles they could have saved. These functionalities are great for improving mileage accountability at your workplace and reducing expenses.
Employee Time and Attendance Monitoring
Switching to a mileage-tracking solution for your business can be a great chance to streamline employee time-tracking and attendance processes.
These additional features can give you valuable insights into your employees' work hours, locations, and activities. So, besides accurate mileage reports, you can choose a mileage tracking app with a time clock to ensure accurate timesheets and law compliance.
GPS Tracking and Geofencing
GPS tracking and geofencing can be precious if you manage field employees. GPS tracking allows you to monitor your employees’ locations in real-time and review their history logs, ensuring they are on track with their work schedules and tasks.
On the other hand, geofencing allows you to set virtual boundaries around specific geographic areas, track employee arrival and departure times, and send push notifications ensuring they meet their work responsibilities and providing better insight into employee performance.
Traffic and Fuel Management
Some apps can also track the speed and duration of an employee’s stay at a particular road junction to optimize trips and routes. By analyzing this kind of data, it’s possible to determine an alternative route, i.e., avoid left-hand turns and maximize fuel economy.
Integrations with Third-Party Apps
By integrating with other apps, businesses can easily link their mileage data with the tools they use daily. This can help you save time, avoid errors, and get a better overview of your operations.
For instance, integrating with accounting or payroll software can sync mileage expenses automatically, making expense reports more accurate and straightforward. This feature will also ensure fair and correct reimbursements.
If you use software that is not on the list, public API allows for creating custom integrations.
Ease of Use
Ease of use of mileage tracking apps is crucial as it directly impacts user adoption and overall effectiveness. “If an app is too complex or requires extensive training, employees may be less likely to use it consistently. Again, this will lead to inaccurate or incomplete mileage logs.
On the other hand, a user-friendly app can make it easy for employees and independent contractors to keep track of their business mileage quickly and accurately.
How to Track Mileage Without Invading Employee Privacy?
Because employee privacy is a delicate matter, it’s essential to consider when implementing a mileage tracker.
The Global Positioning System (GPS) has become indispensable to every accurate and precise mileage tracking app. With it, you can be sure your employees won’t take longer routes, run personal errands while at work, or inflate their mileage. Plus, these records will meet IRS standards .Finally, another benefit of GPS is that it uses the existing hardware in mobile phones, saving you some money.
All you have to do is download a reliable mileage tracker, like Timeero, that safeguards employee privacy, configure it, and that’s it.
Can Google Maps Track My Mileage?
Although Google Maps doesn’t have a dedicated mileage tracker, the app logs routes and keeps track of mileage. To some point, these logs can be helpful for mileage recording purposes.
However, as it’s not tailored to fit the needs of employee monitoring, there are many cons to using Google Maps to track your employees' GPS locations and mileage, most of them related to invasion of privacy and potential ethical and legal considerations. To learn more about these issues, read our Google Timeline Review.
Timeero, as mentioned earlier, captures mileage and has access to the location only when the employee clocks in and stops tracking when they clock out.
Again, this means there are no concerns about privacy issues, as the app is only used when employees work.
Moreover, they have to activate the tracking themselves when they clock in so they will be aware that the tracker is on to monitor mileage.
PRO TIP: To ensure your employees comply with mileage tracking and GPS monitoring for business trips, explain the benefits of fair mileage reimbursement and assure them that monitoring will only occur during work hours. This approach will foster support and cooperation among employees.
How Can Timeero Help Me With Mileage Tracking?
If you opt for a mileage tracker like Timeero, you will facilitate the entire time, mileage, and expense tracking process.
It will enable you to:
always know where your employees are, how long they worked, and how many miles they traveled
run payroll and mileage reimbursement reports quickly and easily
monitor mileage, time worked, schedules, and expenses in one place
track time and mileage precisely using GPS
use integrations to streamline payroll and mileage reimbursement
It’s easy to use, and your employees only have to download the Timeero Android from Google Play or the iOS app from the Apple App Store. Tracking starts when the employee clocks in and stops when they clock out. Only the distance they cover for business purposes is recorded, and their privacy is protected. Mileage auto-tracking begins when the app recognizes the driving speed.
You should note that “always” doesn’t mean the app will track mileage 24/7, but only when the employee clocks in.
So, What Is the Best Way to Track My Mileage?
Paper and Excel logs belong in the past.
Yes, they are affordable, easy to use, and require no special training, but their downsides outweigh the positives. In other words, if you stick to this method of mileage tracking, you practically rely on self-reporting and inaccurate records, thus risking fraud, inflated numbers, non-compliant logs, and exaggerated expenses.
Natasa is a writer specializing in the IT and software industry with 6+ years of experience in content writing and online marketing. During that period, she wrote more than 1,000 articles and several ebooks. She majored in English language and literature and loves cats, sneakers, and candy. When she's not working, she's probably binge-watching Netflix.