Different methods are followed for the reimbursement of travelling expenses. Following are some of the important ones:
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1. The Exact Method:
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Under this method, a weekly report of the actual expenses is submitted in detail, item-wise, by the salesmen. After the items are verified by the office, payments are made. Usually, this method is followed for the salesmen not travelling through regular routes and whose expenses vary from week to week.
2. The Honour Method:
Under this method, a detail of expenditures is not submitted by the sales force. Only the total travelling expenses are reported to the company. The aggregate amount is automatically reimbursed by the company on the presumption that the salesmen have spent the amount actually claimed.
3. Allowance or Limited Method:
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Under this method, the organisation clearly states beforehand the maximum amounts which can be spent on various items. This method is based on a rough estimation of the cost of boarding, lodging and other facilities in a sales territory. ‘Consequently, the salesmen are granted a predetermined amount irrespective of the actual expenses incurred by them.
4. The Flat Daily Living Expense Rate:
If the salesmen travel the same route week after week, expenses on boarding, lodging, travelling etc. would remain uniform. In such cases, a flat rate is fixed by the organisation and expenses are reimbursed accordingly.
5. The Expense Quota Method:
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Under this method, the firm lays down the maximum amount which will be paid towards meeting the travelling expenses of a salesman every month. All the expenses reported by the salesmen within this limit are paid by the firm. If the salesmen spend in excess of the maximum prescribed limit, such expenditures are not reimbursed.
Thus, there are several methods of compensation as well as travelling expenses reimbursement plan put into use by the organisation. It is up to the firm to adopt a specific plan of compensation to suit its requirements. However, the adoption of a specific plan for an organisation is never permanent.
The changing market condition always dictates the method of compensation for the sales force. Since the compensation plan is a reward for performance, every care and caution is needed while adopting a compensation plan for the organisation. A carefully selected compensation plan can instill satisfaction in the sales force, on the one hand and enable the organisation to exercise control over the sales force, on the other.