Work-related travel involves the concern of calculating mileage for business. Here is some information on how to calculate mileage for business.
The efficiency and knack of calculating mileage expense is indispensable for receiving adequate compensation. Even in the case of small entities or self-owned businesses, calculating business mileage can prove to be the thorn in the bush for smooth functioning.
Business mileage is simply the term used for the traveling done for work or job-related errands. Obviously, it excludes all the private/personal travel or traveling to-and-fro, from the workplace to your residence.
The best way to calculate and ensure that you avail proper reimbursement from the concerned organization for the 'business miles' or travel you have put in for that entity, is by simply keeping a track of all the travel data.
How to Calculate Mileage for Business
The following tips help to calculate mileage and get due compensation for the same. These are the simplest and the most crucial records of any business travel.
Keeping records of the miles put in, by noting the starting and ending mile reading.
The expenses incurred for repairs or maintenance made during the course of travel for business requirements
The toll and parking charges and gas charges
Diligently recorded date, time, and purpose of travel.
All these details must be systematically maintained in any of your spreadsheets or even a simple clipboard exclusively used for this purpose. Thus, every single time a business entails traveling, make sure that the mentioned factors are always recorded.
Methods to Calculate Mileage Expense
There are two standard methods followed by companies to keep track of all the data related to business travel. The standard mileage method and the actual mileage method.
The Standard Mileage Method
Here, you make a note of the starting and the ending mile, and calculate the actual distance traveled on a particular task.
Next, multiply the total number of miles by a fixed rate as decided by the government (e.g., For 2018, total number of miles x 54.5 cents per mile).
In this figure, the toll and parking charges along with a percentage of charges, like repair work are added.
It should be noted that the compensation for these maintenance charges is a percentage paid in whole or as a percentage of the amount.
The rate for the same may vary across different firms.
The Actual Mileage Method
The calculation for this method is a bit different from the previous method. However, the choice of the method is a concern and decision of the firm involved.
The procedure to calculate business mileage in this method is more elaborate.
The total number of business miles put-in is noted and divided by the total number of miles actually put in and the percentage for work related travel is deduced.
The next step is the same as in the previous method, which involves multiplying the percentage by the standard rate and adding the other expenses like toll and parking charges.
Once this is done with, the vehicle depreciation charge is calculated. It involves figuring out how much the vehicle has depreciated in value over a period of time and what percentage of that period was used for business related travels.
All these details are to be submitted to the concerned company and the firm pays the due compensation either as a percentage of the amount or in full.
The repair, maintenance, fuel charges, servicing of the vehicle, loan interests, vehicle registration charges, and such miscellaneous charges met during business travel, are to be taken into account while calculating mileage for business.
Thus, by being particular and learning the ways to calculate mileage, you can save some unnecessary expenditure and get due compensation for the services provided for an organization.