Travel expenses are the second-highest business expense in most firms, and it’s often considered as one of the hardest to control. The industry is expected to bounce back to the pre-pandemic level soon and businesses are considering ways to ensure compliance to travel policies and budgets. Most organizations are dependent on international client meetings, trade shows, and networking events especially for bringing in new business. The ROI is almost always great, and their customers and partners also appreciate the face-to-face interaction. But while the company’s financial metrics are soaring, so are your business travel and related expenses.
Most finance experts agree that it’s more about cost-saving than cost-cutting. Organizations that have been successful in cost-saving begin with a well-planned travel policy and expense management strategy, followed by a strict implementation. It’s important to remember that these definitions and strategies vary depending on the business dynamics and requirements of each company. This article is simply an outline of some of the best practices to control corporate travel expenses like air and ground transportation, accommodation, and meal expenses while maintaining employee satisfaction.
Travel and related expenses are the necessary expenses incurred by employees when traveling away from home for business purposes. Most companies consider traveling away from home to be when the employee traveling for his duties require him to be away from the general area of his home town or city for a period substantially longer than an ordinary day’s work, and he needs to sleep or rest to meet the demands of the day. Once incurred it is hard to deduct expenses that were lavish or extravagant or those that were for personal needs. It is hence recommended that those responsible for travel procurement create a practical plan for capturing and accounting for them.
Understanding Travel and Expense
Let’s start with defining what is considered travel for work and what are the accepted related expenses. For best practices, travel and related expenses include only those incurred while away from the normal place of residence. If however, regular work involves more than one place, then the general area where the main place of business or work is located is often considered as the home location. In determining this, also take into account the length of time that is normally required at each location for business purposes, how much business activity takes place in each area, and the relative significance of the financial return from each area. However, the most important consideration must be the length of time the employee spends at each location.
While considering the length of stay, it should be noted that these are only for a duration of one year or less. Some even restrict this to 6 months. Travel expenses include payments for flight, train, bus, or car between the employee’s home and the business destination, as well as his accommodation at the place. Related expenses include non-entertainment-related meals, transfers between the airports and place of stay or work, laundry charges, payments for business phone calls and internet data uses, tips for these services, and sometimes even corporate gifts and entertainment expenses associated with such trips.
Travel Restart and Beyond
Keep a record of health and immunization requirements, especially for the most frequently traveled destinations. Understand the complexities of bubble arrangements between various governments and keep track of the government requirements that have been continuously changing since the pandemic began.
- Plan for travel considering the business requirements, government regulations, and employee readiness.
- Help employees prepare for the travel with necessary immunizations, test reports, etc. Have a centralized system to store and track required information.
- Get travel insurances that cover current health risks including the Covid-19 pandemic.
- Validate what travel is essential and without major risks. Use a mandatory pre-trip approval process to confirm if the employees really need to travel.
- Educate employees regarding the Covid-19 related travel regulations and etiquette they will need to follow during the trip. This helps avoid unpleasant events during the travel and stay.
The lion’s share of every corporate’s travel spend goes to the airlines. Flight tickets can be very tricky, which is why your team should be prudent while booking them. Avoiding or reducing first and business class is one of the most widely adopted practices, but here are more ways than that to reduce air travel expenses:
- Booking in advance is a great strategy considering the 3-5% fare increase year on year. But remember to balance advance bookings with flexible fare types. Non-refundable tickets are not a good option while booking far in advance.
- Don’t stick with one supplier – get and compare costs from various agents.
- Get corporate deals directly from the airlines based on your most frequently traveled sectors. Gather your spending trends and make actionable reports that you can then use to negotiate with the airlines.
- Pack light – many airlines now have limited baggage allowances. Check the details before you book.
- Consider low-cost / low-frills airlines or air service providers. Your agents may even be able to help you get great savings by switching side-trips to lesser-known regional players in the market.
Hotels / Accommodations
Booking hotels can be even more challenging than flights due to the complexities of multiple distributors with varying capability and inventory. While the well-known hotel chains can be easy to find and book they are a whole lot of independent hotels and regional collections that offer better value for their services.
- While booking hotels also consider the location of the business, like the client’s office that the team is visiting or the location of the conference or convention. What you save may need to be spent on cabs apart from the time lost in transit.
- While organizing an event or meeting at a hotel, try to accommodate the employees in the same hotel to save time and money in transportation.
- Consider alternative accommodation types at the destinations. Some destinations may have less formal accommodation options, but at great rates and with better amenities.
- For longer periods of stay serviced apartments are a great alternative. You can also check if the accommodation provider offers weekly or monthly rates.
- Have clear instruction on Dos and Don’ts at the accommodation. For example, rules regarding mini-bar, room services, hotel restaurants, etc. This helps employees what services are reimbursable and to what limit.
Meals During the Trip
The cost of food varies considerably depending on the destination and season of travel. It’s a great idea to work out the meal prices in advance and set a destination-wise budget instead of having a fixed per day allowance that most companies follow.
- Set budgets for meals based on real prices at the destination. It could take some research, but coupled with a proper reimbursement policy, it can help save quite a bit.
- Consider room-only rates with room plus breakfast rates while booking hotels. You may also check if complimentary breakfasts are offered.
Travel spend doesn’t stop there. Even after the flight and hotels, there are ground transportation and fuel expenses to take care of. Continuously educating employees on best practices to follow will help.
- Use an airport transfer from work or residence. This helps travelers be ready and reach airports on time. Saving you avoid losing time and money for no-shows and rescheduling.
- Use airport parking only as a last resort. Arrange transfers or hire a cab. That usually works out cheaper, not to mention the risk and frustration in getting a proper parking spot.
- Consider airlines or hotels offering free or bundled chauffeur services or airport pickups/drop-offs. These are often overlooked while booking travel.
- Depending on the destination you can allow people to use rideshares like Uber or Lyft, instead of renting cars. This works well in cities and towns that have great coverage.
Meetings and Event
Meetings, conferences, and events can take up a major chunk of the spending. Though it could be a mix of other services mentioned above, having a group involved gives you more power for negotiating with the suppliers. If done right you can save anywhere between 10-40% compared to procuring them individually.
- Ask for group airfares and hotel rates. Get involved in the negotiation with suppliers alongside your agents if required.
- For meetings, if you have more employees traveling than the people from the client’s side, you could consider inviting them over to your location for the meeting.
- Plan the travel well in advance so you can benefit from early booking fares and rates.
- Arrange ground transfers in groups with a larger vehicle instead of booking multiple cars.
Implementing these tips and hacks in your organization is a great way to start to control your corporate travel expenses. Even if you already have an effective travel policy in place, you still may feel like you can’t cut down certain travel expenses. That’s where these best practices will help. It may seem like they only make a marginal difference, but on the whole, you will end up saving a lot.
We hope these tips will help corporate travel managers and decision-makers to prepare a policy that produces optimal savings as travel restarts. The list may be a bit overwhelming at the first read, but by streamlining and organizing your travel program and the procurement process with a flexible and secure system like BizTripz, you can ensure the best savings almost every time. Do you have any tips to share? Please add them in the comments below.