You might think that your business travel expenses are straightforward, especially if you're not involved in the day-to-day management of your company's expense policy. Unfortunately, reality tends to look quite different.
Travel expenses can add up quickly, and the value of sending your employees on business trips may start to come into question. If you're not careful, your travel budget can spiral out of control to the degree that you actually have to curb back travel altogether.
Instead, it might be time for a strategic effort to reduce travel expenses for your business by avoiding unnecessary spending. To understand how you can better control your budget before it's too late to do anything about it, consider these five variables that can bring your costs above the rates they should be.
5 Ways Your Travel Expenses Can Add Up Quickly
1) Spending on Nonexistent/Cancelled Trips
Let's begin with the obvious: any spending on a trip that never actually occurs is inherently wasteful. What if one of your managers books a flight and hotel, only to get sick the day prior? When that happens, and no contingency is in place, the expenses can be massive. Tickets tend to go unused when no strategic travel planning efforts are in place.
Through booking and enforcement of travel insurance policies, those risks can be mitigated. A more strategic process also allows for alternative solutions if a change of plans has to occur for a planned trip.
2) Lack of Price Comparisons for Individual Expenses
When booking business travel is not strategic, it can quickly become wasteful. Individual employees often want to book a quick flight or hotel according to their own preferences, or an HR professional may simply use the website or booking process they're most familiar with. This can result in a lack of comparison. Your organization might be leaving better prices on the table, simply because nobody was aware they existed.
By having a streamlined process for booking corporate travel, your company can compare prices more strategically. In addition, a more strategic process also helps to take advantage of discounts that arise as a result of travel reward programs.
3) Late Bookings for Flights and Hotels
When booking any type of travel, a simple truth remains — the later you book, the more expensive it gets. Sure, there are exceptions to that rule, especially as they relate to airlines and hotels looking to fill up to capacity. But there is no guarantee that will happen as your team books their travel. Booking late, as a result, tends to increase prices, sometimes significantly so. Imagine sending a department supervisor to an important presentation, but only booking the flight the week before. At that point, no more flexibility exists.
Having a strategic plan that outlines when trips will occur and when accommodations need to be booked can help mitigate costs. Planning results in more flexibility and greater control of your corporate travel cost savings.
4) Overspending on Incidental Costs
Believe it or not, meals are actually the single biggest average expense during a business trip – even more expensive than plane tickets or hotel costs. If you don't watch incidental expenses such as travel to and from airports, meals, and other examples closely, these costs can balloon.
Employees who don't know how much they can spend on meals might order steak on their corporate card next time they're out. Track and keep a close eye on all incidental costs to prevent this type of problem from happening.
5) Lack of Consistent Policy or Policy Enforcement
Finally, there might be a simple reason why your costs are out of control: there is no policy guiding them. To stay with the above example, how are employees to know what is acceptable to spend on Per Diem expenses during a typical business trip? Why should or shouldn't they upgrade to business class when given a chance?
Only a comprehensive travel policy can answer these and other related questions. Employees need to be informed about what business travel expense etiquette they need to follow when paying with their company cards. That travel policy also needs to be enforced consistently to ensure compliance. Without it, you have little chance of getting your travel expenses under control.
Do You Need to Cut Down on Business Travel?
If any or all of the above scenarios occur, you have a budget problem on your hands. In that case, it's easy to draw a seemingly natural conclusion: you have to cut back on business travel. But is that really recommended in this situation?
Not necessarily. When managed well, regular travel can benefit your organization in various tangible ways. One study, for instance, estimates that every dollar spent on travel generates more than $12 in incremental revenue. Cut back on it, and you lose up to 17 percent of your profits in the first year alone.
And that doesn't even consider the intangible benefits. Employees tend to love traveling for business, especially if they can combine it with some leisure. Cutting back on it might send a message that you are not considerate of their wants and needs, negatively impacting your corporate culture.
Taking Back Control of Your Travel Expenses
Cutting back on travel expenses, in other words, should not prioritize cutting back on the concept altogether. Instead, consider a simpler step: take back control of your spiraling expenses.
That might be easier said than done. However, it is absolutely possible. Once you recognize that your costs are steepening, your first step should be a close examination of your existing travel policy and the consistency of its enforcement. This might be an opportunity to make some simple improvements that get your spending back on track.
Of course, that step might not be enough. You may also need to look into centralizing your booking process, allowing you to take advantage of a more strategic process. With the help of a travel management company, that centralization is made simple. It allows for the above pain points to vanish as you would be working together on getting your spending under control. This type of centralization will enable you to make the most of your business travel, maximizing its benefits while eliminating its downfalls.
By recognizing what issues your company is facing that are causing an increased amount of travel spending, you can take progressive steps to reduce travel expenses to ensure the future of your business travels is not in jeopardy.
