Time is money. The cliché holds a frustrating amount of truth for any executive who's ever tried to save his or her company some of latter, only to find that it requires a significant investment of the former. CEOs, CFOs, and controllers - really anyone who might find themselves tasked with cost cutting - know that reducing a given expense can require more time and energy than is ultimately warranted by the bottom line impact.
This is especially true for employee travel spending. Travel is not only one of the largest expense categories, it's also one of the most difficult to control. Employees don't always spend carefully on their flights, hotels, rental cars, and meals, but executives can't afford to play nanny by carefully monitoring every trip.
Managing business travel shouldn't get in the way of managing your actual business. Here are a few simple steps you can take to make an immediate impact on spending.
Increase Advance Booking Rate
Business travelers are notorious for waiting to book their trips. Sometimes this is unavoidable. "Fire drills," "client emergencies," and "unforeseen circumstances" do occur, just not nearly as often as last minute booking rates would suggest.
Though business travel can be unpredictable, there are measures a company can take to get employees to book in advance. Requiring trip pre-approval dramatically reduces instances of last-minute booking, but also creates additional work for managers. A less drastic approach would be to ask employees to get in the habit of planning their travel for the month ahead. It's common for companies to send monthly reminder emails about expense reimbursement; extending this practice to travel booking can yield major costs savings.
When it comes to booking a business trip, good things don't come to those who wait. One analysis of employee expense data from Concur found that tickets booked fewer than seven days before departure cost an average of 44% more than if it they had been booked 15 or more days in advance.
Create Simple Spending Guidelines
It's tempting to draw a line in the sand, but hard caps often backfire. No single number can accurately reflect all the factors that determine how much a given business trip should cost. Prices vary based on the specific itinerary, seasonal demand, and how far in advance the trip is booked. Static spending allowances invariably miss the mark: they're either too tight for employees to find suitable flights and hotels, or too loose to reduce costs.
It's more effective to give employees clear examples of travel spending that is policy compliant. For instance, rather than drawing a red line on nightly hotel costs, specify the type of hotels that employees should consider on their trips (e.g. four star, three star, two star). Better yet, ground these guidelines in representative examples (e.g. the Hilton, the Courtyard by Marriott, the Holiday Inn). Since flight and hotel prices are unpredictable, it's impossible to mandate exactly how much employees should spend. But it is possible to give employees an idea of what spending will be considered reasonable.
Promote Affordable Travel Strategies
The company travel policy should be more than a set of rules and warnings. It's also an opportunity to share cost-saving tips with employees. Most people know some basic travel saving strategies from planning vacations, but they might not think to extend these best practices to their business travel.
A few simple booking habits can really make a big difference in the cost of a trip. To save on hotels, try booking over the phone, paying in advance, or staying in an Airbnb instead. To save on flights, book on the right day of the week, use secondary airports, and consider itineraries with a layover.
Give Employees a Real Reason to Save
No matter how many policy adjustments you make, discounted vendor rates you secure, or booking tips you share, the amount your company spends on business travel depends entirely on how much employees choose to spend on their individual business trips.
Unfortunately, at least from the perspective of CFOs and corporate controllers, employees are capable of making rational choices. As long as they're being reimbursed for their travel costs, price won't be a determining factor when they book.
Increasingly however, companies are exploring ways to not just limit travel overspending, but actually encourage savings. Motivating employees to spend less by letting them share in the savings they generate is an idea that first took root at Google. Now it's spreading to the wider world corporate of travel.