Global business travel spending is projected to reach a record $1.6 trillion by 2020. Forecasting and controlling this major expense can be difficult for employers, and many organizations don't realize that they spend too much on employee travel.
With the average business trip costing just over $1,000 and travel spend accounting for roughly 10% of a typical organization's budget, even minute changes in spending behavior can translate to hundreds of thousands of dollars on the organizational level.
Fixing the source of overages can be relatively painless. First, you need to identify whether or not your T&E spend is too high and, if it is, where the issue is coming from. A good place to start is with detailed reports from your travel management company (TMC) for purchases made through your official online booking tool (OBT). For travel purchased outside official booking channels, turn to your expense management system.
When reviewing company travel expenses, here are some indications that you spend too much on T&E and some possible solutions that mitigate overspending:
Inaccurate or incomplete employee expense reports - If expense reports lack itemization, it can be impossible to identify factors that drive travel spend. If you cannot identify underlying factors (such as expensive meals or overspending on hotels), there's no way to ensure policy compliance. One common reason for incomplete expense reports is a loosely-defined reimbursement procedure. Make sure to provide managers and their employees with clear instructions about what information is required on expense reports for reimbursements to be approved.
Human error will at times compromise the reliability of employees' expense reimbursement requests. The best way to mitigate this issue is to switch from manual to automated expense reports. This switch is one of the most impactful T&E upgrades a company can make and will create consistent and accurate expense reporting.
TMC reporting fails to capture a significant percentage of travel spend - When employees book trips outside of official channels, built-in controls for policy compliance are lost. If employees do not use the official OBT designated for trip purchasing, trips will not show up in your TMC reporting and will be absent from your company's total travel spend.
Figure out why adoption of the OBT is so low. Employee feedback is a strong tool in finding out what may be causing issues with your travel booking process. If a system is difficult to use, or offers unpopular options for hotel, rental car, and flight, employees may circumnavigate the OBT. Resolving these issues and improving OBT adoption will increase policy compliance and ultimately capture more spend data.
Average cost of business travel exceeds projected expectation - If your per-trip expenses unexpectedly increase, it's important to note that wasteful spending might not be the cause. Higher overall travel spending may simply be due to increased travel volume or travel to more expensive destinations.
To determine why your travel expenses are higher than projected, focus on underlying booking behavior. For example, airline tickets booked 8-14 days in advance cost an average of 22% more than tickets booked 15 or more days in advance. Efforts to solve this issue include requiring trip pre-approval from managers, implementing recurring reminder emails for employees to book trips ahead of time, directing employees to use negotiated rates with pre-approved airlines, and incorporating incentive-based programs.
At many companies, there is a temptation to develop an out of sight, out of mind attitude regarding travel programs. Identifying or addressing travel management issues is daunting. The potential cost of disrupting employees' established travel habits may appear greater than the seemingly marginal benefits of altering familiar procedures. But performing regular checkups of your travel program is not difficult, and the payoff of money saved at the organizational level is quickly visible.
Trouble rarely exists in isolation. Red flags for a finance department, like incomplete expense reports or out-of-policy spending, can indicate that your travel program is not working for your employees either. If you're worried about rocking the boat, don't be. Giving a voice to your employees' discomfort will let you address problems that you may not know existed. Addressing these problems with employee travel spend simplifies the employee travel experience, eliminates wasteful spending, and leads to more money saved for your company.