What to do if you suspect your company travel spend is seeping into miscellaneous expenses, pushing your travel policy into the dark
Procurement managers are no strangers to demands to slash costs. But where do you start? Changing travel policy so that there’s no more flying business class? Banning taxis? Battling with your suppliers to cut their prices?
The key to solving the puzzle is data: comprehensive and consistent data. The only way you are likely to be able to estimate the size of a saving is to know the numbers involved and the cost (anything from lost sales to lost sleep) of the substitution.
Travel managers have traditionally relied upon their travel management companies (TMCs) for the detail – their management information (MI). TMCs have the numbers – price and quantity – for what’s been booked. But that is no longer enough. As anyone business traveller knows, what’s been booked is frequently subject to change. So what is actually spent can look like a very different basket of travel goods and services.
Measuring up or mopping up?
The old edict is that if you can’t measure it, you can’t manage it. The challenge is to identify accurately what you’re attempting to measure. The question then is “Are you capturing it or is it seeping into a ‘sundries’ or ‘miscellaneous’ category where capturing the information is all but lost?”.
Recent research from PayTech Commercial AS says that on average 65% of companies’ travel budgets go on air and hotel. No surprises there. What is surprising is the fact that the same study reports that this 65% of the value represents only 15% of the volume. Only 15% of company transactions that are coded to the travel and expense budget represent air and hotel transactions.
That suggests either or both of two things:
- There is a high volume of T&E transactions that are neither air or hotel bookings (see box); or
- There is spend on air and hotel that isn’t being captured; this could be anything from change or cancellation fees to the well-known ancillaries. According to a recent Ideaworks Survey, air ancillaries in 2015 were worth $40.5 billion, nearly 8.7% of total sales, for the 67 airlines covered by the survey.
The choice of suppliers, booking channels and products is expanding. An air fare used to include a pre-assigned window or aisle seat, checked baggage and a meal and drink on board. Some fares still do. A lot don’t, so now the passenger can choose – or not – to have a drink on board or a bag in the hold. When an orange juice is included, it’s in the fare that’s been booked and captured.
When it’s not and it’s paid for by credit card, it may still be a reimbursable expense (it is subsistence after all) so it will be a cost but it may be coded to ‘miscellaneous’ rather than air travel.
This could give a false picture. Travel expenses may be seen to be pruned down but the many and varied payment points make capturing travel data more complex. And this is happening at a time when many travellers want to self-service their travel and expenses.
There’s power in simplicity
In this age of pocket-size computing, a user-friendly tool for travellers to book their own travel can look deceptively simple while fulfilling complex corporate accounting needs. An end-to-end process (booking plus reconciliation and payment) can be done with a single app – rather than three – which sits on a traveller’s smartphone. Include automated Expense management in this single process and you put an end to the dreaded, time-consuming mountain of monthly expense receipts filling your desk.
Travellers also need the best and widest choice of appropriate content possible. For managers who aim to control costs, that means ensuring access to travel content that is in line with company policy and especially any negotiated corporate rates. This could include direct connects to suppliers that may not be on the corporate TMC’s reservation system.
Implementing any new solution means convincing internal stakeholders and senior management that potential benefits will far outweigh any cost or initial inconvenience. This is where a flexible tool that can adapt to the company’s IT landscape, whatever ERP system it is using, with minimal fuss on the technical integration can come into its own. A flexible solution which can be easily integrated into the company’s IT system will reduce change costs dramatically.
Switched on to savings
An end-to-end booking and expense management system can benefit the whole company because
- Data which might otherwise have been coded to miscellaneous or general expenses will be picked up as travel and therefore be of value to travel procurement;
- Automated systems reduce the risk of fraud; and
- Integrated IT systems increase everyone in a company’s ability to make use of data
Archaic systems can mean that travel spend leaks into expenses and out of the correct data category. Companies can avoid that by implementing an easy-to-integrate and easy-to-use travel and expense management system.
What reimbursable T&E costs could you be missing?
Just a few of the ‘small’ extras on which business travellers spend money: