The holy trinity of your savings
The subject of potential savings in the area of T&E (business travel and expenses) is a well discussed topic for everyone involved in business travel. This sector regularly sees expert studies published on the subject, giving guidance and debating expense reports and less so travel expenses. Over the last few years, the administrative costs of managing business travel expenses has been estimated at around 10% of the budget for business expenses, with savings ranging from 50 to 70% of these costs.
The time spent on administrative and accounting procedures for processing an expense report is still around 20 to 30 minutes in the absence of a solution that automates these procedures.
Many studies then delve into the details of the processing time for each task, which of course will vary greatly, depending on how in-depth the controls and checks required by the company in question are. This does however give us some estimations so that the ROIs can be calculated. Perfect, but what else? Numbers are important, but not enough on their own. Support for any optimisation of your T&E is dependent on your company’s travel policy, which will enable you to achieve your goals for savings both on your administrative processes and on your direct purchases.
This holy trinity is now well known, as 80% of companies now have a travel policy and are therefore familiar with cost controls.
However, the definition of a travel policy is fairly broad: “an internal rule that governs the arrangement of employees’ business trips”. It is worth digging a little deeper than that, though.
Your travel policy. Is it adequate? Properly applied? Future-proof?
It’s been a long time since travel policy consisted of nothing more than a static internal document informing employees taking business trips about the company’s approved travel providers, the authorised class of travel and hotel category, or the maximum value of their rental car.
1. Is my policy adequate?
The travel policy is now a comprehensive tool that is made available to the company and covers instructions relating to the business traveller’s comfort, in respect of your negotiated contracts, good practices when making reservations, regulations about reimbursements and the use of booking tools.
2. Is my policy properly applied?
Your travel policy has been written and distributed, but is it actually applied? This is a simple question of arithmetic. As an example, after tough negotiations with my suppliers, I have managed to obtain a discount of 20%, but only 50% of my travellers comply with the travel policy, therefore my discount drops to 10%. The extent to which people comply with the authorised classes or categories also has a significant impact.
Similarly, for reimbursement of expense reports, a large proportion of overspend is due to lack of knowledge of the travel policy, not only by business travellers but also by their managers. This saving is never taken into account in experts’ studies as it is difficult to account for and quantify. Take the example of a company with 2,000 consultants who add their morning espresso to their expense report, if this expense is not refundable at the company in question, and if each coffee costs on average $1.50, the cost to the company by the end of the year will be $660,000. There are many examples of this type.
3. Is my policy future-proof?
Your policy also needs to be a living policy, in other words, one that allows you to adapt over the course of the year depending on your negotiated contracts—why keep using the same carrier if your market share has been reached?
It is also essential to regularly review your travel policy in order to take into account your employees’ changing travel destinations and the feedback they give you. Is the choice of a particular hotel appropriate? Have you optimised the number of hotels approved for a particular destination? Have you negotiated locally rather than seeking an agreement with a chain that might not always be optimal or even feasible?
Taking these three issues into consideration, you will need help unless you can envisage manually processing all the data needed to apply your travel policy.
Implementing a Travel & Expense solution therefore appears to be a critical gateway—one that allows you to:
- Impose your rules automatically
- Monitor and control the extent to which your policy is applied by giving you the necessary visibility
- Steer your purchasing policy over the course of the year by interacting with your users quickly
If you have an exhaustive travel policy in place and a T&E solution, you are inline with the sector’s best practice… You just need to keep track of when your travel policy was last updated and ensure it was reflected in your T&E solution.
If you don’t have a travel policy, or if you have a policy without a T&E tool, you need to calculate the cost savings you are missing not implementing the sector’s best practice.