Thursday, July 26, 2012

Steps to Control Business Travel Expenses

In a globalized and increasingly competitive economy, business travel is imperative to success. For many companies, business travel is considered an operational necessity. In fact, even during a recessionary economic climate, companies are still spending on travel.

The Association of Corporate Travel Executives (ACTE)’s Index shows that travel activity went up 17%, from 102 at the end of 2011 to 128 in the first quarter of 2012, with most of the growth coming from Asia-Pacific, Canada and the United States.  

Breaking the Index results into travel category, First Quarter 2012 hotel activity growth was up 34% (from 73.6 to 111 on the ACTE Index); air travel growth up 13% (113 to 128) and car rental activity grew 6% (101 to 107). While spending on travel has increased, businesses have become conscious about their spending, shows another survey.

According to the fifth annual American Express/CFO Research Global Business and Spending Monitor, a majority of senior finance executives (58%) say they'll spend the same or more on business travel over the next 12 months. That's down from last year, when 64% said they'd keep travel spending the same or boost it.

Control & Monitor
In an uncertain economic climate, controlling business travel expenses is inevitable. While business travel cannot be completely abolished, spending should be controlled to avoid cash problems in the future. The rising prices of fuel and hotel will ultimately affect the travel budget.
There are many ways companies can tighten controls. According to JP Morgan, recent trends include as much as 25% reduction in spending limits, and better training for personnel who approve expense reports. Some companies have also mined credit card data to identify policy violations or corporate credit card misuse.

Communication is very important in controlling travel expenses. Businesses should regularly communicate travel policy information to employees, especially if there are changes. There should also be strict enforcement of the policy.

Policies governing reimbursable business travel expenses should be tightened as padding corporate travel expense are very common. It is widely known that mealtime is often the right time to conduct business and close a deal.  It is also where the most abuse occurs. Thus, it is important to audit all expense reports that business travelers submit -- to check for instances of fraud, out-of-policy expenses and other potential.

A corporate card would provide the most accurate record of restaurant and other T&E charges incurred by business travelers. It provides the controls and tools necessary to simplify expense management and drive savings to the bottom-line.

While controlling card misuse and reducing cash advances are common practices today, businesses should also consider automating expense reporting and integrating card spend data into their accounting and information systems.

In Hong Kong, employees spend an inordinate amount of time – equal to about HK$1.2 billion (US$154 million) annually – wrestling with travel and entertainment (T&E) expense claims.

Shop & Negotiate
To get better airline deals, shop around to get the best deals, book ahead of time, or haggle with your travel agency. Many airlines allow online bookings, and most of the time, their online rates are much cheaper.  The airline industry, however, has a history of adding ancillary fees to increase revenue. Check with your airline before booking to make sure it does not charge a fee for Web booking.

Many alternatives to business travel have been promoted by technology vendors. These include video technologies such as telepresence. However, for most businesses, the latest technologies are a poor substitute for face-to-face business travel for current or future customers.

“Strategically managed business travel helps to sustain the growth and profitability of individual companies as well as the expansion of the global economy,” says HervĂ© Sedky, Senior Vice President and General Manager, American Express Global Business Travel.

When it comes to travel, nothing creates value like meeting with clients. So focus your company travels on meeting with customers that deliver clear returns.

By Melba Bernad |


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