Business trips at every stage give you the opportunity to save – from booking a flight, renting a car or accommodation, to time-consuming filling in of settlements and reports. However, this is only part of the areas where companies can reduce costs. So where to look for savings and what changes to implement?
Goal – reduction of T&E costs
The Travel & Expense area, despite its dynamic development, is still not well recognized by companies. We mean both the intra-organization context and the opportunities offered by the market. Moreover, the reality proves that companies often do not have a clear strategy for achieving the expected savings effect in this area, but only vaguely expressed overall goals. The lack of transparency of the complete picture of business travel makes it difficult for managers to establish and measure the management of the T&E strategy.
Market leaders, thanks to a holistic view of the company and optimization, are constantly looking for areas where costs can be reduced. We will take a closer look at the changes introduced by the best and suggest solutions that will help you save or avoid additional high costs.
Why don’t we achieve the desired savings?
The main reason why companies fail to save in the T&E process is that they do not know enough about the actual picture of their own business trips and expenses. Getting the picture is a difficult task for enterprises, which means that many changes are postponed.
Additionally, in most companies the relations between Travel Managers and CFOs are not close enough. The result is that the former are not empowered to implement potential improvements. Managers are also unable to estimate the savings resulting from policy changes, because usually this area does not fall within their personal goals – they spend most of their time on contacts with suppliers, thus neglecting the task of improving the quality of the process. This problem is especially important because companies usually have one Travel Manager in their structure. Additionally, investing so much time in relationships with suppliers does not usually bring the expected savings. Most of the work is devoted to procurement and contract monitoring and the control of adherence to the established rates. Further savings are difficult to obtain also because market conditions adversely affect the improvement of preferential individual conditions, e.g. in contracts with airlines.
Another factor hindering cost reduction is the failure to use the potential of KPIs – many companies do not meet important indicators, including savings. Expenses are not authorized before departure, therefore supervisors are not able to guarantee that employees choose the best alternatives. A classic problem is the manual entry of data and filling in expense reports and settlements of business trips, which easily leads to errors that are costly for the company. The last problem that we would like to mention is the unconscious underestimation of expenses, i.e. hidden costs, incurred as a result of unintentional decisions, e.g. additional taxes, contractual fees, or choosing the wrong means of transport or location.
Areas where changes are worth making
T&E Policy. Business travel and expense policy is a key area to achieve savings. It is the enforcement of strict compliance with the rules of the company that allows to save about 23% of costs related to T&E. It is very important to simultaneously establish and meticulously enforce the rules and implement the entire policy agenda, which will also include communication, training, information sessions and feedback for employees, as well as further monitoring of KPIs. The effectively communicated T&E policy forces employees to use the lowest tariffs and alternatives possible within the adopted rules. In this way, companies do not allow for costly exceptions, enabling Travel Managers to plan accordingly and propose new strategies. Ongoing refreshment of employees’ knowledge about the policy contributes directly to the reduction of direct costs, while ensuring the fulfillment of business needs.
Reservations. The implementation of the mandatory use of the company tool allows to achieve a much higher online booking adaptation rate – even 80%, which translates into greater employee satisfaction, as well as an increase in savings of 5-8%. This is a very significant change, as the Pareto principle also applies in this area. The principle shows that 22% of employees make 80% of all bookings. An interesting solution used when booking airline tickets is establishing benefits only for small, intentionally selected groups of employees, under precisely defined conditions, e.g. a team negotiating a contract if the flight lasts over 6 hours.
Suppliers and negotiations. In the T&E area, each reduction of 50 PLN on the room price or 2% discount on the cost of airline tickets translates into real savings. However, to negotiate the best prices, you need to have a comprehensive view of your travel and expenses, and control of every dollar you spend with your supplier. Unfortunately, in the case of bookings outside the approved system, expenses will probably not be detected, which is why it is so important to follow the T&E policy and to harmonize and analyze all booking sources. Accurate information collected about expenses and agreed rates allow you to take a better position in negotiations with suppliers. Travel managers are able to demand proportionally more only thanks to the data on honoring contracts and the discounts achieved. However, an important aspect of responsibilities connected with supplier management is the time employees spend on it. Unfortunately, very often tasks in this area are very time-consuming, which does not translate into the expected savings. Therefore, you should also introduce automation in this area and remember that the discounts obtained should be higher than the time spent on signing the contract.
Roaming costs. Businesses often miss roaming charges, which can quickly accrue while traveling, thus providing unpleasant surprises to their superiors. This problem increases especially in trips outside Europe. Mismanagement of a telecommunications contract can lead to up to 30% increase in bills *. Although roaming in the EU does not charge such high fees, it is still worth carefully analyzing the provisions of contracts with operators, especially in the field of data transfer. To eliminate this problem, it is important to prevent such situations, i.e. identify trips that may incur roaming or additional charges, before they even start. This will allow for adjusting the tariff plans to the specificity of the trip.
Taxes. One example of hidden expenses that are often overlooked. This is a costly mistake as employee’s trips have many tax implications, ranging from VAT charged to international purchases. Some of these taxes, however, can be controlled and recovered, but only if the company has knowledge in this area and appropriate tools.
Incentive programs. An interesting solution is employee incentive programs, consisting in sharing the generated savings. Thanks to the introduction of such programs, both companies and employees gain benefits and, what is more, a healthy organizational culture is created. Through active participation in decision-making, employees quickly identify with the company, which automatically opens the door to promoting entreprenurship among them, which every company dreams of.
Presenting the above areas, we return to the starting point – the need to analyze the subsequent stages of the process. Therefore, when the opportunity arises, that is when planning your next business trip, we encourage you to take a deeper look at what and how you do. This will be the first step to assess the savings potential and implement the optimization described in this article. Good luck!
