Do You Know Your Employee Travel Costs?
The first step to controlling your company’s travel costs is knowing what they currently are.
This post provides a brief overview of how a company can begin to conduct a high-level assessment of its employees’ spending using the travel management solutions it has in place. If you’re a finance, operations, or procurement executive whose primary job responsibilities are not limited to travel, this explainer will help you gain a basic fluency with the main systems used to report on business travel.
Where to Find T&E Expense Data
Not every organization has a travel management company (TMC). It’s also possible (though far from advisable) for an organization to lack a centralized, automated expense reporting system. But for the majority of mid-market and enterprise organizations, a TMC, corporate booking tool, and automated expense system are necessary for managing employee travel.
In this scenario, there are two main places to look for relevant travel-related expenses.
A travel management company is an outside agent that handles many aspects of an organization’s business travel requirements, such as trip booking, rate negotiation, and crucially, reporting.
If your company works with a TMC, ask it to provide historical data on employee’s travel purchases. A year’s worth of reporting is a good starting point, though the longer the timeframe analyzed, the better able you will be to account for seasonal effects on spending trends.
The strength of TMC reporting is its level of detail. Expenses are organized in a systematic way, so that flights, hotel, and rental cars spending can be analyzed by category, or on a per-trip basis.
This reporting can also identify whether a given purchase complied with company travel policy. If your focus is on cost-control, then this is especially important, because policy non-compliance is a leading indicator of high T&E expenses. TMC reporting helps flag “warning signs” such as above policy purchases (e.g. business class instead of coach, four star hotels instead of three star), last minute bookings, and use of unapproved vendors (e.g. Hilton, when your company has a negotiated discount rate with Marriott). Additionally, TMC reporting allows you to see travel costs by itinerary, which is useful for zeroing in on the most common and the most expensive destinations.
The reporting provided by your company’s TMC is deep, but not necessarily comprehensive. To fully audit all travel-related costs, you need to look to other data sources as well.
Since employees often book their trips outside of official channels, not all their spending will be captured by a TMC. Auditing employees’ expense reports will help complete the picture. Your company’s expense tracking system (e.g. Concur, Chrome River, Nexonia, or Expensify) can show how employees are spending on travel purchased outside of the official tool, such as on travel sites or directly with suppliers.
“Leaked” spending is significant. According to one study from the Global Business Travel Association, 40% of travelers who had used their company’s official booking tool occasionally had also booked trips directly with suppliers or on a travel site.
Within the expense tracking system, travel-related purchases can be identified by the vendor name, or by the employee-generated expense description (e.g “June Trip to San Francisco”). Companies often find it to be surprisingly difficult to make sense of individual expense reports because of inconsistent or incomplete expense descriptions. For instance, credit card statements might be deemed sufficient for purposes of reimbursement, but they lack the itemized breakdowns necessary for a meaningful analysis of travel spending.
In other words, expense reports are a useful complement to the reporting provided by a TMC, but on their own they can’t deliver granular insights that help target specific spend areas.
Studying your company’s existing travel expenses will reveal problem areas to target for cost reductions. If your TMC reporting significantly understates total travel expenses, it’s an indication that employees are not booking using the official channels. Research show that 40-50% of employee travel is booked outside of corporate travel systems. Out of channel bookings are more difficult to track and less likely to comply with the company travel policy. Address the problem by:
- Promoting use on your online booking tool and educating employees about the importance of policy compliance. A agood place to start is by updating the booking procedures section of your company travel policy. Don’t have a defined travel policy? Use Rocketrip’s free Travel Policy Template.
- Consider permitting use of open market booking. Employees book outside of the corporate tool when they find online alternatives to be more convenient, provide a better set of options, and have cheaper rates. Some amount of leakage will always exist, but that doesn’t mean that policy compliance and reporting standards have to suffer. With clear spending guidelines and comprehensive T&E data capture systems, cost-control and employee choice can go hand in hand.