Travel & Expense on the Rise and What that Means for Finance
This post originally ran on Inc.com, where Rocketrip’s CEO Dan Ruch has a regular column on travel, technology, and entrepreneurship.
Business trends have changed a lot since the days of Mad Men. However, what hasn’t changed is the fact that people take business trips–a lot of business trips. Travel and entertainment (T&E) is one of the largest slices of the corporate expense pie. In fact, it accounts for 10% of a typical organization’s budget.
Despite the fact that the price of airfare was recently at its lowest since 2009, travel costs remain on the rise. The United States was second only to China in travel spend for 2015, coming in at $289,837 billion. It’s predicted that global business travel spend will hit $1.6 trillion by 2020. In addition to the growing cost of travel add-ons, this is largely due to changes in business travel culture and the rise of trends like the “bleisure” traveler.
Leisure on the loose
Millennials have been getting a lot of attention lately for how they’re reshaping the travel industry. This naturally extends beyond their leisure time and into their business travel, as they find ways to inject leisure into business trips.
What does this mean for finance leaders? It means that an already difficult to control expense just got a little harder. If you had trouble controlling hotel and flight upgrade costs, try reeling in an employee whose favorite ski slope is an hour away from the conference you’re sending them to–and it just happens to have a great hotel next door. Chances are you’re going to see that hotel bill on an expense report.
According to a study by the Global Business Travel Association that was released earlier this month, in the past year over one-third (37%) of North American business travelers extended a work trip for leisure. Millennials (48%) did so at a much higher rate than Gen-X travelers (33%) and Baby Boomers (23%).
How to catch it
Now, more than ever, it’s important to have an eye on T&E. It’s essential to address the impact that it’s having on your organizational expenses, especially if it’s already an unmonitored area, or one that you’re having an issue controlling.
Policies have a lot to do with managing T&E, but it’s important not to forget about your company culture when you set out to gain control. Make employees a part of the equation–a stakeholder in the success of you hitting your expense goals for company travel. Address policies and procedures, but in a way that satisfies not only the needs of your business, but also the needs of the traveler.
Complicated booking processes and long wait times for reimbursements can create aggravation and reluctance in employees. The process should be user friendly and efficient. From a company perspective, visibility is important. Having a program in use such as Concur, iExpense, or SAP is the most effective way to track your T&E costs. From there you can aggregate spend data and monitor compliance against policies.
Taking control of T&E
Though each company will attack this issue with a strategy that best fits its business model, the successful organizations all have one thing in common–they’re turning to technology. A study by the Aberdeen Group that ranked the “Best-in-Class” technology trends for managing compliance determined that 40% of the most successful companies were more likely to approve reports and transactions from a mobile device.
For your employees, ease of use is key. Simplifying the process for a traveler encourages compliance and reduces burden on them. For example, the use of corporate credit cards and travel booking platforms offer both ease of use for employees and compliance management for the company.
Incentives are also a powerful way to control costs. If you can build value for employees you’re upping the ante on compliance. Incentivize employees for saving the company money on trip expenses. When they stand to gain meaningful rewards for saving on business travel, you would be surprised at the dramatic shift it creates in a company’s culture.
Once finance makes T&E a focus and you have control over your travel spend, it doesn’t matter what the next trend is–you’ll be able to adjust accordingly.