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Understanding business travel expenditure


 

 

By Kevin Harrison, Managing Director, Good Travel Management

 

From money spent to savings missed, preferred suppliers and buying behaviour, there’s a lot to keep tabs on, when it comes to the success of your business travel programme.

In this article, I’ll discuss how to better understand your current travel spending to help make data-driven decisions, which drive your business travel policy.

 

Terms and conditions

Business travel expenditure means controlling and monitoring all costs associated with company travel. Eligible expenses for business tax reductions usually include transport or fuel costs, hotel accommodation, food, and drink. Plus, other extras associated with travel like bridge and road tolls and parking fees. Most organisations usually only pay for the necessary expenses required for you to complete your role effectively.

Unlike other expenses, business travel expenses occur across an entire company at all levels. So, one of the biggest challenges is trying to monitor and collect such a vast array of data, plus getting employees to record their expenses accurately.

Precise records are important because they can decrease a business’s taxable profits, which, in turn, could lower the tax bill for the year.

Best practices for managing business travel expenses.

Two-thirds of employees admit they haven’t read their company’s travel and expense policy. It’s often for several reasons like not knowing where the correct information is stored, knowing there is a policy but not checking if it’s been updated or assuming certain things are covered, when in fact, they are not.

Even if travellers find a great flight or hotel deal, they might still get in trouble for being out of policy if their companies require them to book through an official booking tool or with a designated airline or hotel.

To combat such issues, you must clearly communicate expense policies in several ways. Firstly, and most importantly by ensuring it’s widely accessible in company-wide HR documentation and saved in an obvious place on the company server or intranet.

 

Organising team or department expense meetings or sending company-wide emails as reminders during peak travel months are good ways to ensure everyone stays updated.

 

You’ll also need to decide on the best expense method for your business and make sure you are transparent and clear with what this entails. The two most popular methods are usually either reimbursing employees once they’ve paid or your company can pay directly using a company card instead.

 

A clear expense process ensures that employees are logging expenses promptly, providing you with more accurate visibility. Expense forms, spreadsheets, and dedicated expense management software are all helpful options for employee expense claims. 

Travel expense management software often provides all-in-one multiple dashboards, making it easy to track spending for various departments, locations, projects, or specific employees.

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How to calculate business travel expenses

Analysing previous spending and setting up projections will help you get a good idea of what your average spend will look like, when it comes to calculating potential travel expenses.

Benchmarking allows you to look at your costs against industry, market, or account averages, so you’ll always know if you’re spending more or less than the average.

Analyse your travel expenses from previous years too, to set up projections for a longer period, for example, the next five years. You’ll need to include additional factors that could increase or decrease spend like new employees joining the business, seasonality, or recurring expenses.

 

Categorising business travel expenses is also important, and you’ll need to set up foundational categories like air travel, ground travel, meals, accommodation, and miscellaneous. Retaining these groups will make it easier to predict your budget and find opportunities for cost control.

Again, this is where software or using a Travel Management Company can be useful, as many can run reports on amenities like hotels, to help you understand average hotel rates or lodging costs associated with certain locations for projects.

How to reduce business travel costs

There are several factors to consider which could help you reduce booking costs. Peak seasons, particularly during the summer months and winter holidays, can increase your travel costs by 50 percent. So, planning, well enough in advance is essential to managing transport and accommodation expenses.

Flights, accommodation, and transportation also cost more during high-travel months or school holiday weeks. If you can, schedule any events in late winter, early spring, or late Autumn to prevent high costs.

Consider whether an overnight stay is really necessary. Some people would prefer a long day of travel than staying somewhere overnight, so it’s worth checking this to minimise hotel costs.

Clarify in your company travel and expense policy what’s considered an unnecessary fee. Make it clear those little luxuries like room service, dry cleaning and the use of mini bars are not covered, to save yourself additional costs.

 

Negotiating rates and making use of reward schemes where possible is also key. You can negotiate corporate rates with both chains and more boutique options, especially if your company frequently stays at these places and again a Travel Management Company will take the lead on this if you use one.

If you use a travel booking platform with an integrated expense policy, then be sure to work with one that has got the widest content and can cover more complex travel that may not be possible to book online.

Be warned, using generic, digital comparison sites is not always the best route. While the offerings online may appear cheaper, this does not mean better. There are often hidden extras, and your company may end up using unsafe or unrecommended travel vendors.

We recommend a blend of both on and offline bookings to ensure employees travel safely and cost-effectively and integrate all the costs into your expenses systems.

Most airlines, hotels, and car rental companies also offer reward schemes. So, make sure your company is collecting points and employees are using them when enough are collected.

Finally, remember your business might also be entitled to recover VAT on business-related accommodation, meals, conferences etc through their VAT return. Organisations may be able to recuperate foreign VAT acquired on international travel too.

 

 

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