The Global Business Travel Association recently announced the results of its Business Traveler Sentiment Index Global Report. The report assesses the overall happiness with several aspects of travelers’ overall experience, from making travel arrangements through to getting through airport security and taking various forms of ground and air transport.
One of the aspects covered was business travelers’ views of their employers’ travel expense policies. Surprisingly, fewer than half of respondents (44%) had to follow a policy, down from 50% last year, while a further 21% of travelers stated that they don’t have any restrictions on their policies, also down from last year’s 21%. As spending restrictions have loosened, traveler satisfaction has gone up, with 60% of travelers happy with their employers’ travel policies (or lack thereof), compared to 54% in 2015 - not entirely surprising.
This may seem great for travelers – after all, no policy enforcement means you can stay where you like, fly on your preferred airline and so on. However, if you’re an employer, this could lead to huge inefficiencies in your travel spend, which no doubt the CFO will view with considerable unhappiness.
First, it means that your employees have no benchmark against which to measure their own spend. Will they want to be frugal to avoid been seen as wasteful of company money, or will they push their luck with five-star hotels? The likely answer is somewhere in between, with many travelers simply being confused about what they should be booking, and often resentful of others who they view as getting away with spending excessively. Of course, unchecked expenses could also ultimately lead to a corporate crackdown, if they're viewed as unnecessarily high.
Second, by allowing your travelers to choose whichever vendors they like, it means that you can’t funnel spend to one vendor. This reduces your ability to negotiate the best possible rates for your travelers, which can create 25-30% discounts on hotels as well as significant, if smaller savings on flights.
So why do so many companies not enforce travel policies? There are a number of possible theories:
First is that they simply haven’t got around to writing a travel expense policy. Although this may seems like a daunting prospect (if you search online, you can find policies that rival War and Peace for length), using a free expense policy template enables you to craft a straightforward, workable, policy without having to create one from scratch.
Second is that enforcing policies is difficult. While this is certainly true for organization that rely on manual processes to submit and approve expense reports, for organizations using expense management solutions, it becomes a lot more straightforward. Policy rules are built into the system, so that users simply can’t try and submit out-of-policy expenses (or at least require an explanation, for example if a meal is above the policy limit). Combining these with an online booking tool, or working with a travel management company (TMC) to book travel further improves policy compliance, by ensuring that travelers stick to certain airlines, hotel chains and car rental companies, or can’t exceed a certain price for a given booking.
A third, and more radical, suggestion is that companies weigh traveler satisfaction (and the potential knock-on impact of having to replace unhappy employees) against the savings made by forcing policy compliance. Estimates of how much it costs to replace an employee range from 16% of the annual salary for an hourly employee up to 213% of annual salary for an executive. Therefore, if forcing your highest performers to scrimp on expenses becomes a factor in them leaving to join a competitor, the savings made would become moot.
None of these reasons should prevent an organization from setting up a travel policy, and then leveraging the policy to cut wasteful (or even fraudulent) employee spend, as well as drive down rates through negotiated volume discounts. For them to have the biggest impact, they should be:
- Straightforward – as 39% of travelers are unsatisfied with the ease of understanding their corporate travel expense policy
- Clearly communicated – so that everyone is aware of them and what they mean
- Realistic – overly restrictive policies lead to unsatisfied travelers who are more likely to try and bend the rules
- Fair – make sure that you balance cost versus staff happiness, and don’t hamper productivity
Using a travel expense management solution to track and enforce compliance with your policy can also be very cost-effective, and they can often pay for themselves simply with the hard cost savings they generate, in addition to the improved productivity both for travelers and the back office team.
So, while skipping the expense policy in favor of a more “free range” approach to travel expenses may seem like a good option, it could hurt you in the long run. Creating a straightforward, fair and workable expense policy could pay off both in terms of employee happiness and a healthier balance sheet.
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- Why the Manual Invoice Processing Model Is Broken (And How to Fix It)
- 6 Reasons for Implementing an Expense Management System
- How Expense Automation Can Increase Manufacturers’ Profit Margins
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