Cost reduction and risk management continue to top the list of business priorities for procurement leaders in 2019.
For travel expenditure, the focus on cost often leads to stringent travel policies. However, policies that are too strict often have more cons than pros. A better approach, FCM Travel Solutions has found, is to look at the bigger picture.
Nicole Adonis, General Manager: FCM Travel Solutions in South Africa, explains that the secret to travel budgets is to create efficiencies. She illustrates this with an example: “If our data, for example, reveals that a client is using 500 different hotels in 50 cities, we would advise reducing this number to say 100, and negotiate a discount with the remaining hotels”.
Adonis shares four of the most common pitfalls when planning a travel budget and how to avoid these.
1. Viewing travel as a fixed cost
In many company structures today, travel is seen as a fixed cost that is the responsibility of the procurement department. Often, the procurement managers who are responsible for a company’s ‘indirect’ purchases, such as stationery, insurance and coffee, are also responsible for travel. Their business objective is to keep fixed costs as low as possible.
However, it could be argued that the volume of travel – and the quality of that travel – cannot be managed as a fixed cost because travel can be highly variable, depending on the company’s goals, culture and structure.
FCM Travel Solutions believes that corporate culture and strategy are underestimated when people assess the value of travel and that the expected return on investment (ROI) from a trip should be defined in advance. If a company is acquiring, or is about to be acquired, cost control is vital. However, if a company is going through an expansion phase, it has to be more relaxed about costs.
If you link traveller spend to strategy, you will be able to analyse ROI much more easily. Any travel that is vital for business growth, or to keep an organisation moving forward, should be considered an investment and not a fixed cost.
2. Ignoring automation
Advances in technology have enabled companies to take great strides in terms of expense management. Systems automatically populate charges from suppliers, credit card companies and receipts, and lower the risk of missed or incorrectly-entered expenses and fraud. Centralised expense management not only provides convenience and better reporting but can also help simplify future booking processes, such as pre-trip approvals, profile management and traveller tracking.
Not every traveller or employee is excited about technological innovations, which is why a blended technology approach is likely to shape corporate travel in 2019. Technology needs to be simple and implemented only when it enhances the business and enables business productivity. It is important to select the right technology which blends seamlessly with human expertise so as to eliminate human error and reduce abuse of your travel programme while allowing the human element to focus on more strategic travel management.
A blended technology approach offers many benefits for travellers, travel bookers and decision makers alike.
3. Not keeping track of expenses
To run a successful travel programme, it is important to keep track of what employees are booking and how much they spend. Knowing the true travel spend will help companies identify problem areas, allowing them to adjust their travel policies accordingly, re-educate their staff and ensure that they are getting the best value from their travel spend.
By getting a little more granular with travel policies and meeting employees halfway, companies can prevent unnecessary spend that isn’t benefitting the bottom line.
It may come as a surprise, but the time employees take to confirm their travel arrangements can have a significant impact on the company’s bottom line. For example, if employees book fewer than seven days before departure, they are likely to pay up to 28% more than if they had booked 22 to 30 days in advance. In a year, this can make a massive difference to a company’s travel spend.
4. Not having the right data at your fingertips
When analysing the most-used categories of travel suppliers, some key suppliers are likely to show up again and again. It could be a preferred airline or a hotel conveniently located near the office or a client. It’s worth flagging these repeat bookings, because if the company books a single airline route or a specific hotel often enough, it might have the booking volume to negotiate a preferential rate with the supplier directly.
The most effective long-term strategy for saving money on business travel is to work in partnership with an expert travel management company (TMC). The right one will provide market-leading rates, booking expertise (both on- and offline), regular reporting and the assistance of a dedicated account manager who can suggest ways to save without compromising company objectives or service requirements.
If managed properly, business travel needn’t be an excessive spend, nor does it have to be an unpleasant experience for the corporate traveller. “By working with a professional travel management company, such as FCM, and implementing a solid travel strategy, it is possible to find the right balance that will keep the procurement manager and the traveller happy”, Adonis concludes.