5 factors that cause your organisation’s travel spend to be out of control

DianaAkchurina_100.jpgProcurement travel managers have a whole host of issues that they need to take into account: from cost, efficiency and payment processing to data security, service reliability and employee safety. Diana Akchurina, business-to-business professional at Gett, a taxi-hailing app that operates in the USA, UK, Russia and Israel, discusses five factors that make travel one of the most difficult operating expenses to control.

Join us at Smart Procurement World KZN in June to hear more on global trends around procurement’s role in influencing and managing spend. Ian George will discuss global economic trends and the opportunities they present to procurement.

Today, corporate ground travel, both locally and globally, is remarkably complex with worsening traffic and congestion charges adding to the challenge of running a low-cost, efficient operation. Meanwhile, employees, who are accustomed to the ease and efficiency of the technology they use outside of work, expect a better travel experience than ever before.

But what does all this mean for procurement? According to The UK Taxi Expenses Review 2017, 55% of companies don’t even have a defined travel policy! To complicate matters, 24% of financial decision makers rank travel as one of the most difficult operating expenses to control.

Let’s look at five factors that contribute to the problem:

1. Wasted time
Think about how many people are involved in each travel expense claim. Employees need to fill out expense forms, which 60% of employees fill out during working hours, spending up to an hour per month on bureaucracy. In 90% of cases, claims require approval from a senior employee before they are finally sent to another party for processing.

2. Cost inefficiencies
That’s only half of it though. More than 50% of employees round their claims up by an average of 25%, while a third admit to forgetting the fare before they have made a note of the charge. The subsequent expense claim discrepancies can lead to significant losses.

A number of other factors can also lead to financial losses that are hard to track, such as a lack of employee punctuality that causes the overall fare to spike, or unreliable travel service providers that lead to lost business opportunities.

3. Lack of data
Only 31% of companies feel that they have control over their data. This means that the vast majority believe that their businesses are in the dark about their travel expenses. This can have a massive impact on productivity, costs and data security.

According to JP Morgan, for 39% of travel managers, travel data is necessary to enable successful negotiation with vendors. There are multiple reasons why travel information is vital, but if you don’t have an advanced mechanism that lets you know who is travelling, when and where, then it is virtually impossible to manage your travel expenses. In a modern, dynamic business, real-time data is required to know all of this information and more, including which projects or time periods are travel intensive so that you can adjust your travel policy accordingly.

4. Hidden costs
To further complicate matters, hidden costs are abound. This complicates a company’s ability to calculate its expenses. This is most evident when employees are abroad. In an unfamiliar environment, employees are far more likely to hail a ride at a taxi rank, which is, on average, 40% more expensive than doing so on the street or by calling a local service provider. Equally, ground travel costs are frequently folded into per diem payments so there is no clear data on travel expenses. On a local level, tips can vary widely and influence the bottom line. For example, in London, employees tip an average of 19% whereas elsewhere tips are approximately 13%.

5. Inadequate security
While cost efficiency is an essential aspect of any company’s travel policy, employee safety is also a vital concern. It’s important to provide the highest standards of care to ensure the welfare of your employees. Can you guarantee that they are having a consistent and comfortable travel experience? If they are abroad, can you still ensure their security and that they experience the same standards of driver safety, reliability and professionalism?

Clearly, travel can entail an array of unforeseen risks and costs, and a lot of companies don’t have a tight-enough grasp on what is happening in the business.

What can you do about it?
You need to identify the where and how of your company travel. To do so, think about your current travel needs. The following questions are a great way to get the ball rolling:
• Have your needs evolved over time and are you keeping up?
• Do you have a defined, company-wide travel policy?
• How many of your employees travel and for what purpose?
• Do your employees just travel within the city, between cities or also globally?
• How are you ensuring the safety of your employees when they travel?
• How closely can you track your travel activities and expenditure?
• Which reporting mechanisms do you have?
• Which specific projects, business units or individuals are responsible for peak spend?
• How many different service providers are you using and how reliable are they?
• How much of your expenditure is accounted for within your current reporting system?

Claim your 17 CPD points! Join us at Smart Procurement World Indaba in September and attend one of the Learning Lab workshops. >> Click here >> to find how to claim 17 CPD points.


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