Tame your Travel & Entertainment cost beast: 4 tips
Your T&E budget may need a little TLC.
T&E — that's shorthand for Travel & Entertainment, or Travel & Expense — represents the second-largest controllable expense for most businesses. Yes, you want your company's T&E spending to be under control. But that's not the only reason it needs your attention.
For many small businesses, the management of T&E spending spins out-of-control because the companies' business travel isn't centrally managed by an agency. So one employee books online while another calls his travel-agent friend and still another phones the airline directly. The result is a corresponding T&E budget that's a mess — from expensing to reimbursement.
Focusing on T&E expense management can seriously lift earnings. A 2001 Gartner Group study found that just a 5% reduction in operating costs in the expense-management process has the same effect as a 30% increase in sales. So reigning in your T&E expenses requires both better tracking and better managing of them — which, again, can mean a significant boost in profits.
"Armed with accurate spending information, businesses can establish policies that restrict spending to a list of approved vendors, certain categories of spending, and spending limits," says Lori Fairbrother, vice president of marketing for Boston-based Necho, which develops expense-management automation software.
So how do you get a better handle on your T&E budget? Here are four tips.
1. Get all your employees on the same page. You don't have to deploy a third-party solution, but it helps. One of the most popular, OneMind Connect's ExpensAble, allows small businesses to standardize the collection of expenses, to ensure every report is accurate and reviewable by management. ExpensAble (www.expensable.com) is an elegant solution for small-business users. If you have a tech-savvy workforce, a simpler step may be to make sure your expenses are logged into a Microsoft Excel spreadsheet.In trying to tackle T&E expenses, it's absolutely critical that your workers are singing from the same hymnal, in terms of the services they use, receipts they keep, even how they log their expenses. Otherwise, you'll just end up confusing your accountant and creating more work for everyone.
2. Set a clear, reasonable T&E policy. It's hard to control something when you don't set boundaries. Yet travel policies are often not articulated — or not enforced. A competent corporate travel manager can help you create such a policy. If you don't have one, you can do it yourself (think of it as a statement of your business philosophy combined with a good dose of common sense). What kind of hotels do we stay in? Do we fly business class? Do we only rent economy cars?Your employees should not only know what your travel policy is, but also the consequences for violating it. More importantly, they need to understand the reason for these policies, and how they directly affect your company's bottom line — and their own prospects for sharing in your prosperity.
3. Consolidate travel purchases now. You can't manage what you can't see. Consider streamlining your travel purchases through a single agency or online service. Note that an agency may cost you more in the short term, because you'll be paying higher service fees. But down the road, your business will also get consolidated expense reports from a single source, which will not only help you tame the T&E tiger; as your business grows, it also allows you to negotiate with vendors for preferred rates. And that will cut costs.Expedia offers a corporate travel service (www.expedia.com/daily/corporate/default.asp) that can help you consolidate your business travel. Interested in learning more about corporate travel management? There's a trade association, the National Business Travel Association (www.nbta.org) that can get your business in the loop.
4. As your business expands, consider adding more automation. It used to be cost-prohibitive for a small business to automate employee expenses. The software just cost too much. No longer. Prices are far more reasonable now, and there are more options because of the Internet. A solution such as Fairbrother's Necho (www.necho.com) can be implemented on the Web, and it promises to lower the cost of processing an expense report by between 40% and 60%. A 2002 Aberdeen Group survey also suggested that automation has the potential to cut back on out-of-policy expenses, bringing that number to below 10% of total expenses.When your company grows, you'll also have to decide whether to hire a corporate travel manager who works on site and can collaborate with your accounting department to offer solutions for managing your T&E budget.
Getting control of your company's second-largest expense may seem like a daunting task. It doesn't have to be. Even if you don't buy new software, by using what you already have, by using your management skills and common sense, and by keeping your options open for the future, you can make sure the costs don't become runaway expenses that eat into your profits.
For a look at how virtual-meeting technologies can cut your travel costs, see this article.