What is travel and expense management?
Business travel, that vital engine of growth and collaboration, generates a trail of financial footprints in its wake. Travel and expense management steps in as the mapmaker, capturing, recording, and tracking every expenditure incurred – from airfare to local coffee breaks. This data transforms into transparency and control, giving organizations a bird’s-eye view of their travel-related spending. In simple terms, managing travel expenses ensures smart financial decisions, making sure every business trip brings back value that matches the company’s goals.
After a lull of over 2 years, businesses are now keen to leverage in-person connections to drive company growth. Because face-to-face meetings leave a greater impact than emails, business travel is likely to see a significant rise in the coming years. It has already been up 38% in 2022, as per Statistica. That being said, business travel expenses are one of the largest overhead costs that companies have to deal with. Most organizations rely on business travel and expense management software to streamline their expense management. However, budgeting your travel costs is critical to avoid cash flow challenges.
The importance of having a strong budget to keep your business travel and expense spending under control requires thorough consideration and planning. Let’s discuss how to design a perfect corporate travel budget.
Business travel budget – Its goals & expectations
A business travel expense is a cost incurred by companies when they send their employees on business trips to meet clients and attend conferences and other events. These costs include flight tickets, meal expenses, and lodging charges among other things. Companies consider business travel and expense an investment, which can generate attractive ROI solidifying association with a customer.
Like any other business spending, these trips could go out of control and upset your financial health if not managed properly. Most organizations consider cost-saving a wiser approach as compared to cost-cutting when dealing with business travel expenses. Even if you have travel and expense management software to automate most of the tasks, the critical aspect is to have a budget. Travel costs could become a potential chokepoint for a good cash flow.
Different approaches to managing travel expenses budgets
As there is no specific standard that companies need to follow, you can design a budget that best suits your business needs. Typically, there are 3 types of business travel and expense budgets.
Department-based budget: Companies that have multiple independent teams can assign a fixed budget to each department. They will be free to use that money as they see fit, as long as it can be justified.
Per diem budget: This budget type is used by companies that send their employees on business trips lasting days or weeks. It involves allotting per day costs to the employee to take care of their daily expenses like meals, travel, and accommodation.
Total trip budget: If per diem allowance proves too much of a hassle, companies calculate the approximate cost of the business trip and transfer the amount to the employee.
Regardless of the type of budget, managing your expenses manually or through spreadsheets will make it more tedious and expensive. Having a business travel and expense management software will keep your budget in check. Once you have all your expense categories in place, it can also identify invalid expenses made by your employees. So, what exactly goes into a travel expense budget?
Components of travel and expense budget
One core step in designing the budget is to define the different expense categories and then set spending limits for them. Some of the common business travel expenses are listed below.
Visa and flight charges
Broadly speaking, the entire cost of having your employee land at the destination comes under this section. It involves tariffs for visa applications, passports, and flight tickets.
Transportation costs
Once the employee reaches the destination, all the transportation costs like taxi fares, bus charges, and other mobility spendings will be covered in this.
Accommodation and meals costs
The cost of hotel bookings and everyday meals will come under this section. Mostly, companies go for combo deals that offer both accommodation and meals. However, the employees might have to take clients out for lunches, dinners, or drinks. These charges will also be considered business travel expenses.
Event venue and conference cost
If the employee is going to attend conferences or other corporate events, the registration fee and other associated costs will be borne by the companies under this category.
Travel agency and management company fees
When companies hire a travel agency to take care of flight and accommodation bookings, they will levy a commission and service fees, which will be added to this section.
Companies could have additional unexpected expenses such as insurance fees and cancellation costs.
Best practices to follow when creating a travel expense budget
Analyze past travel expense reports to optimize costs
Studying past expense reports and payment receipts will help you arrive at a good budget for the business trip. You can break down each category of the report to check if some costs can be optimized through discounts or offers.
Navigate seasonal influences when planning a business trip
Traveling to certain countries at specific months could prove too expensive due to seasonal demand. Therefore, it is important to consider such calendar events when planning a business trip. If you cannot avoid it, then you need to adjust your budget accordingly.
Set clear travel and expense policies and communicate them to all
You need to have a clear expense policy in place to avoid any illegal or unnecessary costs during business trips. With business travel and expense management software, you can create and implement these policies easily.
See combo services to save on overall costs
By opting for combo services like bundled airfare and cab rental services, you can reduce your travel costs. Individually it might seem counterintuitive, but when you look at your expense report, you will understand its impact in bringing down your entire trip cost.
Create an efficient business travel budget with automation
By automating your business expenses using business travel and expense management software, you can reduce the time, cost, and resources you spend on tracking, monitoring, and managing these spending. A platform like Zaggle EMS can simplify your expense management processes by digitizing the entire journey to save time and costs. Learn more about Zaggle EMS here.
