Corporate travel has long been a necessary expense and exercise that ensures the best possible relations between clients and staff. It is also an activity that allows one to attend in-person meetings, conferences, and networking events. While some corporations specifically budget and plan for corporate travel, other businesses have reduced traveling for work for several reasons. Globalization and the evolution of the business world have been the most prevalent reasons organizations have evaluated business travel. This article explores this topic to understand how corporate travel affects business finances.
Travel Costs
There has always been the misconception that air travel is expensive; well, if you are flying first class, then definitely. However, flying is not a costly exercise unless you book at the last minute. Instances like pandemics, geopolitics, oil prices, and peak seasons significantly impact airfare — but you can travel smart.
For instance, businesses that regularly use a private jet charter could partner with other businesses to split costs. Another idea is to book the company tickets as far in advance as possible. Alternatively, you can negotiate special rates with travel agents based on the business you provide them.
Airfare and Accommodation
Airfare and accommodation are often the most substantial expenses in corporate travel. The fluctuating nature of airline ticket prices and hotel rates can greatly impact your corporate travel budget. Additionally, when you fly, the airline you choose, your destination, and the type of hotel you stay at all influence your budget.
The challenge is often with last-minute bookings, as you are forced to accept a higher price point if the trip is a necessity. Businesses should strike a balance between cost-effective options and employee comfort. This way, the finance team can ensure corporate travel remains well within budget.
Transportation and Meals
Depending on where the business trip takes place, public transport, Uber, taxis, etc., can be relatively expensive and seemingly inexpensive. The same applies to food. In some parts of the world, you can buy an entire main course for $5, including nutritious and delicious options. The concept is the same with transport options, making it quite difficult to budget for if you have no idea what to expect. However, the finance department needs to calculate the average costs based on the location and set the budget accordingly. They should also allow for fluctuations such as surge pricing or emergencies.
Another important aspect to consider is expensive meals for business meetings. In many instances, to land an important account, you may have some form of business dinner. While not as popular as they once were, business dinners still occur. A pro tip is to select two dining options in advance so you know exactly how much you can spend.
Ad Hoc Expenses
Typically, companies will have a rule about ad hoc expenses during business trips. However, they do arise. Ad hoc expenses can include mini bar charges, WiFi, tips, and more, and these can often be overlooked. Many of these items would have been allowed in the past, but these expenses would be deemed unnecessary in today’s business world. Finance teams would reject claims that include ad hoc items and would not even include them in the budget.
Business Travel Expenses Can Be Managed Effectively
According to multiple finance groups, business travel expenses are the second-largest controllable expenses in a company. If you want to reduce costs without reducing corporate travel, consider involving your employees in your savings goals. Think about it like this: You are giving your employees an incentive to reduce costs for business purposes, and this will help not only you but them as well. You can also consider partnering with travel agents or booking platforms where a mutually beneficial agreement can be agreed upon.
Travel Management Within the Business
As far as five years ago, business leaders were adamant that their organization maintained control over business trip expenses. They further added that they could reduce costs over in-person business meetings thanks to a strong travel culture and a structured approach to travel management. Some focus areas included creating and enforcing policies, custom policies based on specific departments and their travel requirements, reduced pricing, and even automatic refunds on unused tickets.
What About the Increasing Need for Corporate Travel?
Of course, we can say that corporate travel affects finances, and probably a large percentage of it. But what do you consider when the need for business travel increases? In many instances, smaller companies are not prepared for such increases but would have to adjust where necessary. Finance managers are often the ones who flag this concern, mainly due to the increasing operating costs of the company. However, it all boils down to creating a company travel policy that considers these changes.
Corporate Travel Affects Company Finances
There is no denying that corporate travel is one of the most significant expenses for a business. The fluctuations in airfares have the biggest impact, but there are smart ways to overcome this. Airfare and accommodation are the largest expenses in corporate travel, but you can be strategic in your approach and budget. Transportation and meals might be the hardest to budget for, but having a fixed policy can assist here. And lastly, having a set travel policy is one of the best ways to ensure no one overspends the corporate travel budget.
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