Companies often turn to their accountants when they need to cut expenses, and a good place to start is with the travel budget.
Rocketrip CEO Dan Ruch has a few tips about how companies can reduce expenditures on business travel. Among the top five ways, according to Ruch, is when companies don’t have a good sense of how much they’re spending on business travel.
“You’d be surprised how many times we ask companies what’s your total travel spend, and they have no idea because they’re not tracking it or they don’t have a good mechanism for tracking it,” he said. “Or they don’t know how much their spend compares to travel and expense benchmarks. The average U.S. company spends about 1 percent of its topline revenue on travel, but many companies don’t track their travel as a function of total revenue.”
If companies can’t answer questions on their travel spending, they’re probably spending too much.
A second way that businesses are overspending on business travel is by “ignoring low-hanging fruit,” according to Ruch.
“As an employer, you encourage employees to take simple steps,” he said. “Booking early saves companies about $108 per week in advance of booking a flight, so if they’re not encouraging employees to book early, they’re missing out on huge opportunities to save.”
He also encourages offering more flexibility and options like Airbnb, which he finds is typically 30 to 40 percent cheaper than regular hotels. “At Rocketrip, we find it’s $110 cheaper on average,” Ruch added. “The travelers who are taking Airbnb actually prefer it. It’s giving them a home to stay in and a taste of what it’s like to live like a local.”
A third way to overspend on travel, according to Ruch, is when employees have no incentive to save.
“If you tell employees you’re allowed to spend $300, they’re going to spend $300,” he said. “They’re going to optimize for comfort and convenience. Why wouldn’t they? If you give employees an incentive to save money, it will drive far more savings than any travel policy will ever realize.”
Rocketrip shares the value of the savings with employees by giving them cash back. “If the employee is willing to stay with a friend or in a lower-quality hotel, or take a connecting flight to save their company money, there is a reason they’re going to do that,” said Ruch. “It’s just a function of how much it’s going to cost. We can change behavior and motivate employees to save. It’s just a question of what is that motivation.”
A fourth way to keep companies from spending too much on business travel is for top executives to set an example.
“Overspending absolutely starts at the top,” said Ruch. “Leadership can either be a great role model for cost sensitive behavior, or lead the company into eradication of cost sensitivity entirely. We have clients whose executives stay at Airbnbs. They stay with friends instead of at hotels, and what you find is that the rest of the employees follow suit. No employee is going to fly first class if their boss is flying economy. It really is a cultural issue. This kind of stuff has to be driven top down.”
Finally, setting goals can help companies avoid overspending on travel. “You need to have a goal of saving or spending less,” said Ruch. “Saving or spending less in a vacuum doesn’t mean anything. You have to get tangible about it and communicate those goals. Our customers typically aim for about 20 percent savings, and they end up seeing more like 30 percent. You have to think about where you are today and what the best practices are. Then when you reach those goals, you should be celebrating those successes. You should be congratulating your team and recognizing the top performers who are saving the most. A simple note of thanks from an executive to an employee can go a long way in nurturing a culture of cost sensitivity. But if you’re not doing that on a regular basis, chances are your employees don’t really care, and they’re not saving you as much money as they should be.”
Accountants can play a role in encouraging companies to save money.
“For the accountant specifically, they need to be looking at those metrics,” said Ruch. “They need to be looking at what does my average trip cost? Is it going down, or is it going up over time? How much am I spending on an annual basis by department? What are we doing about travel and looking at data? The problem is that most companies don’t have a sophisticated way to look at data. From an accountant’s perspective, it’s absolutely about the data, and using software that not only collects that data, but also motivates and rewards employees for going above and beyond to save money.”