Dodging the pitfalls of pre-trip approval
For many companies, travel and entertainment expenses typically account for 10-12% of their annual budget, making it a critical spend category to control. So, it’s no wonder that companies institute pre-trip approval processes to control travel spending. However, these processes can have significant pitfalls that come back to bite companies and frustrate business travelers.
The key to avoiding these pitfalls is a combination of a well-considered policy and technology. Today’s cloud software is making the technology part easier ever. The tricky part is coming up with that just-right policy that is neither too draconian nor too lenient to be effective.
A different beast
To develop an effective pre-trip approval process, it’s important to recognize that travel is a different beast than most other spend categories. If you use a procure-to-pay system, it's pretty simple to manage buying things like paper clips and computers. You contract with a supplier, you agree on the prices, and you load the items into a catalog. Then, employees requisition the items, and get them approved and you're done.
A pre-trip approval process serves much the same purpose, but comes with unique challenges: namely, the sheer size of the supplier base, and rapid price fluctuations in the market. There are thousands -- if not millions -- of travel providers, including airlines, hotels, rental car agencies, rail companies, and taxi/limo vendors, operating in hundreds of different markets around the globe. Even if you’re a Fortune 500 company, it’s simply not possible to have contracts with every one of them.
There are millions of flight combinations when you look at all the airlines, city pairs, and cabin classes, and prices fluctuate a lot more frequently in the travel world than in most indirect spend categories. Airlines are constantly adjusting their ticket prices based on supply and demand, sometimes from minute to minute. So are hotels, although not quite that often.
All of those things contribute to making pre-approval for travel more complicated than for other spend categories. But, it is possible to have a system that works for everyone if you follow these best practices.
1. Leverage technology. Some companies use a mostly manual pre-trip approval process. The employee has to email their manager with the basic information. By the time it’s approved, the prices the employee submitted will probably have changed. Then what happens? Do you book your trip anyhow, or resubmit for approval with the new price? This is why people throw up their hands and give up on pre-trip approval.
Some companies may have a slightly better process, where employees use a web-based request form to enter key elements of their trip and estimate their budget. That too has major drawbacks, first and foremost because there's room for user error or manipulation. How does the approver know that the estimated cost is reasonable and within policy? Most approvers are busy executives who don't have the time to comparison shop.
A better pre-trip approval system has to be more automated. Among other things, it has to automatically populate the best available prices for the key trip components based on company policy, preferred suppliers, and other variables. Then approvers can rest assured that the prices being quoted are reasonable and comply with company policy.
2. Make sure it’s integrated. Your pre-trip approval system should be integrated with the travel booking and expense process. For instance, with modern systems, employees log in and book their reservations through their corporate booking tool. Once they click submit, the trip gets routed for approval before it gets ticketed.
The approval request contains all of the the key details about that trip, and indicates if the proposed bookings are within policy. That makes it very easy for the approver to eyeball the request and approve or reject it.
This streamlined process means that, once a trip is approved, the user doesn't need to log in again and book their trip from scratch. It gets automatically ticketed once the approval is made.
3. Multi-channel. It’s also critical that your pre-trip approval system works consistently whether a booking is made online or offline through a live agent.
This is something to consider when implementing a booking tool or contracting with a travel agency. Most travel agencies -- but not all -- have a pre-trip approval system that covers both online and offline reservations. It can be pretty complex to have separate pre-approval systems for online and offline bookings, and simplicity is what we’re after here.
If you have a preferred travel agency, they can guide you through your options and advise you about the pros and cons of using the pre-trip approval system embedded in your booking tool versus an independent pre-approval system.
4. Focus on exceptions. Managers are busy, which means that there will inevitably be delays in approving some trip requests. But there are some best practices you can implement to minimize the risk of price increases (and employee frustration) from approval delays.
If you have a good booking tool or travel agent, the vast majority of bookings your employees make will be within policy. Why waste manager time and resources approving all of these trips, when only a small fraction of them really require attention?
Instead, focus on the exceptions. Psychologically, if managers get bombarded with approvals for every trip, they may go on auto-pilot and approve everything. Instead, if you only require approval for trips that are particularly expensive or that violate company policy, managers will pay more attention and push back on those requests.
Automated pre-trip approval systems allow you to filter, flag and notify the appropriate approver if items are out of policy. For example, if a trip budget is greater than $2,000, or the airfare being requested is in business class when the employee should be traveling coach, those bookings can be flagged so a manager needs to approve them.
Another argument for this strategy is that, if all trips require approval, there’s a good chance that the price increases that result from approval delays will negate any savings you achieve from the process.
There’s still the odd chance that a trip is booked in-policy and gets automatically approved, but never should have occurred in the first place, but that’s a different problem. In that case, the manager can still potentially reject that expense report or, at a minimum, have a sit-down conversation with the employee.
This targeted approach will keep things moving along quickly. It’s important to note here that although managers are only notified of exceptions, in many travel systems they can still go in and see all the bookings being made by their employees if they are so inclined.
5. Keep approvals to one level. It’s a fairly common policy pitfall to institute multiple levels of approval. That really slows the process down. Unless an item is extremely expensive, one level of approval should suffice. If you don’t trust the first approver to make decisions, why are you sending it to them in the first place?
Yes, there’s a risk that the one approver may be unreachable in a timely manner, but modern technology lets you mitigate this risk with out of office functionality whereby approvals can be delegated when the approver is out-of-office.
6. Auto ticketing. Approvers don’t always know they’re going to be unavailable, or if they do, they may fail to make provisions for their absence. The solution for that is to add rules that auto-ticket a reservation if the approver has not taken action after a certain period of time elapses. That prevents approver unavailability from impacting costs, or the employee's ability to do business. You can put parameters around this. For example, if a trip is particularly expensive you could keep that out of the auto-approval queue.
It's a bit complicated, but it's important to have a way to handle those edge cases that occur and can turn into fire drills when they do.
For example, your company may have a policy that says people shouldn't be booking flights less than four days before departure. As a result, a last minute booking that’s reasonable and necessary could trigger a policy violation and be held-up for pre-approval. If the approver is non-responsive, the policy could be to kick it over to a travel manager or other supervisor, or simply to auto-ticket.
7. Mobility. Managers travel too, and in order to keep the approval process moving, the system needs to work well with mobile devices or email so approvers can work on the go.
Some pre-trip approval systems have actionable email notifications where the manager can review all the trip details in that email and click an ‘approve’ or ‘reject’ button within the email. There's no need for them to login to a web-based system, which can be difficult when you're on the road.
Let technology work for you
Travel is just too expensive for ineffective systems where you can only see costs after the fact. Companies need to have an automated pre-trip approval system that has the flexibility to incorporate your policies and limits right into the booking process, and to handle edge cases.
Once you have that in place, let automation do its job.
Use it to focus on exceptions, rather than approving every trip. If you get too heavy handed, you’ll frustrate employees and lose-out on savings. Instead, an exception-based approach will use manager time and resources more efficiently, while ensuring that employees stay within policy and spend company money wisely.