How To Use Expense Tracking Technology to Cut Travel Costs
In my last post, I wrote about three relatively obvious ideas for trimming unnecessary travel spending that are easy to implement with new expense management technology. If you’re properly tracking travel types and collecting data as I suggested in that post, here’s a new concept that’s a little more advanced: Drilling down into the return on investment (ROI) for different types of trips, and budgeting and managing accordingly.
The underlying concept is that not all trips are created equally, and even in times of cutbacks, there should always be budget for travel with a positive ROI, and it should continue to be easy for people to book high-ROI trips.
It’s a straightforward proposition that makes a lot of sense, but I think this is a rare practice today because until recently most companies haven’t had the kind of technology that could support it on a large scale. However, as companies advance in their use of expense tracking technology, this is something those who are keen on trimming T&E costs should consider.
The blunt object approach
What I mostly see now is that companies put all their organization’s travel and entertainment expenses in one bucket with a single a budget tied to it. For example, let's say that I manage the partner organization. During the next quarter, I may have $100,000 for my team to spend on T&E. Well, that's kind of a blunt object approach to budgeting. All the T&E spending for my group gets assigned to the same cost center in the chart of accounts. There are no distinctions between trip purposes and no visibility into how much “fat” might be in the budget.
A more refined approach would be to break that budget down into revenue- versus non-revenue-generating travel. Instead of a blanket $100,000 budget, it could be more productive to assign $90,000 for categories considered to be revenue-generating, such as sales and customer meetings, and maybe only $10,000 for categories considered non-revenue generating, such as training.
Ideally, you would have an integrated, automated system that helps your managers stay abreast of how they're trending against each budget, so that they're not surprised and so that they can adjust their approval or rejection decisions accordingly.
Scalpel vs. buzz saw
An even more advanced application of technology would be to start looking at ROI for trips, since some sales and customer meetings will generate more revenue than others. If you really have to cut travel, you may even find areas within your "revenue-generating" trips that have a high ROI versus a low ROI so that you can cut back with a scalpel instead of a buzz saw.
As with my earlier suggestions, the key again is using the booking tool and expense management system in tandem—the expense management system as a complete data repository to inform policy decisions, and the booking tool to implement them.
For these advanced suggestions, this requires some integration, but it’s far from impossible to do.
First, you would link expense and customer relationship management (CRM) data together, uploading the list from your CRM into your expense management system so that any time an employee is making an expense line, they could select the relevant company from the list.
Then, for all approved expense reports, you feed the spending data back into your CRM system so that you can generate reports for your managers to understand T&E spending versus annual contract value (ACV) for each customer. Then you do some analysis to segment them into high, medium, and low ROI customers.
A tiered policy
What you might do then is, for customers and prospects in the medium and high ROI categories, the policy may be to continue travel as usual. For customers and prospects in the low ROI category, you can ratchet down travel costs by layering in extra approvals or possibly other disincentives, and pushing more web conferencing.
It's a little complicated to customize within a booking tool, but again, not impossible. With some programming, you could add special messaging or require additional approvals depending on the company that the traveler selects.
These are just a couple of ideas of how you can use technology, and especially some of those more modern expense management technologies, to help budget in a more refined way and help keep your managers and employees within those budgets while spending more judiciously.
Sound like pie in the sky? If you’re still tracking and managing T&E with Excel or point solutions, or just getting started with end to end automation, it may be hard to imagine operating with this level of sophistication. However, as companies mature in their use of travel and expense tracking technology, they will get to the point where transactional and compliance activities are automated and managers have more time to spend on this kind of value added analysis and policy making.