Companies frequently send their employees on business trips to explore new opportunities and drive growth. These trips are strategic endeavors aimed at boosting profits and fortifying the company's financial health. Effective budgeting for these journeys is paramount to ensure they deliver maximum value.
However, it's equally important for companies to provide their traveling employees with essential comforts and security in unfamiliar locations. Neglecting these aspects can lead to low morale and hinder the achievement of business objectives, which could have long-term consequences for the company.
The need to fulfill several parameters at once makes budgeting for business travel a tricky, and sometimes complicated exercise. Keep reading to understand the nuances of budgeting for business travel.
Formulating Your Business Travel Budget
At the heart of the financial aspect of business travel lies a thoroughly planned out business travel budget. Based on the size of the company and the nature of business trips, business travel expenses can vary. A company needs to recognize its key travel expenditures and include them in its budget. This understanding can be derived from analyzing data from previous trips and engaging with employees who frequently travel. It's worth noting that a business travel budget is often a dynamic function, as business needs, travel regulations, and other relevant factors are subject to constant change.
Here are some of the most typical expenses to consider when crafting a business travel budget -
These are the costs incurred on the travel of employees to their intended destinations through flights, trains, or roads. If employees are using their vehicles to travel, they can be reimbursed for the fuel charges they incur, called the mileage reimbursement policy.
Accommodation costs make up a major chunk of business travel expenses. To control these expenses, companies often establish corporate partnerships or agreements with hotel chains, which can lead to discounted rates and special deals for their employees.
Food & Drinks
Many companies allocate a specific daily allowance, known as a per diem, to cover employees' meal expenses. The per diem amount may vary depending on the destination to ensure that employees can comfortably manage their expenses without incurring out-of-pocket costs.
Travel Insurance & Safety Precautions
Companies have a duty of care towards their traveling employees, which means that as long as the individual is traveling for their purpose, they are liable to ensure their safety at all times. Corporate duty of care has gained renewed importance ever since the pandemic, and assuring employees’ well-being in case of an emergency is fundamental for any company. Thus, companies should invest in a comprehensive business travel insurance policy, which covers any type of unexpected occurrence. They should also invest money in establishing safety procedures for employees on the move.
Companies can choose to go above and beyond the statutory costs to increase employee satisfaction. This can be done by including reimbursement budgets for incidental expenses like tips or cab services. They can even provide employees with extra funds to indulge in sightseeing and leisurely activities while on the trip. This can go a long way in making employees feel appreciated and motivated. However, these expenses are optional and contingent on the financial health of the company.
Tips for More Efficient Budgeting
Crafting an effective business travel budget entails the twin goals of preserving employee safety and satisfaction while also keeping company expenses manageable. Here are some strategies that can help accomplish both objectives simultaneously.
Outline a Detailed Travel Policy
The foundation of successful business travel budgeting is a well-defined travel policy. The policy should outline the guidelines and expectations for employees when it comes to booking flights, accommodations, ground transportation, meals, and other expenses. It should also clarify the approval process for travel requests and the requirements for them to keep in mind while filing for reimbursements.
By creating a clear travel policy, you can set spending limits and define what expenses the company will cover. This not only helps in managing costs but also ensures that employees understand their responsibilities and avoid overspending.
Review & Prioritize Expenses
Companies should identify the most critical requirements on their business trips and assign budget allocations to these aspects first and foremost. This is especially important for companies who are looking to manage expenses or cut costs.
They should also conduct periodic reviews of their business travel expenses to assess areas where expenditures could be trimmed for better financial health. For instance, a company looking to cut costs could alter its policy to allow employees to book only budget accommodations rather than 5-star hotels.
Negotiate for Better Deals
Establishing corporate partnerships with airlines, hotels, and car rental companies can result in substantial cost savings. Companies that indulge in frequent travel are lucrative deals for airlines and hotel chains and are open to negotiating better rates.
These deals serve both purposes of a business travel budget, as they provide access to exclusive discounts for the company and perks for the employees. Negotiate contracts that align with your travel needs and volume, and periodically review these agreements to ensure they remain cost-effective.
Use a Business Travel Management Software
Utilizing business travel management software can prove indispensable when devising budgets. An integrated solution such as WegoPro streamlines trip bookings, approval processes, policy enforcement, and reimbursements, placing a wealth of resources at the disposal of both employees and managers.
WegoPro’s unified and user-friendly platform not only facilitates end-to-end management of various aspects of business travel but also diligently tracks expenses, offering valuable insights into expenditure patterns. It also empowers companies to establish corporate duty of care programs, ensuring the continuous monitoring of employees' safety.
Adopting an all-inclusive tool like WegoPro can also lead to reduced implementation costs, as it eliminates the need to establish separate protocols for managing the diverse functions it encompasses.
Implement Schemes like Per Diems & Corporate Credit Cards
Reimbursement policies can vary significantly among organizations, reflecting diverse approaches to managing expenses. Some companies opt for traditional expense reporting, where employees submit their expenses for reimbursement, while others embrace schemes like per diems and corporate credit cards, allowing for predefined spending limits.
These innovative schemes offer enhanced financial control, eliminating issues such as overspending or fraudulent expense claims. By setting clear limits, companies can effectively regulate their expenditure, ensuring it remains within a defined budget. This approach enhances the efficiency of business travel budgeting, providing financial stability and predictability.
That said, a delicate balance must be struck when assigning spending limits. Setting excessively stringent limits may force employees to dip into their funds, potentially leading to dissatisfaction and demotivation. Thus, companies must strike a balance between providing employees with the necessary resources and keeping costs in check.
Effective business travel budgeting is a multifaceted exercise, demanding a strategic blend of fiscal control and employee satisfaction. By adopting the strategies outlined here and integrating indispensable tools like WegoPro, this equilibrium can be attained, ensuring that business trips are a resounding success, benefiting both the employees and the organization.
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