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How to manage travel and expenses costs

Controlling costs can give your business a boost. We look at where to start

Few people actually know how much they spend each year on travel and expenses and most would have to spend valuable time researching to get the answer.

But we should. Travel and entertainment – or T&E as the industry likes to call it – amounts to the third largest controllable corporate expense. Just behind salaries and data processing.

We also are more likely to spend higher on T&E than on advertising. So it is even more frightening that so few of us can actually put an annual total on such a vital part of our operation.

Small businesses are hardly likely to rival a major corporation in terms of T & E spend but it could still be a leakage in our profits and is something we can take control of.

Research from American Express has shown that travel and related expenses account for 7% of total operating costs for corporations and, of that, 44% of the money is spent on air fares.

The study revealed that :

  • One in seven employees travels an average of once a month
  • T&E spending in the UK alone is estimated at $30bn
  • The amount of travel is set to rise 29% this year alone
  • Most of us enjoy travelling on business
  • 92% use a laptop while travelling on business while 74% use the computer for e-ticketing and more than 69% expect to use the internet to book a business trip this year.

The survey also showed that most worked longer hours than expected last year and expect to work the same or longer hours next year. This is influencing our ability to take a break and changing the traditional holiday pattern. More executives, particularly those working for themselves, choose more frequent but shorter holidays.

Some 36% of travellers said they needed a holiday to unwind but only some 13% took long summer vacations, instead 51% chose short breaks.

While much of the survey related to big business, the lessons are applicable to operations of every size, according to Chris Sharp, head of relationship management, corporate services, UK and Simon de Cintra, head of sales, corporate card UK.

They argue that every business, however small, benefits from a formal travel policy and improved T&E management. “With any travel policy the balance is between the benefit of the travellers and the cost saving for the company,” says Sharp.

Although he admits; “The smaller the organisation, the more blurred this becomes because often the traveller is the company.”

Time out of the office has to be managed efficiently. No-one can afford to miss too many important calls and it may be difficult to hand over to anyone else to “hold the fort” while you are away.

But the most direct travel route may be costing a lot more than it need. For example, UK businesses can expect to pay 46% more for a direct flight to New York than their counterparts in Paris and 55% than those from Frankfurt.

If you work for yourself, travel expenses will need to be minimised wherever possible. There are a number of easy steps that you can take to help control your costs.

  • Don’t just take the most obvious route

A business can save almost a third (30%) by sending an executive via Paris to Los Angeles instead of flying direct from London. If you operate away from London and would be paying for a connecting flight, say from Aberdeen or Manchester, it may well benefit you to skip London and go direct to Paris.

  • Think about downgrading

The survey also found that more businesses are using economy rather than business class. For small businesses, “slumming it in the back” may well be the only affordable way to go.

Equally, using secondary airports or “no-frills” airlines can cut costs significantly. For example, a return flight to Geneva, from London Gatwick, is six times cheaper with a low-cost carrier.

Ryanair reports that some 40% of its passengers are travelling on business and, in all, some 69% of travellers surveyed said they had used no-frills carriers in the past year.

  • Look for loyalty schemes

If you travel to see the same client several times a year, there may well be an opportunity to negotiate a better rate.

It is also important to remember that a travel policy is more than just about the flights. Using the same hotel chain on a regular basis can also cut costs with a negotiated rate.

And for individual travellers, who happen to be the company too, loyalty schemes are worth using. Free points towards flights and hotel bills all help the bottom line – and maybe buy a holiday or two as well.

  • Get in the professionals

You could use a company such as American Express that will help implement and follow a travel policy. They can organise travel for you and negotiate better rates on your behalf.

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