5 Best Practices for Travel & Expense Compliance Policies
What is a Corporate Travel and Expense Policy?
A corporate travel and expense policy is a document that establishes rules and guidelines for how a company or organization will coordinate and pay for travel. Travel policies are usually created and enforced by travel managers, travel department leaders who work to arrange and coordinate business trips within the strategic and budgetary requirements set by the organization.
A corporate travel policy document includes policies and procedures for all routine travel-related tasks: booking airfare and accommodations, arranging ground transportation, meals, mobile communications and more. Organizations save money with corporate travel policies by defining which expenses they will cover and establishing limits on reimbursements for each accepted category of expenses.
While there is no one-size-fits-all approach to writing a travel and expense policy, there are some travel and expense policy best practices that every travel manager should consider while developing a policy for their organization.
Five Travel & Expense Policy Best Practices
FOCUS ON THE FIVE WHY'S (AND HOW) OF TRAVEL POLICY
A comprehensive corporate travel policy should encompass all of the information that employees and travelers need. Many travel managers focus too much on the specifics - setting budgets for airlines and hotels, defining preferred vendors, creating a list of exclusions - without answering the "big picture" questions that really explain how the policy should function. To change this, try to answer the five W’s in each aspect of your travel compliance policy:
Who is covered by the policy? Who is not covered? Who can approve requests?
What is covered by the policy? What is included? What is not included?
When should travel requests be submitted? When should bookings happen? When should travelers request an exception? When should expense reports be submitted?
Where can employees find resources in a travel emergency? Where can they ask questions about the policy? Where can they find the policy?
Why does this policy exist? Why is it beneficial? Why should employees follow it?
Travel managers should also clearly outline processes for each activity that is governed by the travel policy; from booking a flight to reporting expenses. Outlining a detailed definition of processes gives travelers a roadmap for engaging with the policy. It also assists in routing bookings and inquiries through the appropriate channels and reduces ad-hoc requests.
OFFER FLEXIBLE BOOKING OPTIONS FOR TRAVELERS
When it comes to booking hotels and airlines, travel managers can face significant resistance from travelers whose personal traveling preferences may not align with the organization's preferred vendors. Our experience in travel management tells us that travelers tend to book with their own favorite hotels and airlines most of the time, regardless of what their corporate travel policies dictate. There are also issues of convenience and cost; if the company's ideal accommodation partner is further away from the convention or client meeting than a competitor, it might be worthwhile to book with the competitor at that time.
Your travel policy should offer flexible booking options that control costs while empowering travelers to choose their own accommodations based on convenience, familiarity, amenities, proximity to important locations and other factors that are unique to each trip.
SAVE TIME BY AUTOMATING COMPLIANCE
The role of travel managers in the enterprise setting is shifting away from manual task-oriented processes and towards the creation and oversight of self-monitoring policies. With corporate online booking tools, travel managers can automate corporate travel compliance with their travel policy and streamline the booking process for employees, reducing manual labor and needless back-and-forth conversations in the process. Here's how it works:
- Choose an online travel booking tool like Etta, powered by Deem that offers a robust policy engine.
- Log on and configure your travel parameters to match your travel and expense policy.
- When booking through the application, travelers are exclusively presented with options that match your parameters.
- These listings are "pre-approved" so no post-reservation approval process is needed. Travelers can book compliant travel from anywhere in the world.
REDUCE SPEND BY CAPPING EXPENSE CATEGORIES
Most travel managers can hit their cost savings targets by adding a cap to expenses on the more costly items associated with travel, such as flight and hotel reservations. These represent the largest areas of variance and risk, so it makes sense for travel managers to focus their time on driving down average flight and reservation costs.
Still, there are other variable expense categories that can put a serious dent in your budget if left unrestricted. As one of your travel and expense management best practices, always make sure that you're setting an expense limit for the following three categories:
Client Entertainment Expenses - There's virtually no limit to the expenses that your traveling sales agents can accrue while entertaining clients. Business dinners and events for prospective customers can set the tone for a productive working relationship, but there is always potential for spending to get out of hand when your corporate office is picking up the tab. Establishing clear spending limits for client entertainment can mitigate the risk of excessive spending while still giving your agents the leeway they need to impress clients and close the deal.
Mobile Phones and Internet - If you're sending employees overseas with a promise to cover their digital roaming fees, you could be in for a nasty surprise. Mobile phone carriers can charge exorbitant rates for out-of-network access to data and calling, and while it usually only takes a few minutes of planning to avoid this, there's little incentive for travelers to manage the costs when they aren't the ones picking up the tab. Assign company phones with pre-configured roaming plans, or set a hard limit on how much you'll reimburse for mobile usage.
Meals - Most organizations give travelers a per diem allowance for food. Some travel managers break it down further into three separate meals (breakfast, lunch, dinner), and may include a bit extra for incidental expenses (snacks, water, gum, etc.). The best meal policies set hard limits on spending and encourage travelers to eat throughout the day.
CREATE A PROCESS FOR MANAGING EXCEPTIONS
Travel policies establish rules and guidelines for every aspect of corporate travel, but there should always be room for exceptions in situations where it makes sense. In addition to formalizing a process for requesting exceptions, travel managers should establish an approval hierarchy for managing exceptions by size. A travel manager might be able to authorize an extra $80 for entertaining clients, while a $200 hotel upgrade would have to be approved through a procurement manager and a $1000 emergency flight would need approval from a CFO.
There are many situations where exceptions to normal travel policies are warranted:
- A sales agent wants to book a hotel closer to a conference that will cost more but enable them to spend more time meeting with clients
- A sales team needs additional budget for entertaining a client while a large deal is being negotiated
- There is political or civil unrest and the employee needs to book an emergency flight for their own safety
DEMONSTRATE COMPLIANCE AT THE EXECUTIVE LEVEL
Organizations tend to disagree on whether travel and expense policies should be equally enforced for all employees of the company. Some corporations believe that higher ranking executives and managers have earned loyalty and deserve perks such as business class flights, nicer hotel rooms, etc. For other organizations, having separate requirements for managers and associates can breed resentment and make policies overly complicated.
The option that you choose depends on your corporate culture, but compliance with policy has to be demonstrated from the top down. Why would associates follow a policy their manager ignores, especially if their excess spending is accepted with no accountability? Executive leaders should set a strong example by diligently following travel policy and encouraging their associates to do the same.