Travel expense management is the most common reason why organizations establish corporate travel policies, hire a travel manager and implement an enterprise travel booking solution. These are just a few of the tools and resources necessary for organizations to effectively meet the challenges associated with travel expense management.
But, what are the biggest travel expense management challenges that these corporations are facing? What's making them act now to drive down costs and increase the efficiency of their travel spending?
We've compiled our top-ten list of critical challenges in travel expense management, along with tips and advice for travel managers who must overcome these challenges to achieve their KPI and cost reduction targets in 2019.
Increasing Travel Costs
Current research is telling us that travel costs are on the rise worldwide, with average hotel booking rates increasing by 3.7% and flight costs rising by 2.6% in 2019. Air fare costs in India, New Zealand, Norway, Germany and Chile are expected to rise by more than 7%, driven by the growing global economy and increasing oil prices.
In the face of these increasing costs, travel managers will still be expected to meet the critical KPIs and cost reduction targets set by their CFOs. In the face of rising costs, travel managers will have to negotiate aggressively with travel suppliers and airlines to achieve the lowest rates for their organizations.
Late Booking Penalties
Travel managers need to ensure that travelers have the flexibility to change their itinerary when the circumstances demand it, but that need can sometimes run counter to a travel manager's desire to book flights in advance for the best prices. A study conducted by CheapAir looked at data from over 4 million trips and determined that the best time to buy a domestic airline ticket (lowest price) was 54 days in advance. The worst price was obtained when travelers booked their flight the day before.
Travel managers need to balance business needs with travel costs to determine when it is justified to pay more for a flight. They also need to encourage travelers to book travel and accommodations well in advance to ensure they get the best rates.
Reliability of Cost-Effective Travel Methods
Ride-sharing and accommodation-sharing services pose an interesting problem for travel managers. On the one hand, these services can represent a low-cost and reliable means of getting employees from Point A to Point B, and they're often accessible in many places around the world. On the other hand, having your business employees stay at a local resident's home can expose the employee to unexpected and sometimes risky situation.
Travel managers need to search for cost-effective options that also ensure employee safety. This means conducting case-specific risk assessments to determine the best option for the employee based on the unique circumstances (location, time of day, etc.)
Vague or Incomplete Corporate Travel Policies
Organizations that fail to establish and maintain a clear, complete and accessible corporate travel policy will always face issues when it comes to managing travel expenses. A corporate travel policy should clearly outline the booking procedure for accommodations and all types of transit, establish allowances for things like meals and entertainment, define what expenses qualify for reimbursement and establish policies and procedures for making an expense report. If any of these aspects are missing or incomplete, employees may incur expenses beyond what the policy is intended to permit. To prevent this, organizations must continuously update their corporate travel policies to be as inclusive and thorough as possible.
A corporate travel policy should give employees options within a framework. It should define the parameters of what is acceptable, but still give travelers flexibility to make arrangements according to their own preferences. Some organizations have implemented corporate travel booking solutions to help deliver that flexibility while automating compliance with their corporate travel policies.
Inadequate Process Control
Effective process control throughout travel management has a major effect on overall expenses. Most organizations implement a workflow for approvals where the travel manager is responsible for reviewing and approving travel itineraries before booking can be finalized. Expense reports and reimbursements also have to be reviewed and finalized by the travel manager.
When these processes are operated inefficiently, they can result in a months-long backlog of approval requests that travel managers simply don't have time to process. When travel managers take too long to approve an itinerary, prices can increase unexpectedly, so it's crucial that corporations maintain a process flow for travel management that avoids backlogs. Effective process control means ensuring that travel managers have the tools available to meet the service demands of the organization. Tools like Deem Work Fource can save time for travel managers by automating the book and itinerary management process for employees.
Poor Visibility of Employee Spending
Organizations that wish to better manage their travel expenses need to structure their corporate travel policies in a way that maximizes visibility of those expenses. The best way to ensure that visibility is to have employees charge all of their travel expenses to corporate credit cards - that way, you'll have full access to review the transactions in particular and understand how and when expenses were accrued.
Some organizations believe that employees will be more careful of their expenses if they incur the direct costs of travel and claim reimbursement later, but that may not always be the case. Employees may spend more liberally if they can report those expenses how they want, knowing that your organization can't view the charges directly because they were charged to the employee's personal account.
Organizations that use corporate credit cards can also benefit financially from cash-back and other reward and incentive programs.
Non-compliant or Unofficial Bookings
Despite their travel managers providing ample options for compliant bookings, employees still sometimes choose to book their accommodations outside of what the company deems appropriate. Employees may also comply with the policies initially, but upgrade to a more expensive room or flight at a later time, attempting to circumvent the policy.
To address the issue, travel policies need to clearly state that non-compliant bookings will not be reimbursed by the company. It also doesn't hurt to collect a signature from employees, verifying their understanding that they'll be on the hook for non-compliant bookings or upgrades. Still, travel managers need to be meticulous when comparing booking costs with actual expenses to detect and address any discrepancies.
Late, Unclear or Missing Receipts (or Expense Reports)
Corporations need to honor their obligation to reimburse employees for eligible expenses when they conduct business travel, but issues with receipts can create disagreement about exactly how much employees are owed or whether they qualify for reimbursement at all.
Missing receipts put the travel manager in a difficult situation - do they simply take the employee's word for it and process the reimbursement? Or does the corporate travel policy require that a receipt is presented? What if the traveler didn't or couldn't get a receipt?
Ultimately, organizations need to establish clear guidelines for what needs to be submitted, and when, with strict and reasonable deadlines imposed for expense reports and reimbursement requests.
Inadequate Oversight of Expense reports
When travel managers are overworked, they may not have time to review each and every expense report to establish its perfect compliance with the relevant aspects of corporate travel policy. In one survey of more than 4000 workers, nearly half claimed to have submitted at least one dishonest expense claim. The same survey discovered that 84% of employees had never had an expense report challenged or rejected.
The data suggests that more careful oversight of expense reports is necessary to ensure that potentially fraudulent reports are identified and challenged. Yet with cost-of-labor restrictions, ensuring adequate oversight of expense reports remains a significant travel expense management challenge for organizations.
Failure to Capture Operational Metrics and KPI Data
Organizations that conduct business travel need to capture operational metrics and KPI data that demonstrate the efficiency (or inefficiency) of the travel policy and its execution. Organizations that want to drive down their travel costs need to benchmark their current travel management performance, institute new policies, then collect data again to determine whether their performance metrics have improved.
The ability to track and measure the performance of travel management is crucial to determining the success of travel expense management initiatives and holding travel managers accountable for results.
Deem Offers a Fast, Friendly and Customizable Travel Booking Solution
Deem has helped thousands of corporate clients reduce inefficiencies, secure their booking process and fine-tune their travel expense management, saving them millions of dollars in the process. To find out how much your organization can save with Deem, request a demo today.