8 ways to... ...control T&E expenses [Financial Management (London, England)]
(Financial Management (London, England) Via Acquire Media NewsEdge) One problem that many finance departments face during a downturn is that travel and entertainment (T&E) expenses head north, while revenues head south. It sparks awkward questions around the boardroom table, and calls to cut these expenses. So just how can those T&E expenses be controlled
1 Develop a T&E policy
"A T&E policy can provide a business with control over direct and indirect costs, encourage travellers to use preferred suppliers, improve compliance to a preferred-supplier list by using negotiated rates and meet contractual obligations, resulting in savings and increased productivity," says Karen Penney, vice president and general manager UK of global corporate payments at American Express.
"Approved payment methods are important for controlling T&E spend and give many financial and administrative benefits, so outlining them in the policy is vital."
"It's important that companies lay down guidelines for their employees as this saves time and reduces the risk of ambiguity or excessive spending," adds Eva Bogowicz, financial controller at Silverdoor, a global accommodation provider.
2 Get employees involved
A T&E policy that rubs against the grain of how staff work can be a constant source of friction, rather than the basis of a smooth administrative process.
Policies based on mandates that are over-prescriptive and enforced with a heavy hand don't work, argues Dean Forbes, chief executive of KDS, an expense management services company. "It's incumbent on the policy to make it easy to do the right thing, and easy normally means choice."
One company that has taken that philosophy on board is Salesforce.com, an enterprise cloud computing company. It has provided employees with an app that lets them compare their own costs and carbon footprint against colleagues and the company believes it contributed to a 9 per cent cut in travel costs last year.
3 Reduce the number of trips
It sounds obvious, but not all T&E policies encourage employees to consider options that don't include making a journey. "Companies can better control T&E expenses by combining trips to several nearby areas, minimising the travel time and cost involved," suggests Bogowicz.
"Companies should weigh up the value of the trip with the costs involved and limit the number of employees who travel."
This is also where technologies, such as Skype, can play a part by turning a lengthy trip into a laptop-to-laptop conversation. For meetings where Skype is not sophisticated enough there are other options, such as BT One Collaborate, which provides audio, video, web conferencing and streaming. A recent update allows call participants to communicate in high-definition video while sharing documents.
4 Use approved travel carriers
Even with greater use of technology, there is still a need for business trips. But booking them can be complex because rail and airline providers offer a bewildering range of ticketing options.
It's normal for larger companies to have preferred carriers, notes Forbes. "Smaller companies with fewer journeys can control carrier choice by making sure that employees are only reimbursed for appropriate flights at an agreed class oftravel/'hesays.
"Employees should be required to use designated suppliers for air travel, accommodation and car rental services," says Bogowicz. "All employees should be given detailed information on their budget before travelling anywhere and on whether there will be any reimbursement outside of the T&E policy."
5 Seek good I hotel deals
Hotel costs are a key area where T&E expenses can escalate unexpectedly. Forbes advises signing up to a hotel group's preferential payment mechanism, which enables the company to pay direct, rather than reimbursing an employee after the trip.
Many hotels offer deals for rooms booked in advance. "Companies can save money by looking at the number of nights that they may need over a year and contacting the hotel for a preferred corporate rate," says Sarah Ahmed, sales and marketing director at the Lancaster London hotel.
"Find out during the booking process whether there are services that can be paid for in advance at a discount, such as internet and breakfast," she adds.
Bogowicz says: "Serviced apartments are a great alternative to hotels, especially if a number of people are travelling together. Because they can eat in, they save on restaurant bills."
6 Monitor expenses in realtime
Too often, the finance department is faced with approving unauthorised expenses - or causing an almighty row with a key employee - because the money has been spent.
But because most employees own smartphones, they can now input expenses on the move using an app. "Managers need to be equipped with the tools and systems to manage travel and expenses costs pro-actively," says Sanjay Parekh, managing director at WebExpenses.
"Software should contain a pre-trip functionality whereby managers can approve expenses before a trip and not after, when it is too late. Mileage claims can be integrated with programs such as Google Maps, enabling accurate postcode-to-postcode measurements when making claims."
7 Reduce mobile phone roaming costs
A ten-day trip to the US can attract roaming costs of between £660 and £1,200, according to figures from TEP Wireless. It hires out "local" smartphones and wi-fi modems, which can connect laptops and other devices from £4 a day.
8 Use corporate, pre-paid cards
Employees can only spend the money that is loaded on to the pre-paid card so there is no danger of them going over budget.
For example, more than 2,000 haulage drivers use Contis Group's credEcard to pay for petrol, accommodation and other incidentals as they drive around Europe.
Mike Fromant, group managing director at Contis Group, argues that pre-paid cards help to streamline expenses administration. Instead, a finance function uses a software program to manage transactions and upload new cash to cards.
It's safer for the drivers, too, who used to have large amounts of cash in their vehicles. Since the drivers have started to use their cards, they've suffered fewer personal attacks.
"It is rare for a card provider to be able to improve the safety of a user's working conditions, as well as making their operations more efficient and convenient," boasts Fromant.
Peter Bartram is the author of The Perfect Project Manager (Random House Business Books)
(c) 2012 Chartered Institute of Management Accountants
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