How to Create a Travel Allocation Plan That Grows with Your Company
Business travel can take a toll on budgets, especially without proper planning. Making room in the budget can be worth it in the long term, as travel can have a positive effect on your company’s bottom line. In fact, each dollar spent on travel could lead to multiple dollars in profits.
Here’s how to create an effective travel allocation plan that will allow you to budget more effectively and reduce costs in a smart way:
1 – Start Planning Before You Need To
It is important that you have a travel allocation plan in place long before you need one, and you should communicate it to your employees. Start by reviewing how employees currently travel.
What are their most frequent destinations? Do they change reservations often? What lodging and transportation needs do they have? Is there any need for parking or other incidentals? What level of service are they able to purchase? For example, is business or first class allowed on international flights for some or all of your employees?
Next, research suppliers that meet your needs in each of the major travel categories (e.g., airlines, rental cars, and hotels), and take the time to ask them not only what products and services they can offer your company and employees, but also what discounts or rewards are offered for consolidating your company’s business.
For example, if you commit to using one or two-car rental companies for all of your business travel, what rewards (such as free rentals or discounts) can that company offer you? Also, don’t forget the value of benefits for your travelers; they are on the road and away from their friends and families, so making travel easier and more rewarding for them will pay off for your company.
2 – Determine Your Budget, but Be Realistic
There is no magic number for how much to earmark for travel, but it is important to think about how much face-to-face time you need for sales, as that will play a major role in increasing the need for travel. According to data compiled by Concur, small businesses actually spend 24 percent more while traveling than their larger counterparts. Keep this in mind as you plan your budget.
Once you’ve determined your budget, narrow down your vendor list to one or two in each category. Then, allocate the expected costs accordingly.
3 – Enact Rules (and Stick by Them)
It is imperative that you set rules. Here are some categories to keep in mind when you do:
- Airlines: How much more are you willing to spend on the perfect flight time or for your employees to have the flexibility to catch another flight if their meeting ends early or runs late?
- Advance purchases: How far in advance should tickets and reservations be booked? Often, the earlier you book, the cheaper the purchases are.
- Class: Can first or business class be used on longer flights? Some companies choose to forgo this option to save funds, but it is an important conversation to have, regardless of where you land on the issue. And keep in mind the expectations you have for your travelers when they land. Do they go straight from the airplane to the meeting room? If so, consider allowing them to have a more comfortable seat so they can rest on the flight. If possible, help travelers get access to the airport lounge to use the shower before heading to the meeting.
- Car rental: What size car should you rent based on the number of travelers? Does each employee need his or her own car, or can several share an SUV?
- Hotel: What’s the minimum room price that requires prior approval? Or is there a cap that employees simply are not allowed to go over? Are you willing to pay more for a room in a conference hotel to cut on transportation costs?
- Other considerations: Provide guidelines for key items such as meals, entertainment, internet use, and transportation (e.g., taxis, tolls, and parking). For example, some companies set a daily per diem for food, which is paid regardless of what the employee spends and doesn’t require travelers to submit receipts. Others set limits on tipping percentages based on the service (taxis vs. meals), and some require that employees use specific parking garages and car rental services.
Finally, consider how expenses are paid for and work with your finance team to determine the best approach for your business. There are pros and cons to each method:
- Company card: This method offers the company the ability to earn perks and provides reporting, but it can have higher interest rates and possibly late fees. It also requires much more overhead management on your company’s part, particularly when team transitions take place. For instance, if an employee leaves the company, you need a system in place to ensure his or her card is canceled and any outstanding balances are paid off.
- Employee payment: In this method, employees earn rewards but manage the potential late fees if they don’t submit them on time. Some companies encourage employees to use their personal credit cards but offer the option of a company card if they prefer.
4 – Reward Your Business Travelers for Being on the Road
Use company rewards, such as those earned in loyalty programs, to reward your top sales or business travelers with personal travel benefits. For example, American Airlines’ complimentary program, Business Extra, is designed to help small to mid-sized companies reduce their travel costs. It lets member companies earn points for their employees’ air travel, which can be redeemed for flights and other awards. Another program is Avis For Business, which offers low rates and discounts and allows companies to earn Rental Reward Days.
5 – Grow Your Program With Your Business
As your business grows, it is important to adjust your travel plan accordingly. For example, if your salespeople are traveling to entertain more affluent prospects, you may need to up your per diem or loosen the rules around expensing large dinners and drinks.
Additionally, in your initial planning stages, you may have over- or under-budgeted. As your program becomes more mature, review expenses closely to determine more accurate forecasting moving forward. This will also help you identify areas of opportunity in your travel plan.
Recognizing the value of business travel is critical, whether you are meeting with potential customers, nurturing relationships with existing ones, or meeting with suppliers. Although travel is not cheap, these steps will help you maximize your investment.