Travel is an important item of cost for many organizations, whether in “manufacturing” or in “services” sectors. I have chosen to use the word “manage” instead of “monitor” (reference my previous article How do we monitor Power Costs?) since I am sharing some thoughts which may, besides bringing savings to the organization, help in making travel process more effective. I like to cover them under the following sub-headings:
• Meaningful Data on Travel
• Travel Policy and Travel Rules
• Tour Program Number
• Approval Process
• Pre-Commitment Approval against Departmental Travel Budget
• Infrastructure – Ticketing
• Infrastructure – Hotel Booking
• Expense Reimbursement Process
• Internal Audit
• Analysis of Travel – Post Tour Report.
Meaningful Data on Travel
In one organization, where employees travel all over the globe, incurring travel expenditure in crores of rupees, usual travel procedure existed, namely travel rules, pre-approved travel ticketing, advance given through some travel card, employee on return making expense claim according to entitlement, and settling advance. The organization wanted to explore savings in travel costs and looked for details. The company could not make out places frequently visited, airlines used and hotels frequently stayed, since the travel reimbursement data did not contain these details. In fact the company was giving significant business to a couple of Hotel Chains. This was not known either to the company or to the hotels chains because it is the employee in whose name the booking is done. This data was extracted by manual scrutiny of travel claims for a period, to pursue its exercise on optimizing its travel costs. It is good to preserve such data as a part of your information system.
Travel Policy and Travel Rules
One of the important policy or procedure document for any organization, Travel Policy sets the norms for reimbursement of expenses incurred on business travel. Eligibility, Pre-tour Approval, guidance for booking, Class of travel, Boarding and lodging Entitlements for different levels of employees, Daily Allowances, Local Conveyance, Reimbursement Limits based on Cities visited, Travel Advance, Expense Report Submission and Settlement usually figure in Travel Policy. In the case of overseas travel, there could be additional guidelines on Type of Visa and Forex. Unambiguous Policy and strict adherence to the policy are some of the recommended best practices.
Tour Program Number (TP Number)
A distinct TP Number, for each tour undertaken, which is used to seek approvals, booking, advance payments and settlement is a good practice to manage travel related transactions.
Normally, a proposed travel by an employee needs to be approved by his / her Reporting Officer, before bookings are done. In particularly large organizations, this approval mechanism could be costly, in these days of dynamic airfares and hotel bookings. In one organization, where bosses are all the time busy, and TP approval has been getting significantly delayed many times, and reminders were required to obtain travel approval which is anyway rarely rejected. Analysis of some months’ data on date of travel request by employee, and the date of approval by the Reporting Officer, and the movement in air ticket cost has shown that ticketing cost was going up by more than 25%. Overall cancellations were less than 1%, not to think of cancellation cost. The process was altered where employee shared an advance copy of Travel Proposal with Travel Desk, who went ahead with booking, but who handed over the ticket details, only on obtaining RO’s approval.
Pre-Commitment Approval against Departmental Travel Budget
In another organization where travel has discretionary element, a pre-commitment approval process, in workflow automation, setting off proposed tour cost against departmental budget, before approving a travel was found quite effective in controlling travel cost.
Infrastructure – Ticketing
This is a fairly common practice with large organizations, where data relating to places visited and number of tickets purchased is shared with Airlines, to negotiate discounts, nil cancellation charges and fixed rates between specified destinations to obtain significant savings in ticketing costs.
Infrastructure – Hotel Booking
Technology as well as innovative service providers are offering phenomenal opportunities for savings and for making a company’s travel process employee friendly and hassle free. Important players to know about are: Travel Management Companies (TMCs), Travel Aggregators, Self-Booking Tools (SBTs), Hotel Properties and Hotel Chains. Travel Aggregators and TMCs buy in advance, Room Nights from various properties and Hotel Chains and obtain discounts by offering volumes. Then they market their services and pass on the discounts to Corporates at a service fee. SBTs enable transaction processing. Usually TMC ties up with one or more SBTs to offer services to Corporates. If an organization can analyze, based on past data or business plan, places likely to be visited by its employees on a large scale, spot hotel chains in those areas, tie up with hotels or select a TMC who is strong in that area, integrate their travel booking process using suitable SBT, can see significant gains in their travel process and costs.
Expense Reimbursement Process
Prompt settlement of expense claims, and travel advance should be insisted upon. Many organizations lose money on gaps in travel policy implementation. Accountant processing the claims needs to be vigilant not to allow false claims. Hotel Expenses and Local Conveyance offer scope for manipulations. With due respects to organizations where ethical standards are high, it is good to make the process fool proof, to eliminate false claims. An employee, on travel to US, submitted a statement from the hotel where he has claimed to have stayed. On day 1, he deposited with the hotel $ 5,368.80, and day after day, room rent and other charges were reduced from the balance available, such that on the day he checked out from the hotel, amount due to / due from the hotel was “nil”. This attracted attention as to how he could know the exact amount to the last cent on day 1. He claimed that he could not swipe the Travel Card given to him by the company, and had to draw cash and pay the hotel. Statement directly obtained from Travel Card Company showed a different picture. Only half the amount was drawn. It was an obvious false claim from the employee. In another organization which reimbursed up to $100 as taxi fares, from Airport to place of stay, receipt produced for one of such claims for $83, which appeared over written. Airport to the Place of stay were nearby and google maps showed the distance, and cab tariff for that particular state showed that it would be $23 and not $83. Accountants need not blindly process reimbursements saying it is the employee’s entitlements, at the same time should not become a doubting Thomas and harass employees.
Effective Internal Audit
Quarterly, in depth internal audit of Expense Claims, post reimbursement, and taking stringent actions, where manipulations come to surface would help in minimizing false claims to a good extent.
Analysis of Travel – Post Tour Report
In one consulting organization, where 60% of the employees travel, I came to know of an instance, where a Manager travelled from Mumbai to Chennai, only to know that the person he was to meet was not available that day, and returned. Not going into further details on how it happened, a Post Tour Report was introduced. This report, submitted to the RO, proved to be very useful, and travel costs were analyzed into “Travel for Operations”, “Travel for Business Promotion” and “Travel for Receivables Collection” and so on.
Trust I have shared useful information for managing travel. For more articles from me, and to know about my book, “Translating Operations into Money – Cases in Business Management” please visit www.operationstomoney.com
Tulasi S Sastri