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Business travel and expenses (T&Es) are a significant source of indirect spend for corporations, with globalisation requiring executives to travel to build strong relationships with suppliers and stakeholders.
Yet, despite its importance, outdated corporate processes mean quantifying a meaningful return on investment (ROI) from T&E programmes remains a challenge for most. The study, Managing every mile – commissioned by travel technology firm Amadeus and written by Dr Alexander Grous, a lecturer in the department of media and communications at the London School of Economics and Political Science (LSE) – found with some minor adjustments, greater ROI is well within reach for travel category managers.
A clear travel policy is the essential starting point for a successful T&E buying programme. This code must include all relevant content to enable compliance – from supplier partners to group deals and promotional savings. Employees must be able to access this information instantly, while on the move, to help prevent employees deviating from the policy.
The study found companies with compliance rates of more than 80% could reduce individual costs by up to 23% per traveller. Despite these savings, 95% of respondents said they permitted out of policy bookings. Travel managers need to clamp down on this and focus on exploiting preferable partnerships in order to realise these savings.
A managed buying channel is one of the most effective ways to monitor compliance. This can lead to savings of up to 10% and help improve fraud detection by up to 20%. Yet a managed booking tool was mandated by only 5% of interviewees, indicating the majority are missing out on the benefits of volume discounts and consolidating spend.
Corporate cards can also simplify spend data. Such cards were found to be offered by two-thirds of the executives involved in our study, but uptake from business travellers is as little as 10%. There is clearly a cultural issue with employees choosing personal incentives over the company travel policy. To achieve best practice, the use of cards should be mandatory.
Consolidating T&E buying into a monitored channel can also help achieve greater ROI. Not only will this exploit group benefits and reduce out-of-programme activity, it will also create valuable data that can be used to assess and improve upon processes.
The study also found that more than 80% of executives felt they did not have enough information to make strategic T&E decisions. This lack of vision is due to an inability to capture and analyse data. More than half (55%) said they wanted to capture data to target out of programme spending that financially damages ROI.
An established buying channel, combined with data feedback loops, can enable a more transparent T&E process, allowing inefficiencies to be identified more quickly and buyers to make more confident decisions.
Small changes to T&E buying practices can bring substantial benefits to businesses. Having a well-communicated policy, as well as capturing data through a managed channel, will create the foundations for a more efficient, compliant T&E programme.
Dr. Alexander Grous is a lecturer in the Department of Media and Communications at The London School of Economics and Political Science (LSE)
The report, Managing every mile: How to deliver greater return on investment from travel and expense, by London School of Economics (LSE) and commissioned by Amadeus, outlines T&E buying best practices and was based on 26 interviews with international C-level executives from a broad range of industries
Image: Lia Koltyrina / Shutterstock.com
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. Procurement Leaders received no payment directly connected with the publishing of this content.