Firms Examine Entertainment, Travel Costs : Executives Seek Ways to Cut Back, Survey Says
Many companies will begin 1989 by trying to streamline and reduce travel and entertainment costs, one of the largest controllable expenses for many firms.
With airlines making 150,000 fare changes a day, it is no surprise that corporate travel expenses frequently soar out of control, according to American Express travel consultant Judith Dettinger-Gardner.
In 1988, American companies spent an estimated $95 billion on travel and entertainment. By 1990, the amount is expected to reach $115 billion.
According to the American Express 1988 travel management survey, travel and entertainment expenses are the third-largest controllable expense for most companies, after salaries and data processing.
Seek Out Best Fares
Dettinger-Gardner, who oversees the American Express Survey of Business Travel Management, said a company can save 30% to 35% on travel expenses by requiring employees to purchase the lowest logical air fare when they travel on business.
“Companies should establish a good travel policy and distribute it to everyone,” said Dettinger-Gardner. “Then they should find a good travel agency to help monitor and control expenses.”
Even the smallest business can benefit from a good relationship with a reputable agent who seeks the most economical fares and provides a detailed, monthly travel report to the company, Dettinger-Gardner said. Too many companies create a flurry of paper work and confusion by relying on too many travel agents. In fact, Dettinger-Gardner recently consulted with one Fortune 500 company that was using 273 different travel agencies.
Trying to manage travel and entertainment expenses has become a major concern for executives, according to the survey. Fifty-five percent of the respondents from 1,600 companies, government and educational organization said rising travel and entertainment costs represent one of management’s top concerns. Sixty-two percent of the respondents believed that employee travel is occasionally abused and must be closely monitored. And 29% of the respondents have hired a corporate travel manager, up from 16% two years ago.
Internally, a company can do several things to keep a tighter rein on travel costs. Dettinger-Gardner said it is cheaper in the long run to issue credit cards to employees who travel frequently, rather than offer large cash advances, which are frequently misspent. A small cash advance of $10 or $15 a day to cover tips, tolls and taxis is enough for most trips, she said.
Companies that provide generous meal allowances and do not require receipts for expenses less than $25 also encourage travel expense abuse, according to Dettinger-Gardner. She suggests that companies require receipts for any travel or entertainment expense of more than $10 or $15. And, she recommends that someone carefully check the receipts to make sure they are legitimate.
“One fellow we encountered visited three major cities but turned in consecutively numbered tear tab (receipts) that he bought at a stationery store,” said Dettinger-Gardner.
One way to reduce abuse is to do more than just add up the math on travel expense reports, according to Dettinger-Gardner. She said the person reviewing expense reports should check to see where and how the airline tickets were purchased and question the traveler if the tickets were not purchased through the company’s authorized travel agent. Frequent flier programs that reward travelers with free trips are also “a big problem” for businesses, according to Dettinger-Gardner.
“They entice travelers to make decisions not based on price,” she said, adding that it is nearly impossible for a company to keep track of frequent flier mileage or require employees to turn in their free trips.
“One company hired seven people to keep track of the frequent flier miles,” she said. “And even with that, only two out of 200 people turned in their free trips to the company.”
PUTTING THE BRAKES ON TRAVEL AND ENTERTAINMENT COSTS
Nearly 40% of the executives surveyed said travel and entertainment costs increased by at least 10% between 1986 and 1987.
Increased 10% or more: 38% Increased less than 10%: 29% Remained the same: 14% Decreased: 16% Fewer than half of those surveyed--42%--said they felt “extremely” or “very” successful at managing costs.
Somewhat successful: 47% Very successful: 35% Slightly successful: 10% Extremely successful: 7% Not at all successful: 1% The following cost-control measures were found to be effective by more than 60% of survey respondents.
Tighten receipt requirements: 67% Require travelers to take lowest ‘logical’ airfare: 66% Consolidate travel arrangements to fewer travel agencies: 63% Designate mid-level manager to handle travel: 63%