Frame a travel strategy: find the delicate balance between avoiding travel costs and keeping travelers productive.

EXECUTIVE SUMMARY

* HAVE A CLEAR TRAVEL POLICY signed off on by the highest levels of management, and give someone responsibility for managing the program.

* BEST PURCHASING PRACTICES are to maximize the amount of business you do with a small number of suppliers. But small firms often do better letting travelers choose the least expensive option for each trip.

* USING A SINGLE CORPORATE CARD for all travel and entertainment expenses simplifies the process of collecting data and ensures the best service for partners and employees on the road.

* LET TRAVELERS BOOK THE LOWEST AIRFARES available for each individual trip, but funnel all your firm's business travel and meetings to one or two hotel chains in the primary cities where you do business.

* OPT FOR ONE PREFERRED CAR-RENTAL company to qualify for free insurance.

* BOOKING ONLINE AND USING E-TICKETS and nonrefundable tickets are the least costly options. Even if you have to swallow the cost of some unused nonrefundable tickets, you will save in the long run by encouraging their use.

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Anyone who's been to a supermarket or drug store lately already knows the basic rule of purchasing: Frequent customers get the best prices and the best service. It was the travel industry--American Airlines in particular--that invented the idea of a frequent shopper's program to encourage travelers to bring all their business to one supplier. Today, 30 years later, even small accounting firms and their clients can save money and make traveling a little easier for their staff by applying this basic concept. This article outlines the best practices of corporate travel management programs at America's biggest companies and accounting firms and shows how they can be adapted to meet the needs of smaller CPA firms and their clients.

At the Big Four CPA firms, where travel spending runs in excess of $100 million a year, managing the travel program is a serious business handled by a dedicated staff. When traveling for a firm, CPAs must book their trips through a designated travel agency or Internet travel site, using airlines and hotels with which the firm has negotiated discounts. Travelers charge their tickets to a single charge card, drive cars from the firm's designated car-rental company, bring their meetings to preferred hotels and file their expense reports online. These travel programs easily can be adapted on a smaller scale.

Optimizing the budget comes down to juggling pieces of the puzzle by making decisions about the five components of a viable travel strategy:

* The firmwide or corporate travel policy.

* The in-house manager of the program.

* The travel agency that serves as the intermediary to suppliers.

* The airline, hotel, car-rental, charge-card and online travel-booking suppliers with whom to partner.

* The system used for tracking and reporting spending data.

Keep your policies concise and clear, covering the basic goals and guidelines for each of the five major components. We'll look at and offer best practices for each, with a focus on small and midsize accounting firms and their clients.

START THE JOURNEY WITH A MAP

Whether employees are traveling for the firm or billing every charge back to a client, their preferences are the same as everyone's: they like to fly first class--and will, unless someone sets clear limits. Every firm and company should have a travel policy outlining basic rules that are signed off by top management and distributed to every employee who travels. Keep in mind, however, that buying travel is not like buying paper clips. Flying far from home is a stressful and emotional business, and the time of executives is a valuable commodity not to be wasted. Often the least expensive option is not the best value in terms of time and effort.

Many companies have a two-tiered policy--one for heavy travelers, senior partners and executives; and another for those who travel only to an occasional conference. That's an option worth considering.

Every travel program begins with people, and firms have two options here: to use in-house staff, or to outsource the program to a brick-and-mortar or online travel agency. In the not-so-distant past, many companies had travel agents physically sit in their buildings, but rising personnel costs make that impractical today, and technology makes it unnecessary. Travel agency and online sites provide round-the-clock service at a fair price. Unless your office is open 24/7 and your office space is extraordinarily cheap, the best practice is to outsource. Even if you do, though, it's imperative to designate a partner or employee to oversee the program, manage the relationships with suppliers, ensure best practices in pricing and execution, and negotiate some deals of your own.

Remember, too, that rule of purchasing. Consolidating all your travel buying through a single travel agency or Web site is the way to win discounts and deals, keep spending data neat and provide the best possible service to your travelers on the road.

Making reservations over the Internet is less expensive than booking through a travel agent, and the three major travel sites--Expedia.com, Travelocity.com and Orbitz.com--all offer dedicated small business programs that provide monthly spending reports. Even better, the systems can be configured so that when a traveler searches for a hotel in Phoenix, for example, the Sheraton with which you have a negotiated discount will be highlighted.

Online travel agencies like these display the widest range of choices--but not every choice. Travelers also may want to check the sites of the expanding number of start-up airlines where the lowest prices lurk. On the other hand, many small firms have reported being inundated by offers from Southwest Airlines' SWABiz program. The savings there are real, as travelers enter their own information directly into Southwest's computer system. But as on any airline-owned Web site, travelers see flights and fares for only one carrier and lose the ability to comparison shop.

Even beyond the travel-agency fees you can save, letting travelers make their own reservations over the Internet invariably results in lower costs. Perhaps the biggest surprise firms have realized from online booking is that when travelers are offered a wide range of options on their computer screens, a surprisingly high number do the right thing and change their plans slightly to take advantage of lower-priced options. In fact, if we had to offer a single piece of advice for cutting travel costs, it would be this: Get as many travelers as you can to book their travel online as fast as you can.

Shifting traveler behavior so that employees book their own trips online instead of calling Mary at the agency down the block may take some doing, though. A clear policy from top management is the only way to accomplish this; even large companies report only about 50% compliance unless there's a strong mandate from the top. Compliance is much higher if you designate one employee as the official travel arranger for staffers to call and decline to reimburse travelers who stray from policy.

TRAINS, PLANES AND AUTOMOBILES

While big CPA firms and businesses are best served by pushing their travelers to use one airline and then negotiating discounted rates, smaller entities generally do better allowing travelers to pick the airline or hotel with the lowest rates on each individual trip. Remember that every travel dollar not spent falls right to the bottom line; saving a few thousand dollars in expenses is as valuable as four or five times as much in additional revenues.

No matter how hard you try, though--and especially if your firm has international clients--the need for high-end travel will not go away. Many firms (and their customers on whose dime the CPA is traveling) allow first and business class for partners and executives and for employees traveling with customers on red-eye flights. It's on those tickets that the airlines derive their biggest profit margins. Track them and negotiate a discount for first- and business-class tickets with one major airline that offers frequent flights from your home city and on your most frequently flown routes.

Virtually every airline, hotel, car-rental company and railroad offers discounts to business customers; make it someone's formal responsibility to negotiate on your behalf and then to nudge travelers to use these vendors. Airlines typically offer small business programs that yield free tickets with the purchase of a given number. Take advantage of them.

Of all the pieces of the travel framework, moving travelers to a single car-rental supplier is the easiest. The issue here, as always, is cost vs. convenience. In general, on-airport companies cost more, while off-airport companies cost less. But any preferred car-rental program brings one important advantage: free insurance. With car-rental companies typically charging $9 to $14 a day for insurance, and the average rental lasting 2.5 days, the savings from directing your travelers to a single company are compelling.

Remember that CPAs traveling on client business and billing expenses back have a fiduciary responsibility to travel at the same level as clients. Many firms follow client travel policies in such cases, sometimes using the clients' travel agencies as well. Handling negotiated discounts demands careful accounting; a spate of class-action lawsuits in 2004 objected to firms billing customers for the actual fares paid and then keeping the corporate discounts they got back from travel suppliers. Unless you're prepared to argue the issue in court, bill what you actually pay, or the lowest available fare when you fly on a free ticket.

CHECKING IN WITH A HOTEL PROGRAM

While it's possible to push staff travelers to use one or two major airlines without inconveniencing them too much, hotels are a different story. Location really does make a difference. Staying in a particular hotel often offers tangible and intangible benefits: saving cab fares, minimizing wear and tear, and keeping staffers close to the action at conferences and meetings so they can mingle with important contacts or potential new customers.

Rather than insist that everyone stay at the Sheraton, a best practice is to focus on the five or six cities to which your firm travels most frequently and negotiate discounts with a hotel or two in each. If your travelers or their assistants are using a corporate Internet site, set up the system so those properties appear first and are highlighted, with your firm's negotiated rate made clear.

Maximize your business to these hotel partners by requiring that employees register all meetings they are planning with the staff travel manager, and encourage them to patronize the same hotel chains. Managing meetings is a politically sensitive area, as many meeting planners are accustomed to receiving gifts and rewards from the hotels to which they bring business. Make it clear that as with every purchasing decision, it's important to base the choice of a meeting location on what's best for the firm, not for the individual doing the buying. Centralizing and managing meeting spending is the biggest opportunity for small businesses in the travel arena.

OTHER PIECES OF THE PUZZLE

The most important element of a successful travel program is the use of one corporate charge card to which all travel expenses must be billed. This is a relatively easy step to enforce: Mandate that charges not booked on that card will not be reimbursed. Charge cards (such as the American Express or Diner's Club corporate cards, which are not credit cards because they must be paid off every month) capture the data that show what your travelers actually bought and are the key to rebates, discounts and enhanced services. (For an innovative approach to charge cards, see the case study on page 48.)

When dealing with the data, pick out the items or objectives that matter most and track them. Some midsize companies have developed a dashboard or scorecard of key travel program measurements they track quarterly: percentage of compliance to travel policy for air, car and hotel expenses; average airline costs per mile through the agency and through online booking sites; rate of online vs. travel agency bookings; and average hotel room rates in key cities. Those are the fundamentals. Establish the conditions for success for each key measure and work toward achieving them. As the numbers improve, set new benchmarks and start all over again.

Like any good frame, the best professional travel management programs set boundaries without getting in the way. Their most important goal is always to help partners and employees get their business done safely and quickly. But CPAs can teach their own firms and those of their clients that a little management attention up front can get both the staff and the bottom line just where they ought to be.

Projected business travel cost increases
for North America in 2005

Air, domestic economy class            1%-3%
Air, international business class      2%-5%
Hotels, standard corporate rates       0%-3%
Car rental                             0%-2%

Source: American Express Global Travel Business Forecast, 2004.

Maximizing the Travel Tab

Corporate use of online booking sites and
low-cost carriers reached new heights in 2004.

Percentage of bookings made online          60%

Average airfare savings of online
booking vs. travel agency                   15%

Average usage of online vs. traditional
travel agency at midsize companies          65%

Source: Survey of 160 corporate customers, GetThere.com, 2004.

Small Company Travel Benchmarks

Average one-way domestic fare                     $327

Mandate the use of a corporate card for
travel expenses                                    54%

Centralize meetings at preferred hotel chains      79%

Source: Business Travel News, July 19, 2004, www.btnonline.com.

RESOURCES

AICPA Resources

The AICPA's Elite Values program offers discounts and benefits to Institute members with Hertz, Starwood Hotels and Visa. For information, go to www.cpa2biz.com/Affinity/default.htm.

Other Resources

* Expedia.com, Orbitz.com and Travelocity.com are the largest travel booking sites. All have special programs for small and midsize businesses.

* Business Travel News, www.btnonline.com, offers news for travel managers.

RELATED ARTICLE: Executive protection: play it safe.

Be proactive about safety on the road. Here are some tips to follow and share:

* Notify others of your whereabouts. Share your itinerary with someone at the office and with your family, and make arrangements to communicate regularly--every day if you are going overseas.

* Carry emergency information. Include addresses and phone numbers of your family, office and doctor; the provider and policy number of your medical insurance; and a list of your current medications. When headed abroad, add the American embassy and put a photocopy of your passport's cover page in your suitcase in case you lose the real document.

* Watch your back. We all know not to wear expensive clothing or jewelry, or walk alone at night. Go the next step: Never say your hotel room number aloud or mark yourself as a tourist by wearing your name badge out of doors. If you'll be out late, take a taxi instead of driving a rental car, and request a hotel room near the elevator so you won't have to walk down a long hallway alone.

* Protect your assets. Beware professional thieves who frequent airports to gather information on who's going out of town. On outbound trips, use the airline-supplied ID tags for your luggage, and fill in the address of your hotel rather than your home. On the way back, use your office address.

DEBBIE ZIMMERMAN, CPA, is a vice-president at Stonefield Josephson Inc. in Santa Monica, California.

CASE STUDY

Playing for Points at Meyners + Company

At Meyners + Company LLC, travel management revolves around maximizing the firm's two-pronged charge-card program and the free travel benefits that accrue from using it.

Though its annual travel and expense tab is close to $150,000, much of it charged to clients, the Albuquerque-based firm earns points on the roughly $1 million a year it lays out by paying virtually every bill with co-branded Citibank/American Airlines and Southwest Airlines charge cards.

"We sat down with a printout of every vendor we do business with--from magazine subscriptions to our landlord--and asked them to take one of our two credit cards," says principal partner Bruce F. Malott, CPA, who heads the Meyners program. "We charge $315,000 a year just for the rent and $300,000 for health insurance, so those two vendors alone give us 600,000 points."

To sidestep the limits that corporate-card vendors set on monthly charges, Malott applied for the cards in his own name and assumed personal responsibility for the payments. "That's risky business," he acknowledges, so he offset the risk with a contract that gives him an assignment of the firm's receivables, making him a secured creditor to the extent that's owed on the cards if the firm goes out of business.

After quickly charging enough to make himself a gold member, Malott negotiated a $70,000 monthly credit limit with Citibank. When the firm spends more than that--such as the time it bought $250,000 worth of furniture--it wires Citibank the amount over the maximum. Along with the new desks and chairs, that furniture purchase brought the firm 10 free coach tickets.

Once tickets are earned, the internal travel coordinator--Malott's assistant--takes over the process of maximizing their use. Free tickets are used only on trips that otherwise would cost more than $300; if they're being used for client business, the travel coordinator checks the Internet for the cheapest available coach fare and bills the client that amount. Everyone flies coach on trips of less than three hours' duration; on longer hauls, directors and partners can use points to upgrade to first class.

When no free tickets are available, or for short hops costing less than $300, the firm turns to its second travel partner, Southwest Airlines. "Southwest has the best mileage plan because there are virtually no blackouts," Malott says. "If there's a seat on the plane for a paying customer, there's a seat for you. You get a companion pass after 100,000 miles or 100,000 points on the Southwest credit card, and you can use a free pass and a free companion ticket together. That's the best deal there is." Meyners + Company gives Malott the companion tickets in return for accepting the risk of using his name.

On the hotel side, the firm's travelers stay at Marriott or Hilton properties whenever possible, and then use the points they accrue in those frequent traveler programs to avoid travel costs. To maximize the points, the firm uses the same two hotel companies for outside meetings; one recent firm conference at the Marriott in New York City earned 30,000 points--enough for a free room night on a future trip.

"After a while the loyalty programs start to snowball," Malott says, "and you can travel even to big cities affordably."

The firm stopped using brick-and-mortar travel agencies, except for complicated international trips, when they began charging fees a couple of years ago. Now Malott's assistant makes the reservations for all firm travelers online, on Travelocity.com, Orbitz.com or Southwest.com. She buys nonrefundable tickets whenever they're available.

"We have eaten a few of those," Malott notes, "but in the long run the money lost on nonrefundable tickets that never actually get used is far less than the higher price we'd have had to pay if we bought all refundable ones."

In the seven years since Malott first took a serious look at managing travel, the firm has chalked up 5 million points and earned 200 coach tickets. And best of all, he notes, "the IRS has ruled that points are not taxable."

For 2005, Malott is considering just one change to the travel program. With the cost of gas so high, it might pay to allow staff to rent cars rather than use their own for the much-traveled Albuquerque-Sante Fe route. "Thirty-eight cents per mile is not covering the wear and tear on our cars," he says.

And think of all the free car-rental points they could build up.

PRACTICAL TIPS TO REMEMBER

* Consider a two-tier travel policy, with one set of rules for partners, executives and road warriors, and another for those who travel less frequently or shorter distances.

* When traveling on client business, follow the client's policies. Be careful about billing back only the amount you actually paid or, when using free tickets earned through frequent-traveler programs, bill the lowest available fare.

* With many airlines teetering on the edge of bankruptcy, cash in those frequent-flyer points and use them while you can.

* If one partner is willing to charge the firm's travel on a personal card, cover the risk with a contract that makes him or her a secured creditor.

WILL TATE, CPA, is vice-president of Management Alternatives, a travel consulting company based in Norwalk, Connecticut, and a former auditor and travel manager at a Fortune 250 company. His e-mail is [e-mail]. CHERYL ROSEN is managing editor of the Journal of Accountancy and former executive editor of Business Travel News. Ms. Rosen is an employee of the American Institute of CPAs. Her views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through certain specific committee procedures, due process and deliberation.