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Written travel policies: foundations for savings.

WRITTEN TRAVEL POLICIES Foundations for Savings

Whose responsibility is it to ensure that we are efficiently spending company funds for travel and entertainment (T&E)? This is a frequently asked question by corporate controllers, travel managers, CEOs, department managers, vice president, travel planners and, yes, sometimes by travelers themselves.

Companies here and abroad have learned that successful T&E management requires a strong partnership between them and their travel agencies. If that relationship is viewed as a true partnership, great opportunities exist for aggressive savings in T&E expenses.

Consider this: travel and entertainment currently ranks in the top five line-costs for most companies. Only payroll and data processing exceed T&E costs for many companies. According to industry analysts, a company's T&E budget typically breaks down as follows:
Air Travel 50%
Lodging 25%
Meals 14%
Rental Car 6%
Miscellaneous 5%

Once you have selected a travel agency with which you feel confident, one which has earned valuable purchasing power with its suppliers (airlines, hotels, etc.), you must then evaluate the effectiveness of your company's T&E policies.

Your company can save thousands of dollars annually by using effective travel practices. Such practices stem from good travel policies in a written travel-policies manual.

Goals of a Successful Manual

1. To control employees' expenditures of company money. 2. To prevent fraud. 3. To control and utilize vendor contracts. 4. To provide basic accounting guidelines. 5. To enhance employee morale. Objectives A team of executives should determine travel policies. It is recommended that the team be composed of executives from the following departments: * Finance - For the ability to analyze past expenses and project future budgets. * Internal Audit - To approve expenses. * Purchasing/Procurement - To analyze expenditures on an annual vs. unit-cost basis. * Administration - To serve as catalyst for all departments involved. * Personnel - To maintain performance records which frequently show an employee's past trends in spending company money. * Sales/Marketing - To represent the department that frequently uses the greatest share of the travel budget. * Traffic/Travel - To represent the department that is probably the most current on issues, technology, and terminology. * An experienced travel planner - to offer extra insight.

Determining Travel Policy

The executive team should strive for these goals when putting together a company travel policy: * Success of Mission - Travelers must not be inhibited by policies. * Efficiency - The purpose of the trip should not be sacrificed for adherence to rules; that is, if traveling first class would meet the needs of the trip better than a lower class, it should be considered. * Flexibility - Policies should not be ambiguous, but they should be changeable. Exceptions should require approval. * Economy - You should strive for lowest rates in all situations. * Clarity - Current terminology should be used (definitions frequently change - deluxe becomes superior, superior is redefined to something else). * Conformity with Agreements - Your company should demand that travelers use negotiated rates. An employee contract may be necessary to ensure this conformity. * Legality - Make sure your policies are in accordance with IRS laws and labor laws.

The Golden Rule of Travel

"Do unto your travelers as you would have them do unto you." The ABCs of this rule are:

A-Attitude: The attitude of the traveler toward corporate funds can be either negative or positive. An opening statement by a company officer explaining the company's position and expectations and the benefits that accrue to the employee as a result of good travel practices can help in developing positive travel habits. This officer need not be the CEO, but he or she should be a well-respected officer who "abides by the book."

B-Benefits: Allow travelers to benefit from your company's purchasing power. Not only will it be an advantage to them, but increased travel one year may help you negotiate an even lower rate the following year.

C-Controls: (1) Reservations - Explain your control points and how they work, (2) Records - Keep accounting simple, and let travelers know exactly how soon after travel their reports are due, and (3) Cash Advances and Reimbursement - Advise travelers as to which expenses are reimbursable, and let them know exactly how to request and account for travel advances (remember the longer the accountability time, the greater the chance for padded expense reports).

Additional Tips

* Teach employees to spend company money as if it were their own. * Provide a smaller version of the policies manual which they can carry with them while traveling. * Explicitly state company policy as to corporate intent, and leave little to independent decision. * Make cost containment, rather than cost uniformity, a principal purpose of the manual. * Remember that rules unpalatable to their creators will be equally indigestible to those who must travel by them. * Be informative. Give all the required information on supplier agreements, and tell how to take advantage of the terms. * Incorporate into the manual a "How To" section, covering obtaining advance approval, booking reservations, completing the documentation required following the trip, etc. Include samples of all forms. * Do not allow new employees any privileges outside the manual boundaries to which other employees must adhere. * Update your policies with your travel agency at least twice a year.

Randall A. Hunt is vice president of Morris Travel.
COPYRIGHT 1991 Olympus Publishing Co.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:tips for managing business travel
Author:Hunt, Randall A.
Publication:Utah Business
Date:Jun 1, 1991
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