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How to estimate business travel expenses

Expenses related to employee travel are one of the biggest costs for a business and almost every company would expect to incur these throughout the year.

But how predictable are business travel expenses? They’re a variable cost – and even if two employees took a trip to the same town on separate occasions, the cost of those trips would unlikely match each other. Different travellers will make different choices. One employee might choose to travel at off-peak times to save the company money, but another might choose to travel at whatever time perfectly matches their schedule of meetings.

Although booking flights and accommodation takes place before a trip and therefore in some respect is easier to be reported on, there will always be incidental expenses during trips that could be unpredictable. Where one employee takes public transportation, another might take an Uber or taxi; where one has room service, another might eat out at a nice restaurant.

So how can you accurately estimate business travel expenses?

1. Use a travel and expenses system

It would be very difficult and time-consuming to attempt to estimate business travel expenses from a paper-based, manual expenses system. Not only that, but the data wouldn’t be captured in real-time and so it could be weeks, months or even quarters later that you gather the full cost of travel expenses incurred by your employees.

Using a travel and expense system that captures all expenses and travel bookings in one place will enable you to report on historical data, and use that to help predict future spend.

Some expense systems can tie your travel and expense data back to a business outcome such as a sales opportunity, customer project or marketing campaign meaning companies can predict their expenses spend based on similar opportunities or projects of the same value. Companies could even decide that a percentage of an opportunity value is worth spending on travel to close that opportunity and therefore it’s easier to set a travel budget based on sales pipeline targets and opportunity values.

2. Analyse historical data

When companies are able to analyse their historical travel and expense data at the click of a button, it makes it easier to predict future spend. Some providers of expense management and online travel booking systems charge extra to provide analytics on your spend own data. Working in this way means not only added cost but data that is months or quarters out of date.

Having access to all data, in real-time, is the best scenario for timely analysis. Companies can keep track of spend against budget, intervening and adjusting where necessary. Some travel and expenses systems also capture data alongside your commercial, financial and project data to give you instant analysis of spend and inform crucial business decision-making. For example, you can calculate the average cost of trips to frequent traveller destinations and use this as a basis to predict future spend.

3. Have knowledge of why your teams need to travel, not just how

A few years ago ACTE researched the reasons why people travel for business. The three most common reasons were: maintaining customer relationships (42% of trips), internal meetings (22%), and developing new business (20%).

Understanding your sales pipeline activities, existing customer base and internal meeting needs in line with travel and expense spend, is key to assessing the value business travel brings to your organisation. It also enables you to reasonably forecast how much travel spend is necessary in order to hit revenue and operational targets – and maintain the success of your business in the long run.

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