Next time an employee has a tantrum about not being able to fly on their preferred airline when a low-cost carrier has a better fare think of Ikea founder, billionaire Ingvar Kamprad. His company’s travel policy was to always fly economy and to catch public transport (a chance to talk to customers) wherever possible.
The logic is simple. One of the most important ways to control the operating costs of your business is through travel and expenses (T&E) spending. Keeping overheads low gives small businesses the chance to grow.
RedBalloon Days chief executive Naomi Simson shares the Kamprad approach to travel expenses. After starting her corporate gift business at her Sydney home in 2001, she now has 40 employees. Her travel policy is simple: cheap and cheerful.
Her personal assistant uses sites such as Webjet.com.au to book airfares. When RedBalloon Days staff travel, all meals are capped. Lunch, for instance, should cost no more than $25. “Pasta and a salad is fine,” says Simson.
“We don’t want to appear flamboyant or our customers think they are paying for that,” she says. Simson’s team leaders approve all travel expenditure and on the rare occasion when rules are flouted, Simson take the approach: “Look them in the eye and say ‘would you have spent that if it was your money?’ “If they don’t like it, they don’t have to work here,” she says.
Here’s Smart Company’s quick checklist of ways to improve your T&E policy in 2008.
Be the enforcer
Get back to basics: Explain how travel bookings work in the company. Eg. who handles bookings in house, if there is travel management company involved or whether staff is expected to make their own arrangements.
Demand a business case for travel: If the work can be done via video or telephone conference, challenge why there needs to be travel. Think about combining trips to cut back on travel costs.
Deadlines: Set deadlines for lodging expense claim forms. Make life easier for travelling staff by giving them an expense claim form and a receipt envelope to take with them on the trip. They might make time on the plane to fill in the forms.
Updates: Regularly distribute updates on the company’s travel policy.
Big ticket items
Airlines: Clearly state whether the company books tickets through preferred carriers or takes a lowest fare of the day approach to airline tickets.
Also encourage tickets to be booked well in advance to take advantage of savings. Last-minute airfares at peak times will cost double, sometimes triple average rates. Also be clear about when/if business class travel is offered.
Hotels: List the hotels/hotel chains that the company has corporate rates with. If employees are permitted to choose their own hotel, list the cost-per-room limit for each city.
Encourage use of last-minute accommodation sites for the cheapest rates. Also encourage staff to find rates that include breakfast to avoid an extra $30 charge.
Meals: Set caps on breakfast, lunch and dinner. Be clear if employees can use services such as the mini-bar where 375 ml bottles of water can cost $6.
Transport: A high-risk area for businesses. Ensure that the destination and business case for trip are clear. Clarify whether the company is prepared to pay for premium taxis, limousines, valet parking and other upgraded services.
The sneaky expenses that keep adding up
Alcohol consumption: Decide whether the company will pay for alcohol or whether it will be an out-of-pocket expense for the employee. It is also reasonable to put caps on the cost of wine, beer and spirits. (Grange Hermitage anyone?)
Corporate entertaining: Rationalise expenditure and measure the return on investment.
Dry cleaning and laundry: These services can add more than 20% to a hotel bill. Offer the service to employees only after a certain number of nights away.
Hotel extras: All manner of services including in-room movies, massage, parking, beauty treatments, takeaway meals from nearby restaurants and babysitting (just to name a few) can be charged back to the room. Be clear if the company will pay for it.
Telephone calls: Encourage staff to use their mobile phones rather than hotel phone lines. On overseas trips, look at keeping costs down through local phone hire or Skype services.
Leave nothing to chance: List every conceivable expense in the policy. Make sure all staff have a copy of the travel policy and invite feedback. Keep the document simple and easy to read. Clearly communicate to your team why this is so important and be consistent about enforcing the policy. It is never to late to rein costs in.
By Emily Ross