Travel and entertainment (T&E) can be significant operating expenses for businesses that require frequent travel or client entertainment. Not every business needs T&E, and it’s typically best to minimize these expenses if possible, especially if video conferencing software can be effectively used as an alternative.
Audio and video communication isn’t an adequate replacement for in-person interaction in some circumstances. Some examples of businesses that have unavoidably high T&E costs include:
There are several reasons why T&E tracking and management is vitally important. Tracking allows for forecasting future costs and allocating resources effectively. The data can help inform future decisions regarding vendor relationships and travel policies.
Travel poses a unique issue for management. Employees often have limited oversight, exposing businesses to the potential for significant losses from irresponsible behavior, fraud or the abuse of discretionary funds and per diems.
Tracking is also key for assessing expenses and spending patterns. Could you save more by booking at specific hotels or with certain airlines? Are there business-oriented travel packages? How many amenities do your employees really need for a 24-hour round trip? The only way to separate the necessary costs from the superfluous costs is with tracking.
Expense management software may be key for your business. Some platforms incorporate automation and give managers real-time visibility into T&E and individual employee spending with the business’s funds. The best expense management software has integration with commonly used accounting systems to further automate expense reconciliation and management.
It’s best to use a platform with a good mobile app so employees can easily submit expenses on the go, enhancing accuracy and reducing the demand on management’s time. The less babysitting managers must do, the better.
It’s far easier to curtail T&E abuse when employees know they’re being meticulously tracked. Transparency also helps establish behavior expectations up front. Abuse is far less likely to happen if there’s a system that thoroughly tracks T&E without the need for management supervision.
Corporate credit cards are a necessity for companies that rely on travel and entertainment. Each credit card can be issued in an employee’s name. Corporate cards can centralize spending and simplify tracking, making it easier to hold irresponsible employees accountable. These cards typically allow employers to set spending limits and monitor transactions in real-time.
Any business with high travel and entertainment costs should regularly audit their T&E accounts and track platform-generated reports. Doing so helps ensure issues are caught early and compliance can be enforced without a lag between abuse or fraud and the consequences.
Good tracking platforms typically allow for customized reporting on a variety of criteria, like reports to track spending patterns of individual employees or departments. These can be used to identify areas or individuals that need improvement.
Establishing relationships with preferred vendors, like airlines, car rental companies or hotels, can yield significant cost savings for businesses that depend on travel and entertainment. Many of these relationships can lead to enhanced group discounts for services, which is especially important if several employees regularly travel as a group.
Businesses should also set strict per diems and expense caps for meals, lodging and entertainment. Setting clear expectations up front and quickly holding employees accountable for violations is vital. Letting employees get away with abuse for weeks or months can cause the problem to spread to other workers.
Also be cognizant of the difference in spending between frugal employees, irresponsible employees and the average employee. Some workers may be overly thrifty, while others might splurge when they know the expenses are being picked up by their employer. You don’t necessarily want employees to be miserable, as it could affect their performance and future recruitment, but controlling costs can save significant money over the course of a year.
One way to encourage good behavior is through rewarding it with attractive incentives. For example, allow employees to keep a portion of their per diem they don’t spend – or give employees a percentage of the savings if they find cheaper travel arrangements or use reward points effectively.
There can be surprisingly easy ways to implement rewards programs like these, but businesses may first need to effectively track T&E and establish a baseline cost target.
H&H Accounting Services would be happy to discuss your business’s travel and entertainment tracking, management and accounting needs. We have extensive experience consulting with businesses in industries where T&E is an important activity, and we can recommend everything from tracking software and management strategies to reward programs to encourage responsible behavior.
Learn more about your options by calling us at (480) 561-5805.
