Organizational policies are important for companies to function smoothly and adhere to compliance norms. With business travel expenses on the rise, a well-structured T&E (travel and entertainment) policy for both local and international travel is even more critical. However, most organizations lack on this front. As per a recent global survey by GBTA with business travellers, only 44% of them said they had to follow a policy, while 21% of travelers stated that they don’t have any restrictions on their policies.
The scenario in India is no different. Business travel spend in the country is one of the highest in the world and expected to grow by a compound annual growth (CAGR) of 12% through 2020 to 6% by 2030. With well-managed travel policies these expenses can be curtailed to a great extent and this can have a direct impact on the company’s bottom-line.
What happens when organizations don’t have well-defined travel policies?
Are employees prudent in their spends? Do they keep organizational expenditures within limits? Or do they tend to push their luck and spend more?
Chances are that most employees will be confused about what their rights are and how much they should spend. They will have no benchmark against which to map their expenditures and can end up spending unwisely even if their intentions are right. With no adequate controls in place, this will lead to lot of wastage of company’s money. It could also lead to resentment amongst employees against those who get away with excessive spending.
From the organizational perspective, the HR and finance departments will have no view into accuracy of expenses, no insight into whether funds are being used wisely, areas where operational efficiencies could be brought in.
For example, a salesperson job profile can involve multiple local travel within a city. Hiring a taxi from organizations’ vendor for a whole day could prove less expensive than hiring ola or uber several times during the day. Without any policies in place, different employees could use different modes of local travel and it would be a nightmare for management to track, which is more efficient.
So if the benefits of travel policies are so many then why don’t corporates have proper policies in place?
There are five key reasons for this.
- They haven’t given enough importance to travel related expenses – This is surprising but true. Travel expenses are the second largest controllable expenses for corporates and hence merits greater attention. But it is seen that most organizations consider it as a part of business and don’t focus on controlling it.
- They feel controlling travel expenses could result in employee dissatisfaction – This could be true to an extent. Business travelers would be happy if they have fewer restrictions in terms of policies, especially senior employees.
- Framing travel policies could be complicated – Organisations will need to keep several aspects like seniority of employees, travel habits and trends in mind before framing policies. Hence most of the times, policies in organizations are standardized but at the same time flexible for employees.
- Small and mid sized corporates are unable to scale up processes – a large part of growth in the business travel segment in India is led by small and medium enterprises. It is estimated that India has close to 50 million SMEs, accounting for nearly 40 percent of the gross domestic product. When they are small they do things manually and sometimes continue to do so even after scaling up. The concept of “managed travel” with best practices and policies is novel to them.
- Lagging in digital implementation – Companies who have not yet undergone digital transformation will either have old BI systems or will be working manually on spreadsheets. In both cases they would be working with outdated policies that have not been updated and integrated into the organization’s systems.
Whatever be the reason, it is imperative for organizations to update travel policies as per current needs and trends. This will help them save costs as well as offer useful insights for business critical decisions. GBTA says that a well-executed managed travel program can save a company approximately 15% on its travel spend in the first year it is implemented.
How Happay can help
We have rich experience in handling policies for different size of businesses. Our customer success teams have handled 4500+ clients. For organizations that don’t have policies in place, we can help them build policies using insights we have gained and best practices we have come across. If they have policies in place, we help them incorporate those policies into the system. This helps in maintaining compliance by tracking flaws in reports, violation of processes, identifying the violators and informing their respective managers in time.
The insights and data gathered through automated systems can be used to bring in more operational efficiencies and improve policies further.
Travel policies play an important role in T&E spend management. They can help set the right benchmarks to control excessive spending.
What do you think about travel policies in your organization? Share with us and write to us to know more about our T&E solutions.