The power of in-person connections is real. Studies have found that face-to-face requests are 34 times more successful than emails and that 84% of business travelers believe travel is important for driving company growth.
Companies rely on business travel to build relationships, participate in training and conferences, and stay ahead of the competition. But business travel costs can quickly add up and become a significant portion of a company’s bottom line.
It’s crucial for businesses to adopt effective strategies to manage business trip expenses. Creating a travel budget can help travel managers and finance teams monitor employee travel costs, make informed financial decisions, and prevent overspending — but only if done correctly.
Keep reading to understand how your company can take control of its travel program and maximize its return on investment.
Like many other operational costs, companies must budget for the expenses associated with essential business travel. Here are five practical tips for setting a corporate travel budget.
What is the purpose of business travel for your company? What specific goals does the company hope to achieve? If you can’t answer those questions, it will be difficult to establish guidelines for business travel spending and get all stakeholders to agree on a business travel budget.
Are you looking to expand into new markets, strengthen client relationships, attend industry conferences, or explore partnership opportunities? Determine which travel initiatives are critical for achieving your corporate goals so you can effectively allocate resources.
Next, set measurable performance metrics for the company goals. These metrics could include:
Aligning travel objectives with measurable outcomes allows for better budget justification.
Look at past travel bookings for patterns to make a realistic business travel budget. Understanding past business trips' average length and average cost can help your company make more accurate estimates.
Travel expense categories to look into include:
Beyond the breakdown of expenses and the total average cost of the trip, you’ll also want to understand the peak travel times for your company and which departments travel. Conferences or networking seminars typically occur annually, and certain departments — like sales and finance — tend to travel more. (However, there has been a marked shift in who travels since the pandemic.)
Now that you know how much an average business trip costs, you can start building a more detailed budget. Determine how much your company can afford to dedicate to travel while considering other business expenses like payroll, rent, and utility bills.
When putting together a business travel budget, it’s crucial to consider various external factors that may affect your expenses. These could include:
It can be difficult and time-consuming to forecast these external factors. A global business travel management company can help keep you abreast of changing conditions. Think of them like travel agencies built specifically for corporate travel; these travel industry insiders specialize in performing duty of care and can assist your company in making informed decisions that optimize your travel budget.
A business travel expense policy helps companies manage employee expenses for those on the road. It helps make business travel effective, cost-efficient, and easy for everyone involved.
A good corporate travel policy should:
In short, a business travel policy clarifies travel practices and travel expenses to all employees. It is a tool to help business travelers stay within policy compliance. Road warriors can keep the policy on hand to ensure they understand what is deductible while on a business trip.
Above: A desktop view of travel spend analysis using the Navan app
Implement a robust expense tracking system to monitor actual expenses against the budget. This practice will help identify deviations, spot potential areas of overspending, and inform future budgeting decisions.
Monitoring expenses and noticing trends can make business travel more affordable and improve the traveler experience. Some common ways to reduce expenses include:
Corporate travel management companies can also connect your business with corporate negotiated rates. Navan has negotiated up to 15% off the best available rates at thousands of hotels globally.
Read More: How to Cut $1 Million from Your T&E Program
Determining a reasonable business travel budget can vary significantly depending on factors such as the company’s size, industry, travel objectives, destinations, and employee roles.
Some general considerations to help establish a reasonable business travel budget include:
Remember, a reasonable business travel budget should strike a balance between meeting the needs of the business and ensuring responsible financial management. Regularly review and adjust the budget based on feedback, industry trends, and changing business requirements.
With Navan, companies can: