If you’ve clicked on this post, like many companies you want to better control your travel & entertainment or T&E expense. Check out this video to see how we can shave $100,000 or more off your T&E expense.
Take Back Your T&E: 5 Minutes to $100,000+ in Savings
Thanks for checking out our video series presented by One Stone Consulting. I’m Walt Jones, CEO of One Stone Consulting and this is Take Back Your T&E, 5 minutes to $100,000-plus in savings. In this brief video, I’m going to show you how a few simple changes to your travel & entertainment strategy, can save your company over $100,000 annually!
A little about One Stone Consulting, we’re a management consulting and advisory firm that helps companies increase profitability & efficiency by creating strategic solutions to automate and improve business operations. We believe that business growth is more about tenacity & efficiency rather than sheer size. So whether you’re a $500 million company or a $10 million company, you deserve every opportunity to reach your business goals and be a formidable force within your industry.
The One Stone Approach is to challenge growing & emerging companies to effectively utilize their size, nimbleness, and adaptability to enhance their competitive advantage. Our approach draws from the belief that the smallest of elements can create the greatest of impact. Hence, a STONE can ripple an Ocean, a STONE defeated Goliath and inspired an Army, a STONE can build an Empire.
This is the first video in our “Finding the Money” series, which looks at 8 different business areas and identifies opportunities for cost savings. Travel & Entertainment is one of what we call the Fast 4 (**click**), those areas you can reduce costs without a huge undertaking (usually 2-4 months).
Any firm with employees who spend time out of the office can tell you the difficulties of controlling T&E spend. In a 2014 poll by Forrester, T&E was voted as the 2nd most challenging operating cost to control. On average, 23% of T&E expense comes from auxiliary spending, which includes spending outside of flight/hotel/car, such as dining and per diem. Oftentimes, companies overlook T&E expense given its purpose which typically involves visiting customers or prospecting new ones.
Lastly, T&E expenses are behavior-driven. People tend to play more loosely when playing with house money. So when employees are on the company dime, they may decide to take the first-class upgrade, or go for the 5-star hotel vs. the 4.5, or rent the full-sized car even though they are staying in the same hotel as the convention they’re attending.
So let’s look at some numbers. Consider a small/mid-sized company with approximately $60 million in revenue. While operating expenses can vary widely based on a number of factors such as industry, company size, internal operations, and even cost of goods sold, the average company’s operating expense ratio typically falls between 60-80%. In this example, we’ll assume 60% or $36 million. Based on a 2017 report by Certify, T&E represents 9% of operating expenses on average, or in this instance, about $3.2 million, with 1/3 of the cost coming from auxiliary spend.
What are some solutions to these challenges? First, engage your employees on your T&E concerns. Employees are much more likely to respond positively to change when they feel they are included in the process. Next, a centralized T&E management system. There are a number of tools available that allow companies to track travel-related expenses and provide robust reporting. Although, unless you have this third step, the system can be ineffective and that step is detailed policies & procedures. There should be a detailed, written travel policy for your employees to adhere to.
These policies and procedures will help set the baseline for how travel is booked, tracked, and expensed. Next, there should be some form over oversight. Depending on the organization, that can range from detailed reports, to ongoing compliance audits performed by the accounting or finance department. And lastly, providing incentives and rewards to encourage employees to be mindful of their spend.
Examples include: corporate travel and booking platform Upside, which allows your employees to receive gift cards to places such as Amazon and AirBnB when they purchase bundled travel services. Another strategy, which our firm is currently testing, is offering a cash back program for employees who spend below a specified threshold on their travel costs, including meals and per diem spend.
Now for the important stuff, what is the impact of these solutions? First, by developing and implementing a centralized T&E program, your company would see cost savings between 14 and 17%, and in the case of our example, approximately $448,000. This comprehensive program would include your T&E management tool and booking platform which will provide bundled travel services which can offer savings as much as 30% or better. Booking in advance, whenever possible, can save an additional 20-25% on travel expenses, and lastly compliance audits to track performance and ensure that employees are adhering to the policy.
Next, incentivized engagement will provide an additional 4-6% savings by allowing your employees to take part in the T&E program and rewarding them for their efforts. As I mentioned in the previous slide, we are testing out a strategy with our clients which will offer employees cash back when they save money on their bookings. This would also include encouraging alternative travel options such as opting for AirBnB or staying with local friends and family instead of a hotel, or skipping the rental car.
By implementing these 5 simple fixes, you can reduce your company’s T&E expense from 9% of your operating expense to just 7.4%. That 1.6% you shaved off equates to about 18% or $576,000 in overall T&E savings. These savings can vary depending on the makeup of your company, but saving your firm hundreds of thousands of dollars by being smarter when it comes to employee travel simply can’t be ignored.
Thanks for checking out this video. For more information on how One Stone Consulting can save your company over $100,000 or more, check us out at www.onestoneapproach.com/LearnMore.