As corporate are opening up for business trips, framing a corporate policy and planning the budget becomes essential. Business travel budget entails all the necessary elements that helps in travel cost prediction and reduction. As the demand for in-person meetings and corporate events rises, corporate travel managers will face challenges balancing growing travel expenses with the steep rise in airfares, ground transportation costs, and hotel tariffs. Therefore, let us discuss how to manage corporate travel budget in detail.
Why is a business travel budget essential?
Business travel is a crucial aspect of any business because it works as an investment for the consistent growth of the organization. A business travel budget enables better ROI for the short-term and long-term progress of the firm. Companies prepare a travel budget by identifying ways to control travel costs without impacting business goals and employee satisfaction. Using strategic budgeting for business travel activities helps companies focus on cost saving rather than cost cutting. Business travel cost is a noteworthy contributor to the overall company costs. Implementation of a travel budget is essential for cash flow management.
Types of business travel budgets
There are several types of employee travel budgets that companies may use depending on their business needs and travel requirements. Here are some of the most common types of employee travel budgets:
- Per diem budget: In per diem budget, employees are allotted per day costing during a trip for meals, lodgings, travel and more.
- Lump-sum budget: An employee is give lump-sum budget at once that has fixed calculation of the trip expenses.
- Project-specific budget: Some projects can cost more than the others. Hence, companies may provide project specific budgets.
- Departmental budget: Some departments may require client meetings and event while others may require site visit. Therefore, companies sometimes assign department-wise budgets.
What to Include in business travel budget?
Business travel budget should include the following things as mandatory:
- Transportation and accommodation costs
- Ground transportation and meals costs
- Travel insurance and incidental fees
- Visa and passport fees
- Event venue and conference cost
- Travel agency and management company fees
Business travel budget forecast
Forecasting a budget for carrying out a business trip and meeting the required objective plays a crucial role. It helps in reducing the stress of spending a huge sum of money at the last moment. It involves several steps as listed below:
- Past Data Analysis
- Listing down the expected activities
- Inflation and market trends
- Exchange rate fluctuations
- Estabilishing a contingency fund
What are the steps to set a business travel budget?
Managing the rise in travel costs as business trips recover from downtime needs proper travel budget planning. The following stems provide brief guidelines for setting a travel budget.
1. Collect data to create a comprehensive travel history
Getting historical travel data from the pre-pandemic period is necessary to build and review the travel budget. 2022 and 2023 figures can provide standard travel expenses for your company. Breaking it down to various expense categories, like airfare, accommodation, meals, and length of stay, enables you to project and allocate funds for 2024.
2. Make room for seasonality and uncontrollable factors
Some businesses have seasonal influences on business travel, as employees are busy undertaking business trips during specific months. Refer to the training and conference calendar to allocate the corporate travel budget for these events. Know the role of external factors like cost escalation on the business travel budget.
3. Create a clear travel policy and communicate to all employees
A business travel policy must address all aspects of business travel, like expense categories, expense limits, allowances, employee safety, approval processes, and expense reporting. It ensures clarity across all employee levels and minimizes policy deviations. The ideal travel policy serves as a guide for employees to know the expenses eligible for reimbursements. It also provides guidelines on booking processes to enable employees to avoid out-of-policy travel expenses.
Communicating changes to the travel policy is crucial. You can use a SaaS-based travel management tool like Paxes to integrate travel policy to eliminate policy deviations as it restricts non-reimbursable expenditure. You can set limits and define approval workflows for streamlining expense reimbursements.
Business travel budget template
Here is a template for business travel budget:
Trip Details
- Destination
- Purpose of Trip
- Number of Travelers
- Duration of Trip
- Expense Categories
Transportation
- Airfare
- Train/Bus Tickets
- Car Rental
- Ground Transportation (e.g., taxis, rideshares)
Accommodation
- Hotel
- Other Accommodation
Meals
- Daily Meal Allowance
- Conference/Event Meals
- Ground Transportation
Airport Transfers
Local Transportation
Incidentals
- Tips
- Parking Fees
- Baggage Fees
- Internet/Phone Charges
Other Incidentals
- Travel Insurance
- Visa/Passport Fees
- Conference/Event Fees
Miscellaneous Expenses
- Travel Agency/Booking Fees
- Training/Education Expenses
- Communication Expenses
Total
Who are the main stakeholders in corporate travel budget management?
Accounts staff and the Chief Finance Officer create a travel budget for the company. Finance staff can generate historical data, including category-wise expenses. Travel managers should adopt an all-in-one travel management tool with an app facility to improve travel experience and policy compliance.
Travel managers should involve employees and line managers in creating travel policy guidelines. They can provide practical insights for controlling travel costs. Their suggestions are vital for creating a custom travel budget for the organization.
The most important stakeholders for implementing the travel policy budget are employees traveling to meet business goals. Their involvement in adhering to the travel policy guidelines is crucial for policy implementation.
Tips for setting up a business travel budget
- Prioritize Spending: Allocate budget based on trip importance and prioritize essential expenses.
- Negotiate Vendor Deals: Negotiate favorable rates with travel vendors, hotels, and airlines for cost savings.
- Use Technology Wisely: Adopt travel management tools to streamline bookings, expenses, and reporting.
- Educate Employees: Train employees on budget adherence and encourage responsible spending.
- Monitor and Adjust: Regularly monitor expenses, analyze trends, and adjust budgets for optimal financial control.
Tips to control overspending for business travel
1. Set clear policies
Establish well-defined spending policies outlining acceptable expenses during business travel. Clearly communicate these policies to employees, emphasizing the need for adherence to budgetary guidelines.
2. Pre-approve expenses
Implement a pre-approval process where employees submit expense plans before the trip. This allows management to review and approve or adjust budgets before expenditures occur, ensuring alignment with overall financial goals.
3. Regular audits
Conduct regular audits of travel expenses to identify any deviations from the set budget. Regular reviews help detect overspending patterns and allow for timely corrections to prevent further financial discrepancies.
4. Employee training
Provide comprehensive training to employees on budgetary constraints and the significance of making cost-conscious decisions during business travel. Equip them with the knowledge and tools to understand the financial impact of their choices.
5. Utilize reporting tools
Leverage advanced expense reporting tools that offer real-time insights into spending patterns. These tools enable immediate visibility into expenses, allowing management to intervene promptly if overspending is detected and empowering proactive budget management.
Suggested Read: The Effective Management Of Work Related Travel Expenses
Budgeting and expense tracking software
Here are some of the top budgeting and travel expense tracking software:
- Expensify
- Concur
- Certify
- Zoho
- Xero
Conclusion
Integrating a business travel budget with a travel policy is essential to control overspend without affecting ROI and employee satisfaction. Adopting SaaS-based travel management solutions like Paxes ensures strict compliance with travel policy. Automated expense management systems facilitate stringent control over excess expenditure.
Business Travel Budget FAQs
How does per diem help control travel expenses?
Per diem combines standard travel expenses like incidentals, meals, and local transportation to limit expenditure. These are more helpful in preventing overspending than reimbursing actuals.
What are indirect travel costs?
Indirect travel costs include time to prepare expense reports for travel booking, negotiating hotel and transportation, cancellations, and rescheduling.
What makes up a travel budget?
The main expenses that make up the travel budget are meals, transportation, and hotel accommodation.
Are business meals eligible for tax deduction?
Most business expenses, including costs of business meals, qualify for a 100% tax deduction.
What are the business travel budget examples?
Business travel budget examples include airfare, accommodation charges, ground transportations, meals, etc.
How can I save money on hotel bookings for business trips?
To save money on hotel bookings you can book in advance, use corporate rates, explore loyalty programs, and opt for packaged deals.
How can I manage currency exchange rates and fees when traveling internationally for business?
Research well on what is exchange rate and how is it affected. You can talk to your bank before going on the trip. Additionally, you should carry internationally approved credit cards along with the allowed cash as per your requirement.
How can I optimize the business travel budget for maximum ROI?
Plan in advance, use loyalty programs, encourage cost consciousness in employees, use expense management software, and analyze data to find cost saving opportunities.
What should I do if I exceed the business travel budget?
Analyze the reason, communicate to the stakeholders, reallocate funds, use cost saving methods for the rest of the trip, and prioritize the activities to achieve objectives.
How can I ensure compliance with the business travel budget?
Establish clear guidelines, ensure policy compliance, educate the employees, conduct audits, encourage open communication, and reward employees for achieving budget targets.
