How much does it cost to run your company? If you’re like most business owners, the answer to that question is probably a number you don’t like to think about very often. It’s not uncommon for enterprises to spend millions of dollars on operating costs. Over time, things like office supplies, hardware and software, maintenance and other outsourced services can really add up. However, even with all these operating costs, you may be surprised to learn that after payroll expenses, the largest cost a company faces are T&E expenses, according to a report from MasterCard.
The reason for this is partly due to T&E (travel and entertainment) expenses being difficult for companies to manage. A survey conducted by JP Morgan Chase found that companies regularly devote 10-12% of their annual budget to travel and entertainment expenses, and a good portion of that ends up slipping through the cracks as either wasteful spending or spend that’s non-compliant with your travel expense policy.
Before the pandemic, T&E expenses were already a huge source of leakage, but once work culture started to change, the issues surrounding these expenses were exacerbated. To get your spending under control, your travel expense policy is a good place to start.
Map Out & Assess Current Policies
If you want to reduce the amount of money your company spends on T&E, you need to begin by taking a critical look at your current policies. How does your travel expense policy work in practice? This can be a difficult question to answer since data about this kind of spending is often stored in several places. You’ll have to locate and consolidate this data in order to evaluate what is and isn’t working about your policy.
Once you’ve run the numbers, you should be able to answer this question: do any of your policies need to be updated? As the kinds of expenses employees claim evolve, your expense policy needs to align with your current expense landscape. For example, if employees are working from home, they should be able to reimburse for one-time expenses such as office chairs, desks or printers. In terms of travel expenses, employees working from home may be able to reimburse for the mileage they drive to an appointment with a client, something they would not have been allowed to do in the past.
If your travel and other expense policies are working as intended and effectively controlling non-compliant spend, then you could be fine. However, if employees are reporting the wrong kinds of travel or out-of-policy expenses for reimbursement, then you may have a problem on your hands. The good news is that you can solve it.
Define & Outline Wasteful Spending
The way expenses were once handled could be different now. What was once considered wasteful may be acceptable spending and what was once allowable expenses may now be unnecessary. A few years ago, face masks and hand sanitizer were not required to meet with customers, but now, these are routine purchases. On the other hand, per diems for food could be lower since employees aren’t going out to eat as much. The amount employees travel for work may also change as we become more comfortable with virtual meetings, so if you issue a car allowance to employees each month, you’re probably wasting money. By outlining what you consider wasteful spending, you can reform a policy around disallowing these costs.
Non-compliance with your travel expense policy is another issue you need to tackle to reduce costs. According to research from Aberdeen Group, on average, approximately 20% of T&E spend is out of policy. This could be because employees don’t understand the policies you have on the books or simply don’t take them seriously. Whatever the reason, updating your policies should be about more than creating new rules; you also need to communicate them properly.
Communicate Your Updated Travel Expense Policy
When you make changes to any policy, you should proactively communicate them to employees before it becomes an issue as well as your reasoning behind it. If you’re planning to switch your travel reimbursement from a car allowance to a standardized mileage reimbursement, explain to them why you’re making this change and how it will benefit them. The same goes for updates to daily per diems or one-time WFH expenses.
To improve compliance, dedicating a bit of energy to enforcing policy rules and regulations will ensure employees are taking them more seriously and making an effort to improve their compliance around work-related expenses. With a well-defined policy, better controls in place for managing non-compliance and widely-followed procedures for managing expenses, companies should be better positioned to reduce costs and innovate their processes.
Eliminate Manual Oversight
The best way to guarantee sustainable process innovation is by eliminating manual work as much as possible. Manually overseeing expense management takes a lot of time and energy away from other more important activities, which is why administrators often neglect it. This only compounds the problem as companies are put under more pressure to ensure internal spending controls are adhered to and external regulations are complied with. The risk of making a critical error is naturally higher with humans auditing your processes.
Using an automated solution to manage T&E costs can help reduce the risks associated with having admins constantly looking out for instances of non-compliance with your travel expense policy. You then reduce costs two-fold: by improving enforcement of expense policies and freeing up resources you could put towards other cost-saving ventures.
Reduce Costs With CompanyMileage
CompanyMileage’s suite of products – SureMileage, SureMobile and SureExpense – automates T&E expense management while saving you money. We bring accuracy to the whole process from trip logging to reimbursement, reducing the time spent managing expenses to just a few minutes a day for your mobile employees.
Our system also offers other features designed to make traveling expense management as simple and straightforward as possible, including an integrated Address Book, one-touch check-ins via Quick Capture, a configurable approval workflow for expense reports, the ability to flag certain behaviors in the system and integration with accounting and payroll platforms.
With an improved approach to managing T&E expenses, including updating your travel expense policy and adopting an automated expense solution, you’ll substantially reduce company expenses. And, if you partner with CompanyMIleage, you’re poised to save even more. CompanyMileage users reduce travel expenses by up to 30%, and this doesn’t even consider the amount of time and resources you’ll save as well.
Join hundreds of other organizations that are reducing their travel and expense management costs through our automated reimbursement solution. Request a demo with CompanyMileage today.