Travel and business expenses soaring*

Canadian businesses now spend twice as much on those items as they did nine years ago. No wonder the issue is high on the agenda of Canadian executives

*This is an expanded version of a summary that first appeared in the January/February issue of CAmagazine.

Tighter management of travel and business expenditures is quickly becoming a top priority for senior business leaders across Canada.

According to the 2006 American Express Travel Management and Business Expense study, Canadian companies now spend approximately $24 billion annually on travel and business expenses, compared with $12.9 billion in 1997.

“A lot has changed in the past nine years,” says Andrew Pilkington, vice president and general manager, Global Commercial Card Canada, American Express. “Tremendous transformation in the travel industry and increased emphasis on financial control and accountability in the corporate environment have put a spotlight on the issue of expense management and pushed it high up on the agenda for senior leaders.”

The study shows Canadian companies are applying more management discipline to their travel and business expenses. Seventy-three percent have implemented travel polices and 32% have their most senior executives directly involved in managing the company’s travel and business expenses. Also, 45% say their company has conducted a review of their travel agency in the past three years. Sixty percent of companies issue corporate cards for travel and business; only 49%, however, mandate their use.

Despite the use of formal controls, however, Amex says significant savings are still being left on the table. The issue seems to be a lack of consistency and commitment to the practices companies have introduced.

“Too often, the systems for maintaining and controlling expenses remain rooted in management practices that are out of date,” says Pilkington. “Most companies have travel and spending policies, but there is no follow through to ensure and reinforce compliance.

Amex says companies can save as much as 10% or $2.4 billion by implementing simple procedures such as appointing a dedicated resource to monitor policy compliance, consolidating spending through a corporate card program, adopting new technology and automating manual processes.

Some companies such as Motorola Canada are already reaping the benefits of these changes suggested by Amex.

A little over a year ago, senior leaders at Motorola were looking for ways to cut costs and decided to take a closer look at their travel program to see if they could find new savings opportunities.

A quick analysis of the company’s travel patterns revealed that a majority of their trips were within Canada and to the US. This made them an ideal candidate for a managed online program. Employees could use the online tool for booking travel within North America, and reserve the use of travel counselors for international and last-minute flights.

“Our decision to move online has been a real benefit to our company,” says William Kuenzig, controller at Motorola Canada. “We had some hiccups at the start as people were learning the system, but after a few months, 83% of our travelers were booking their trips online and we’ve maintained this level of compliance ever since.”

According to Amex, a managed online booking program presents several savings opportunities for companies.

“Using a managed online booking tool, companies are able to highlight their preferred hotel and car rental suppliers and rates, making it easy for employees to select travel options that are within the company’s spending policy,” says Pilkington. “Also, when employees are booking online they tend to choose the lowest-priced options listed on the screen – a phenomenon called “visual guilt” – helping the company save even more money on travel.”

Motorola’s success with online booking is the result of several factors, including training and communication and support from senior leaders. The company has put a lot of control around this process: among other initiatives, William Kuenzig was appointed to oversee the entire program.

One of Kuenzig’s responsibilities is to ensure employees are using the online tool. He receives daily reports telling him who’s traveling, where they’re traveling and how they booked their trip. He uses this information to monitor compliance with the program and make sure that it’s working to the company’s benefit.

By appointing a dedicated resource to its travel program, Motorola gains significant cost savings. Also, by having such a closely monitored program, the company knows where and how to reach each of its travelers in the event of an emergency.

Corel Corporation is another company realizing savings from some of the suggested changes by Amex.

A few years ago, Corel was acquired by a private equity firm. During the acquisition, all of the company’s process and policies were reviewed closely.

The company needed to adapt quickly while maintaining strong fiscal responsibility, so it implemented a corporate card program with loyalty and automated its expense reporting system.

“By offering a loyalty program and simplifying the expense process, employees are more inclined to use a company card,” says Pilkington. “Once the spending is consolidated, the company can collect the data and use it to negotiate better deals with key suppliers.”

Amex says a corporate card program and automated reporting system can also help to monitor employee compliance with travel and spending policies. Automated systems can be set up to recognize all spending that is out of policy and escalate for signoff from a senior manager.

“Twenty-four billion is big business and managing this expense is core to running a sophisticated business,” says Pilkington. “Companies need to apply the same degree of rigour and governance to their travel and business expenses as is applied to other areas of financial responsibility.”

HO-HUM -- ANOTHER TRIP  

Attention business travelers:
We’d like to know how your company been faring with business and travel expenses. Do you travel more or less often? Does your company have a policy? Fill out our short (and anonymous) survey at www.CAmagazine.com/travelwebsurvey07. We’ll post the results in a future issue.