Revisiting Travel Spend Methods with Corporate Cards and Virtual Payments
Many companies, especially small and mid-sized enterprises (SMBs), still allow business travelers to use payment methods such as personal credit cards or cash advances that don't comply with travel policies. Adoption of corporate credit cards has remained consistent through the years. Though virtual payment adoption has been on the rise, cash and personal credit cards still play a role, not just for settlement of small bills, but for the purchase of air tickets and hotel bookings. This can pose problems including reduced spend visibility, making it difficult to both track and enforce policy compliance, and perform back-office functions such as reconciliation and reimbursement.
Spend visibility can drastically be improved using corporate payment products. Majority of travel managers choose data collected from central travel accounts (74 percent) and corporate cards (73 percent), in comparison to data obtained from the usage of personal cash/card (48 percent). The reason being more transparency and spend visibility. For many travel programs, detailed expense data is critical to track policy compliance. Encouraging the use of corporate cards and virtual payments can play a major role in travel cost control. Key methods to improve travel cost control include benchmarking (internal & external), tightening policies, centralizing control and enforcing compliance through automation.
Internal benchmarking is the first step toward reducing travel expense. Benchmarking helps in improving visibility into company behavior and easy idenfication of anomalies leading to opportunities for behavioral change. Data gained from internal benchmarking information supports more accurate budgeting and job-cost analysis. The internal benchmarking dataset includes spending information of an individual, business unit, project, client, vendor, policy compliance information, and historical and current information for frequently visited locations.
External benchmarking expands the visibility and understanding of cost parameters, trends, policies and peer performance. The company can identify opportunities for improvement by comparing its own performance and the objective industry standards. External benchmarking includes comprehensive industry cost data for frequently travelled locations. Equally valuable is peer benchmarking.
Successful cost control policies depend on sound and updated policies to guide employee behavior and prevent unnecessary spending. Visibility plays a key role in identifying opportunities for improvement. High-performing organizations have higher policy compliance rates compared with the industry average. Policies must be developed based on the organization's needs, and this in turn will drive improvements in policy compliance. Creating and monitoring reasonable, fair and understandable policies can improve compliance. Influencing employee behavior involves educating employees with travel policies and institutional training to improve compliance and ensure the employee’s understanding of the policies and clarify the grey areas to ensure future compliance.
It is also important to enforce compliance through automation. Automating processes increases the compliance, reducing manual efforts. Automation minimizes the chances of errors and unnecessary spending. Automation eliminates mistakes which might be out of policies and performance audits, helping improvise process control, fraud protection and provide essential visibilities into policy compliance.
Centralizing control increases the visibility across the organization — gives a better insight into the policies and trends for cost control. Economies of scale can be leveraged while negotiating with vendors and to optimize the process of corporate card rebates.
Influencing traveler behavior can be done through compliance education and it needs to be an ongoing process. This cannot be a one-time warning after a non-compliant booking/payment, because the traveler is likely to forget about it, if there is infrequency in communication. Stakeholders need to be equipped with the right data. Additionally, managers closer to the individual employees should be actively involved as influencers. It is critical to engage everyone with information that is relevant and understandable, delivered on a consistent basis in a timely fashion and presented in a way that’s easily consumed and understood, with clear and relevant calls to action.