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Business Travel Cost: Types, How to Calculate and Minimise It?

Aishwarya Srivastava by Aishwarya Srivastava
September 20, 2022
in Travel, Travel and Expense Management
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Business Travel Cost: Types, How to Calculate and Minimise It?

Table of Contents

  • What Is Business Travel Cost?
  • Different Types of Business Travel Costs
  • What Are the Business Travel Expenses That Employees Can Claim?
  • Business Travel Cost Reimbursement: Best Practices for Employees
  • Business Travel Cost Reimbursement: Best Practices for Businesses
  • Types of Business Travel Cost Management Processes
  • Business Travel Cost: How Can You Calculate It? 
  • How To Curb Business Travel Costs?
  • Curb Business Travel Costs with Happay
  • Business Travel Cost – FAQs

What Is Business Travel Cost?

Business travel is an innate part of the corporate world. From MSMEs (medium, small and micro enterprises) to large corporations, all types of companies invest in various business travels to fund operations that surpass physical borders. The entire sum of investment in business travel is called business travel cost. 

The global travel market is growing despite seeing a brief dip because of the pandemic. By 2028, it is estimated to grow by 188 percent from what it was in 2020. The business travel market owes this growth to the several business travel costs we will discuss in this exhaustive guide. 

Different Types of Business Travel Costs

Business travel expenses include expenses like- 

  • Transportation 
  • Hotels/Stay
  • Utilities
  • Meals

With prudent planning and intelligent resource allocation, you can optimise these costs to achieve maximum savings. Read on to learn more about different types of business travel spending and the best ways to plan travel. 

What Are the Business Travel Expenses That Employees Can Claim?

If employees initially cover the cost of business travel, they become eligible for reimbursement. While the expense reimbursement policy may differ for companies, businesses must reimburse the employee for the following expenses made during business travel.

  • Flight or train tickets
  • Taxi rentals
  • Parking fees
  • Meals
  • Lodgings

If the employee used their own vehicle for business travel, the organisation must give the employee mileage reimbursement. 

Business Travel Cost Reimbursement: Best Practices for Employees

1. Know the travel policies

As an employee, carefully study and understand your company’s business travel policy before incurring any business travel expenses. If your organization has a cost limit, it is better to know it in advance to optimize your spending process.

2. Maintain receipts

Employees that do not travel frequently may not remember to store the bills and receipts they took care of during travel. However, employees must ensure that they can produce receipts during expense filing. This is especially important for organisations that have a manual expense management system. 

3. Be wary of malpractices

Some people might find it tempting to take advantage of an imperfect reimbursement system. However, this can lead to dire consequences like termination, hefty fines and, in some cases, prison time. 

Hence, while at first it may feel like a minor offence, expense fraud is a severe offence and can ruin careers. 

business travel cost

Image Credit: rocketrip.com

Business Travel Cost Reimbursement: Best Practices for Businesses

1. Maintain a precise travel and expense policy

A clear travel and expense policy is the first step to ensuring that employees stay the course when self-booking business trips. An expense policy should clearly state the limits, categories, approval processes, credit card usage etc.

2. Ensure your employees understand the policy

Merely creating a travel and expense policy won’t help if your employees are unaware of its existence. Ensure that all your travelling employees know the guidelines and steps they can take to ensure that they comply with all the rules. 

3. Simplify expense reimbursement processes

Manual expense reimbursement is a tedious, repetitive process that both employees and the finance team find tiresome. Thankfully, technology can help you simplify it through expense management automation. 

Types of Business Travel Cost Management Processes

Companies have their own way of managing their business travel costs. Let’s discuss the standard practices here. 

1. Booking on behalf of employees

Some companies have their own administrative or travel management teams that book tickets, hotels and transportation on behalf of the travelling employees. This allows for complete visibility of significant expenses. However, managing incidental and other on-trip expenses becomes tricky. 

2. Reimbursing employees after self-booking

This is one of the most common business travel cost management practices. In this process, employees pay for the expenses initially and then file expense reports. The managers approve the reports, and then the company’s finance team validates them and issues the reimbursement.

Learn everything about employee expense reimbursement in this exhaustive guide. 

3. Prepaid cards or corporate credit card

Prepaid and corporate credit cards operate on the same principle. It is that the employees do not have to pay out of their own pockets before, during and after the trip. 

In prepaid cards, the business allows a certain amount of money to the company card they give to the employee. The traveller only has that specific amount of authorised cash to spend during the trip. 

On the other hand, a corporate credit card is a regular credit card that companies allot to employees. They can use it to make various authorised purchases. 

Prepaid and corporate credit cards enable 100% spend visibility and real-time expense tracking. They help avoid the tedious process of travel and expense report filing and reimbursement. 

4. Travel management companies or corporate travel agencies

Some organisations outsource business travel planning and employ travel management companies (TMCs). Travel management companies have professionals that are specialists in the travel planning industry. They help bring down the overall cost of travel and help with travel compliance. 

Business Travel Cost: How Can You Calculate It? 

Calculating business travel costs and analysing the spending patterns can help finance officers gain insight into the efficiency of expense management practices of the organisation. This information can help them understand their company’s financial standing and make the right decisions while deciding on the travel budget. 

Here is how you can calculate your organisation’s average cost of business travel. 

1. Track and organise all expenses

Maintaining a comprehensive record of your business travel costs is crucial to cost calculation and optimisation. Decide on a timeframe with your finance team, after which you will reconcile, tally and audit your expenses. 

Credit cards and other electronic payments will automatically get recorded. So you have to focus on cash and incidental expenses, especially if they amount to a considerable sum on expense reports. 

2. Categorise previous spends 

Categorising expenses and making records according to the category tags is an efficient way to ensure that your spend data is easily retrievable and comprehensible. You can categorise expenses based on department, project type, business travel type, and expense type (transport, accommodation, meals, etc.). 

3. Analyse previous spends according to categories

Analysing past spending trends by employees based on different categories can help you understand patterns in business travel spending. It can help you identify and eradicate the most wasteful areas and increase your savings. 

4. Forecast future expenses 

You can use the analyses of previous expense spending reports to project your future business trip costs. 

how to curb business travel costs

Image Credit: bcas.co.za

How To Curb Business Travel Costs?

1. Use an expense management software

An expense management software simplifies the reimbursement process, increases spend visibility and hence, minimises the risk of expense fraud. An expense management software like Happay can help increase savings by enabling the following features. 

  • Eliminates the 15-30% fare increase due to long manual bookings by enabling self-booking.
  • Helps save about 8 to 12% per year by enabling a fare freeze. This eliminates last minute fare increases.
  • Saves up to 8% annual travel costs by driving over 95% of travel policy compliance and cutting out manual policy checks.
  • Has a ‘missed savings’ features that encourages employee travelers to book flights with the lowest fares. This can save up to 7% annually.
  • Saves up to 15% on expense budget with the smart audit feature.
  • Has a GST automation process that helps you claim GST ITC and save up to 5 to 18% annually on travel and expense costs.
  • Has corporate credit cards that eliminate cost leakages and expense frauds.

2. Encourage employees to use subways and public transport

Communicate with your employees that you are trying to cut down on business travel costs. Ask them if they will be comfortable using public transport like buses, metros, subways or rickshaws to travel within the city. This can help you save a lot on taxi rentals. 

3. Shorten stay durations

Encourage your employees to plan trips to minimise the number of nights they spend at the destination. This will significantly reduce the per diem cost per employee. 

4. Negotiate better deals with vendors 

An analysis of past expense reports can show you which vendor your business frequently does business with. You can use this information to negotiate better deals with these vendors and get company discounts. 

Curb Business Travel Costs with Happay

Travel and management software comes in handy for enterprises to cut their business costs/expenses. Happay’s T&E software is a  tailor-made solution made for every company’s expense policy. It has helped save businesses crores of rupees and exterminate cash leakages.

Happay’s self-booking tool enables end-to-end business travel reservations, from flights to hotels to cabs. It has pre-spend violation alerts and pre-spend limits that can help the employees comply with the company’s expense policy. 

Hence, you should use Happay to consolidate your travel and expense infrastructure. Schedule a demo with the Happay team to learn more about the fantastic features. 

Business Travel Cost – FAQs

1. How do I calculate travel cost?

You can calculate travel costs by tracking past travel purchase, categorising these expenses, and analysing past spending patterns categorically. This will help you understand the employee spend behaviours and forecast future costs. 

2. What qualifies as a business trip? 

Travel that facilitates any business function qualifies as a business trip. These may include client meetings, site visits, conference-related travels, etc.

3. What is mileage reimbursement?

Mileage reimbursement is given to an employee who uses a personal vehicle for business travel. All costs associated with the use of the car are reimbursed as mileage reimbursement. 

4. Which expense reimbursements are valid? 

Companies have different expense policies and can have different expense validity rules. However, things like travel, meals and accommodations are always reimbursable in business travel. Although, these reimbursable expenses can have a spending limit that employees must keep in mind. 

5. What should a travel budget include?

A travel budget should include major expenses like transportation costs (flights, trains, taxis), accommodation costs, etc., and also incidental and minor expenses.

 

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Table of Contents

  • What Is Business Travel Cost?
  • Different Types of Business Travel Costs
  • What Are the Business Travel Expenses That Employees Can Claim?
  • Business Travel Cost Reimbursement: Best Practices for Employees
  • Business Travel Cost Reimbursement: Best Practices for Businesses
  • Types of Business Travel Cost Management Processes
  • Business Travel Cost: How Can You Calculate It? 
  • How To Curb Business Travel Costs?
  • Curb Business Travel Costs with Happay
  • Business Travel Cost – FAQs

Related Articles

  • 10 Best Travel Management Software and Systems in 2023
  • Corporate Travel Management: The Business Guide
  • A Comprehensive Guide for Travel and Expense Policy (T&E…
  • What are Business Travel Expenses: A Process Guide
  • The Ultimate Guide to Travel and Expense Management…
  • A Guide to Creating a Corporate Travel Policy 2023…
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