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Travel and Expense Policy – part one February 12, 2011

Posted by solutionsbconsultants in Business Improvement, Increase Profitability, Procurement, Travel Policy.
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I have had quite a few requests for a travel and expense policy. Before I go into the philosophy and nuts and bolts, let me make a few comments.

First, most companies have severely curtailed travel, both for internal group meetings as well as attendance at training, seminars, and supplier visits. I am actually glad that a good number of these trips have been curtailed. With communication mechanisms like Apple iChat, Skype, Webex, Go-to-Meeting and other low-cost, highly effective tools, the goals and accomplishments of an in-person trip can be achieved without an unnecessary hit on the pocketbook. Why send three people to the same training? Send one and have him/her train the others – or film the training and put it into your training library for future hires.

Let’s look at a hypothetical scenario: A few years ago a IT executive wanted to send two of his personnel to make a presentation at an overseas conference. I challenged the $10,000 cost of the trip (which probably cost more than $15,000 if you count the loss of two IT resources for 10 days) for three reasons. 1) If you are invited to present, the body sponsoring the presentation should have covered the cost; 2) the virtual communication technology available at the time could have easily have achieved the goal; 3) the economy was showing signs of decline and it would send a negative message to the rest of the company (besides being fiscally irresponsible). I was told that this presentation was not only prestigious for the company but it would also serve as a reward for the employees. Actually, the company did issue a press release, however, both employees left the company before the year was out. There was no measurable ROI or any direct benefits to the company. Anyway, I lost the argument but would still make the same plea today.

Enough pontificating, let us talk about what you want to accomplish with a good travel and expense policy.

First, create some goals and objectives for your policy:

1) To fairly compensate the traveler and provide for his/her safety and comfort away from home
2) To ensure company resources are managed responsibly, ethically and legally and minimize costs when possible
3) To ensure consistency in travel administration, yet provide reasonable flexibility
4) When in doubt, use common sense.
5) Apply the same rules to everyone regardless of position.
6) The traveler should neither lose nor gain financially as a result of business travel

Think about these and let me know if I left anything out – I will follow up shortly with more on this in Part II.

Yours in Supply Chain,

Steve

Remember what the Aberdeen Group says……….

“For a typical enterprise, it takes an increase
of $5 in sales to equal the impact of
a $1 reduction in procurement costs.”

If you have a topic of interest you would like me to discuss in our blog, “in-person”, or see a typo, just send me a comment or email me directly. I would like to hear from you!

Respectfully,

Steve Gordon
Senior Consultant
Solutions Business Consultants
http://www.costavoidance.org
__________________________________
”Bringing Service, Value, and Efficiency to the Supply Chain”

steve@costavoidance.org
(865) 356-3575
Skype: stevegordskype
Blog: https://innovativeconsultant.wordpress.com/
Linkedin: http://www.linkedin.com/in/stevegordonthecostsavingsguy

Travel and Expense Policy – part two February 25, 2010

Posted by solutionsbconsultants in Accountability, Increase Profitability, Travel Policy.
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With the goals and objectives mentioned in Part I, let’s begin.

Common Sense: If it can be accomplished via video conference, then don’t fly. For example, many IT courses are available via e-learning instead of a flight. Spouses and other non-employee travel with a company employee should not be allowed due to abuse and liability.

Budgets: Travel should be budgeted in advance. I recommend $400 domestic airfare, $1500 international airfare, $100 domestic/$200 international per hotel day, $100 for taxi and $50-$75 per day for meals with a maximum of a 15% tip. One employee may pay for additional employees of the company if it is more convenient.
Here’s a hint: Use the Radisson and Holiday Inn instead of the Hilton or the Hyatt. With that being said, there will be some variance for not booking 14 days in advance and for execs who insist on flying business or first class.

Hotel Amenities: No hotel amenities will be reimbursed so don’t use the honor snack bar. The exception would be internet service for those travelers that do not have a wireless internet card, dry cleaning for stays exceeding five days and one ten-minute phone call per evening if the traveler does not have a company issued or reimbursed cell phone. Room service is discouraged unless there is a good business purpose.

Approval: There should be a hierarchial system in place for travel approval but it should only be for exceptions as follows:
1) Not booking more than 14 days in advance
2) Out of budget request
3) Flying business class or greater
4) Person booking is not a supervisor, manager, director etc.
5) Not specifying a specific business purpose – there should always be some type of ROI for the company when someone travels
6) Not using a preferred vendor

Reimbursements: All travel expenses should be submitted for reimbursement within ten (10) days of return. The IRS limit is 120 days but what we have found is the longer someone waits, the greater chance of loss of receipts. Original receipts are required for all reimbursement and this means the detailed receipt (not the receipt that only shows the total). For example, a receipt must have the date of purchase, the vendor name, an itemized list and unit price of the purchased items and the total amount.
This eliminates liquor, multiple entrees and other non-deductibles from being reimbursed. For convenience, I would issue frequent travelers – four or more trips per year an American Express card. Amex has great electronic record keeping and if you migrate to a full-blown travel and expense package, you can easily integrate their data. Finally, approval of reimbursement should NOT be done by a supervisor or department head. Better to let accounting or procurement sign off – they are less likely to let unauthorized purchases slip through the cracks as they are more objective in their review. Infrequent travelers may require corporate booking of their transportation and hotel. We designated a person in procurement and accounting to take care of these folks who might undergo a hardship if they had to use their own funds to prepay.

Conferences: There is no reason to really stay in the conference hotel if more reasonable accommodations are a couple of miles away. The organized traveler should be able to plan his/her day in advance to avoid any inconvenience.

Saturday stay over: If savings for a Saturday stay over (when not required) are greater than the hotel and meal allowance for an extra day, the traveler may choose to stay over on Saturday.

Cancellations: Must be reported to accounting or procurement and the ticket put in the company “bank” for future travel. Cancellations should require the approval of a division vice-president or greater to dissuade abuse.

Rental Cars: Rental cars are approved on a trip by trip basis. For instance, a conference usually would not require a rental car. But a trip to meet with suppliers and factory tours may require a rental car. Rentals should be non-luxury, economy or mid-size cars from an approved supplier.

Domestic Travel: Travel under 250 miles should be accomplished by vehicle as the costs in time traveling to the airport, delays in airport travel, taxis and other factors make this type of travel cost more cost effective. Air travelers should be responsible for packing their bag appropriately within weight and girth limits. Additional bags for stays less than five days are the responsibility of the traveler. Non-stop travel is preferred, however, if a connecting flight within four hours is available and the difference is $200 or more than a non-stop, the traveler would be required to take one connecting flight. All flights under five hours in duration much be flown “coach”.

Think about these tips and let me know if I left anything out – I will follow up shortly with more on this in Part III.

Yours in Supply Chain,

Steve

Remember what the Aberdeen Group says……….

“For a typical enterprise, it takes an increase
of $5 in sales to equal the impact of
a $1 reduction in procurement costs.”

If you have a topic of interest you would like me to discuss in our blog, “in-person”, or see a typo, just send me a comment or email me directly. I would like to hear from you!

Respectfully,

Steve Gordon
Senior Consultant
Solutions Business Consultants
http://www.costavoidance.org
__________________________________
”Bringing Service, Value, and Efficiency to the Supply Chain”

steve@costavoidance.org
(865) 356-3575
Skype: stevegordskype
Blog: https://innovativeconsultant.wordpress.com/
Linkedin: http://www.linkedin.com/in/stevegordonthecostsavingsguy

Responsible Travel Policy December 13, 2008

Posted by solutionsbconsultants in Business Improvement, Increase Profitability, Travel Policy.
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If you review or approve travel for your company, chances are you have seen it all. Many of our clients have had similar issues with wasteful trips and requests for reimbursement that are abusive. One would think that most employees who travel would have the good common sense not to bite the hand that feeds them. However, in all fairness, sometimes you just have to spell it out in black or white. That’s why a comprehensive travel policy is a must to set proper expectations for your traveling employees.

Here are some points that should be covered. 

1) Set up an approval process that requires a superior’s approval for any travel and a VP approval at $1000

2) All expenditures should conform to IRS requirements for documentation.

3) Where possible, the company should negotiate a blanket contract with airlines, hotel chains and rental car companies.

4) Meals should be limited to a specific dollar amount, disallow liquor and limit tip to 15% and any reimbursement should require the detailed receipt showing exactly what was purchased.

5) Require lowest fare adoption and 14 or 21 day advance notice of travel – exceptions should go to a Senior VP to dissuade poor planning.

6) Larger companies should use a dedicated person to make all travel arrangements or use a web-based system that allows for your policies to be programmed in to the system.

7) Hotel room nights should have a maximum $ per night limit depending on the market.

8) Rental cars should be disallowed unless it can be demonstrated that the cost plus hotel parking and gas would be less than airport shuttles and taxis.

9) Family members/friends should not be allowed to travel with the employee on business trips – this just encourages company paid vacations and distracts from the business purpose of the trip.

10) Phone on planes should never be used and hotel phones should not be used if the employee has a cell phone.

11) There should be a list of things that are not going to be reimbursed such as dry cleaning for stays less than 5 days, valet parking, personal and sundry items, etc.

For a comprehensive travel analysis, policy creation, approval systems or other expense policy needs, contact Steve at Solutions Business Consultants steve@costavoidance.org