Shanghai, June 18, 2015 /PRNewswire/ -- "When it comes to financial management, one thinks of the pain our finance team goes through when preparing annual budgets each year. Once the company's development strategy and plans are determined, the rigid and uncontrollable operating expenses are mostly set, and the expenses we can compress are business entertainment expenses, travel expenses, office expenses, and other controllable costs." Recently, at the 6th Financial Management Summit Forum, Jin Ting, Financial Director of Ctrip Business Travel, was invited to share insights on the topic of saving and managing travel expenses.
Hidden costs should not be overlooked
According to the "2014 China Business Travel Survey Report," in 2014, an average of 38% of employees in China traveled for business, compared to 33% in 2013 and 28% in 2012.
"But travel expenses do not make up a large proportion of a company's total expenses, accounting for only about 5%. Therefore, some management teams do not pay much attention to travel expenses, and management largely allows fluctuations within a certain range without paying attention to the reasons for overall changes or the specific cost structure. This is not conducive to the effective management of travel expenses," Jin Ting believes. As the second-largest controllable cost for companies, travel expenses fall within the management authority and control scope of company executives, and better management can improve the company's actual economic benefits.
Statistics show that currently, 10% of companies in China use professional travel service companies for travel management, while the remaining 90% either book tickets themselves or go through small ticketing agencies.
Jin Ting explained that travel costs include both visible and hidden costs. Most companies only calculate visible costs, such as transportation, hotel accommodation, dining, and travel service fees; whereas hidden costs refer to time spent on booking, approval procedures, reimbursement document verification, change and cancellation fees, unused tickets, etc. These significant hidden costs are difficult to track and are often overlooked.
Effective travel management yields maximum savings30%
The purpose of travel management is to save money, but savings do not only come from reducing airfare or hotel prices. More importantly, they stem from compliance control, complete data, optimized processes, and transparent travel information. Jin Ting pointed out that excellent travel management solutions not only reduce costs but also improve the efficiency of the finance department’s audit work, enhance the company’s capital utilization rate, and boost employee satisfaction.
Professional travel management organizations can effectively help companies save on travel expenses. Taking Ctrip Business Travel as an example, savings can reach up to 30%. Small ticketing agencies usually only offer booking services, not comprehensive travel management.
"By using a professional travel service platform—for instance, setting up alerts for the lowest airfare—companies can enforce the principle of booking at the lowest price. Whether it's the lowest price within a day or the lowest within an hour before or after, these standards can be preset. If an employee does not choose the lowest price for the selected time period, they will be prompted to provide a reason for not selecting it, which will then be reflected in the travel report. This approach aids in travel expense analysis and also has a certain binding effect on employees, ultimately achieving the goal of cost savings," Jin Ting explained.
In addition, the advance payment services and longer credit periods offered by travel management companies can save companies the cost of capital tied up in travel expenses. Technical means such as OA system integration, automated authorization, and automated settlement also indirectly reduce labor costs for businesses.
Big data analysis targets key pain points in corporate travel
Detailed travel management reports and in-depth data analysis play an extremely important role in financial management. By analyzing travel data, companies can identify frequently used airlines and hotels and negotiate agreement prices, which can help achieve some cost savings on travel expenses.
At the same time, companies can conduct horizontal comparisons of internal travel expenses. For example, the airfare for the maintenance department may be higher, often because staff must immediately travel to client sites for emergency repairs upon request and cannot book flights in advance. However, if the marketing and sales departments have similar roles and the marketing department's average discount rate is higher than that of the sales department, the respective departments can be asked for explanations to identify the cause. In addition to internal departmental analysis, companies can also rely on professional travel management firms to analyze industry-average discounts, average travel standards across different cities, and even travel standards for the same city during different time periods. Through continuous research and analysis, best practices can be promoted and shortcomings improved, thereby continuously optimizing travel policies.
Professional travel management eases the burden on finance
Many companies have established comprehensive travel policies, but their implementation is often ineffective. For example, employees may purchase hotels or airfares at discounted rates to obtain high rebates from suppliers; or employees may freely choose hotels, making it difficult for companies to secure discounted agreement prices by increasing bookings at specific hotels; and some employees may even earn extra income by falsifying invoices or submitting fake receipts for reimbursement. These behaviors not only harm company interests but also render internal controls ineffective.
Professional travel management can solve this problem. On the one hand, monthly settlements mean employees do not handle cash directly; on the other hand, agent prices, corporate agreement prices, and airline direct-connect prices are all displayed on the same platform, ensuring price transparency and the effective enforcement of the company’s travel policies.
Jin Ting also pointed out that the users of travel services are the company’s employees, so the humaneness of travel policies and the convenience of travel services are their top concerns. Professional travel management organizations offer unified settlement methods such as prepayment and monthly billing, which can alleviate employees’ financial pressure for travel expenses and eliminate the hassle of collecting receipts, filling out reimbursement forms, waiting for leadership approval, finance audits, and cashier reimbursements after travel. It also simplifies the finance team’s audit process—they no longer need to verify the authenticity of receipts, check whether reimbursement amounts match the receipts or comply with travel policies. They only need to reconcile the monthly statements provided by the travel company, significantly reducing the workload for finance personnel.