There is a definite balance that needs to be maintained when talking about travel policy compliance within your organization. As the CFO, you have seemingly clear expectations regarding compliance; employees simply enter their travel spend information, reports are processed, and data is analyzed to show cost savings.
On the other hand, employees don’t simply comply with travel policy and procedure just because it’s there. They have other jobs to do and the time it takes for them to manage their travel – especially if the travel and expense system is not automated – is cumbersome and decreases productivity.
A study published in the Journal of Business Ethics states that a regularly updated and enforceable travel policy can reduce overall travel and entertainment expenditure by between 20% – 30%. When employees don’t comply with travel policies, there’s a definite loss in cost savings, directly impacting a business’ bottom line. It’s well-known that the travel and expense (T&E) line item in the budget is the second largest controllable cost within an organization, and CEO’s are demanding increased visibility into the overall travel spend.
It’s no surprise that CFO’s are being tasked with improving travel policy compliance. In addition to cost control, increases in regulatory requirements are prompting leadership to take a hard look at travel policy compliance, and what effect the lack of control and predictability have on the success of the company. Following are 3 tips to help CFO’s improve travel policy compliance and positively impact overall business outcomes:
1. Assess your current travel policy and define strengths and weaknesses
There are many reasons that employees may not be in compliance with your travel policy, including time constraints, lack of knowledge about the policy requirements or a “rogue traveler” attitude that causes them to ignore this important information.
The first step in improving your travel policy is to assess the causes of non-compliance. Are exceptions being made when employees book outside of the travel policy, and if so, why? Are traveling employees familiar with the preferred vendors? Has your policy been updated to include traveler preferences? Do employees know what data is being accounted for, and how to receive, for example, reimbursement for travel expenses?
Dedicate time to completely review your travel policy, gather feedback from travelling employees, and assess areas that are contributing to the lack of compliance. Gathering this information will help to improve compliance and in turn provide predictability and control when assessing compliance benefits.
2. Communicate to employees and management the positive results from travel policy compliance
Many times, employees and leadership alike simply don’t know about or understand the travel policy, and how they can stay compliant. It’s critical for everyone within the organization to understand that their adherence to policy, or lack of it, has an effect on the overall business success. Talk with managers about the positive and negative effects of policy compliance and ask for their feedback and suggestions. Encourage them to assist their traveling employees with questions about what is or is not reimbursed, thereby saving time for employees and the finance department regarding reimbursement follow-up. Explain the benefits of using preferred suppliers including consistency, cost savings and possible added benefits (seat upgrades, VIP access, entertainment perks) when employees utilize these travel vendors. If exceptions to the policy are necessary, clearly communicate with management, employee and leadership as to the reason(s) for the exception.
Thorough, consistent communication about the travel policy will help to improve travel policy compliance, resulting in increased productivity and control.
3. Automate your T&E system and integrate this technology with business systems already in place
The benefits of an automated T&E system include cost savings, control over travel data and spend information and ease of use for traveling employees, increasing overall productivity. Combining your T&E system with your business system platform or ERP system streamlines the availability of data and increases visibility into travel expense.
In the PayStream Advisors 2015 Travel and Expense Management Report, 51% of SME’s surveyed cite manual data entry and inefficient processes as their biggest challenge facing the expense management process. Also included in the report was the lack of visibility into spend (35%) and inability to enforce corporate travel policies (22%) because of inefficient T&E processes control of travel policies.
To increase travel policy compliance within your organization, it’s critical for your road warriors to have an efficient system that allows them to seamlessly record and manage travel data on a consistent basis. This in turn produces accurate and timely information regarding travel spending, and data related to employee compliance with travel policy and procedure. This data can then be used to assess strengths and weaknesses within the travel policy and ensure necessary improvement.
Improved travel policy compliance delivers positive business outcomes
A well-communicated, strategic travel policy integrated with an easy-to-use automated system produces compliant travelling employees and positive business outcomes including:
- CFO’s have increased visibility into overall travel spend and are able to provide accurate, real-time financial information to CEO's
- Cost savings is realized in T&E due to ancillary fee control and the ability to better manage preferred vendor relationships
- Employee productivity increases because of automation and less staff time is spent following up with non-compliant travelers.
It may not be on the top of the financial executive’s “to do” list, but improving travel policy compliance contributes to overall business success by providing control and predictability; ultimately decreasing the travel and expense line item in your budget.
As the CFO of your organization, with the goal of improving travel policy compliance, what are some of the ways that you can improve compliance, and as a result, impact overall business outcomes? Share your comments below and if you would like see what an effective T&E policy looks like, download “How to Create an Effective T&E Policy” to learn more.