Budgeting for Business Travel — Is it worth the cost?

When it comes to a prosperous business, smart business owners look to save money where they can afford to. Traveling for business is certainly no cheap endeavor, but it is also an imperative part of business and marketing in a modern marketplace. As such, business owners everywhere are looking for ways to reduce their business travel costs and increase profits. While costs can vary drastically based on the destination and length of the trip, there are a few ways to find out if your business is making the most of its travel budget.

Calculating the Cost

The first step to defining the budgets for business travel is determining the different expense factors that are a part of corporate travel programs. A few common ones include:

Airfares

For business travel budgets, this usually includes the cost of airline tickets and baggage. Airlines can often be the highest of expenses, and especially depending on the industry a business operates in. Tech companies, for example, may have to pay higher costs on airfares due to more luggage to transport technology, while a marketing business that keeps most of their assets digitally may not need checked baggage at all, if it is a short trip. Some companies may also engage in corporate mileage cards or airline loyalty programs, which can bring reduced travel costs through returns on repeated bookings for a business — Just more returns to add to the annual budget monitor.

Lodging

In regards to business travel budgets, The cost of hotels during business stays or layovers. Lodging is a fairly straightforward cost, though the length of a stay and usage of lodging shuttles or amenities may be bundled in. Similarly to airlines, some companies may have loyalty programs or point rewards that regular users can benefit from, which provide extra returns over time, leading to reduced travel costs for the business overall.

Ground Transport

When calculating your budget for business travel, ground transport cannot be ignored. This typically includes cars, trains, shuttles, or any other forms of transportation that will be required once a team has reached their destination. Certain sustainability plans could affect this as well, limiting the types of transport available to a business, while some amenities in a plan may expand the list. There is a deep variety to what ground transportation options are available, but a business’ travel management company should have a clear outline of what they can offer.

Incidental Fees

When budgeting for business travel, incidental fees are a part of spending that can quickly and quietly add up. Incidental fees cover a large variety of small charges that can’t otherwise be covered by the plan, such as parking charges, convenience and service fees, cancellation and missed connection charges, among many more. As is the nature of these incidental fees, small quantities can add up very quickly without being calculated into the costs of business travel, leading to a spending sum that can appear daunting if not monitored. A budget should be set aside specifically for these incidental fees, or covered by another part of a travel plan if at all possible. Incidentals like food and drink, for example, can sometimes be covered if the lodging location offers meals as part of their room package.

Defining the Best Type of Budget for Business Travel

After the costs are defined, it is beneficial to stick to an outline for the budget that best fits your mode of business. While others may exist, these two approaches can help set up a basic budget that can be tweaked for the best efficiency.

Hard Cap Budget

Hard Cap budgeting is a straightforward and simple way to approach business travel. The cost of trips is checked against the total budget, and the business can then decide if the trip fits within the budget, or if travel costs need to be reduced. If the trip falls below the hard cap, workers are good to fly! If above, financial supervisors may need to look into the trip to decide if the costs are worth it. With this simple plan, businesses with very few trips in a fiscal year can get an easy glance at travel opportunities.

Unfortunately, simplicity comes with its own cost. Hard Cap Budgets are rigid and inflexible, meaning that high travel seasons or departments may need extensive administrative oversight. Further, hard cap budgets should be monitored annually, to ensure that travel plans comply with company policies, and for any market fluctuations that may have changed travel prices.

Dynamic Budget

As opposed to the hard cap, dynamic budgeting is a more flexible, albeit more complicated way for businesses to handle their travel budgets. By working with live data, market trends, and trip forecasting, dynamic budgeting is a granular and dependable way to handle business travel costs. With dynamic budgeting, the total budget can change based on the season of flight, necessary policy requirements, or frequency of trips in a given part of the year. Further, dynamic budgets can provide a deeper insight into which flights are being used — and for what reason — allowing business owners and travel managers a clear view of what is most important in the business travel budget.

Though dynamic budgeting is more complicated to set up, working with a travel management company or taking the time to put in all the pieces of a dynamic budget will elevate a business’ travel to a higher level. Dynamic budgeting allows for trip forecasting, flexible policies, and deep insight into business spending, leading to a budget plan that will save more money in the long term, and create fewer hiccups along the way for businesses that travel with high frequency.

Business Travel is Unavoidable

While traveling for work is the norm for most businesses now, there are many ways to save money while doing it. Setting up a budget or signing on with a travel management company will ensure growth for a budding business, and increase returns for larger businesses as well!