How to minimise the burden of travel expenses

Managing expenses on a business trip is excruciatingly hard work. Most travellers will easily ratchet up 10+ expenses per day: breakfast, multiple coffees, lunch, public transport fares, taxi fares, dinners, the list goes on. It requires significant discipline to manage expenses en route entering information into an ‘app’ - no matter how user friendly it is - especially on journeys lasting multiple days.

Research shows that 80% of frequent travellers find managing expense claims the most difficult and stressful task they deal with when they travel. Requesting receipts, converting currencies and committing details of expenses to memory so they can be entered at a later date. Time consuming, frustrating and totally unnecessary.

It’s even more difficult for infrequent travellers. Their travel expenses are more than likely funded using personal credit cards. Seeking reimbursement through complex and unfamiliar processes compounds the frustration of dealing with expenses.
So, why do organisations do this to their employees?

There’s a simple and fairer way to manage the majority of travel expenses. The low value, day to day expenses like public transport, meals and refreshments. It’s called per diems.

Per diems have been around for decades. They became unfashionable when organisations began introducing corporate card programs, thanks to some very clever marketing by corporate card companies. Finance managers were seduced by the promise of efficiencies, better reporting and the ability to rein in rouge spending of company funds on non travel related products and services.

Reporting hasn’t delivered the intel they promised, because corporate cards are used liberally across multiple expense types (many non travel related) and employees. It’s difficult to get data on employees expenditure habits when twenty people are using the same card. Moreover, enhanced reporting requires significant human intervention, which is difficult to manage, time consuming and prone to inaccuracies.

The rouge traveller issues never went away, in fact they probably got worse. Travellers suddenly had access to spend limits they never had previously. To ensure expenses remained in check, finance teams increased their numbers, expense management systems were introduced and managers were engaged to scrutinise the expenses of their subordinates. The efficiencies promised by the corporate card companies evaporated.

Travellers were happy, myself included. The thought of no longer having to ratchet up huge expense claims on their personal cards appealed enormously. Little did we know how burdensome it would become recording and reconcile expenses on an ongoing basis. This is amplified if you have a team of travellers reporting to you. The expectations of the business is that you are keeping their expenses in check. And the finance team constantly reminds you of this as they too are monitoring all their expenses.

The expectations of the business is that you are keeping their expenses in check, which the finance team constantly reminds you as they too are monitoring all the expenses. Remind me where the efficiencies are coming from?

A number of years ago I did an analysis on expenses at a top eight university. They were keen on the idea of per diems, however the leadership thought the Australian Tax Office (ATO) reasonable travel allowance rates were too generous. The analysis showed the average expenditure by travellers was 20% lower than the ATO rates. A proposal was put forward to the leadership where non corporate card holders could apply for a travel allowance at the reduced rate. It was approved and the infrequent travellers leapt with joy - all 80% of them. It’s still in place today.

The fallout of COVID has placed a significant amount of pressure on a number of sectors, especially higher education. Reduced funding and resourcing has lead to difficult trading environments across the sector. The introduction of travel allowances (per diems) will significantly reduce the burden of managing travel expenses for travellers, managers, budget holders and finance teams.

Reducing the burden can only be achieved by implementing an effective process. A process that streamlines the management of travel allowances and removes the risk of paying travellers that don’t need them. Moreover, the implementation of travel allowances cannot be done in isolation. It needs to be incorporated into a process that manages every aspect of an organisations travel: approvals, budgeting, risk, bookings, expenses, reporting, compliance and corporate governance.

That’s what we do at Nutrip.