As the economy stabilizes, travel and entertainment (T&E) costs are once again on the rise. According to FareCompare.com, the major airlines have boosted fares a total of 12 times since 2010. Hotel and dining costs are also on the upswing, although rental car rates for businesses have actually declined slightly since last year.
As a result, the Global Business Travel Association reports that the average amount spent on a business trip in 2011 was $564 - higher than the average of $422 in 2000.
The good news is, T&E is one expense that is relatively easy to control. Here are a few tips from small business management experts on how to reduce yours, while getting the most out of the dollars you do spend.
IMPROVE YOUR PROCESSES
Henry Ijams, managing director of PayStream Advisors Inc., based in Charlotte, N.C., believes that process improvements can help strip hidden costs out of your overall T&E expenditures. Among his suggestions are:
- Reduce friction. According to Ijams, most small businesses spend too much time on paper-based expense tracking methods. “Filling out an expense report takes time away from delivering service to your clients,” he says. Instead, Ijams recommends cloud-based tracking solutions that streamline the process, allowing employees to enter costs online for direct integration into your company's bookkeeping system. These services may be used even while traveling, so that most costs are already entered by the time you or an employee returns to the office.
- Set limits. Give your employees well-defined guidelines for spending limits and use technology tools to enforce them. “For instance,” he advises, “instruct your people that if a direct flight is $200 more, take the direct flight. But if a connection saves $300, take the connection.” To help enforce your policies, Ijams recommends a service such as Egencia, Expedia Inc.'s corporate travel solution, which helps small businesses “rationalize” their travel costs.
- Negotiate. Small businesses may not have the same negotiating power as their larger counterparts. But according to Ijams, small business groups do. Therefore, if you're a member of a professional organization or a professional certification group, ask about their travel discount programs. Or, simply take advantage of travel aggregators such as Travelocity or Orbitz, or even individual airline sites.
PAY ATTENTION TO TAXES
According to Barbara Weltman, a well-known small business advocate and author of J.K. Lasser's Tax Deductions for Small Business, “T&E comes back to a tax matter. You want to make sure that any expenses you incur result in the maximum deductibility, which comes down to following all the tax rules.”
Weltman also recommends using an “accountable plan” - a reimbursement arrangement for the costs your employees pay for travel, entertainment, and other items on behalf of the company. “If you use an accountable plan,” she says, “you will wind up saving on employment tax.”
For additional details on T&E tax rules, Weltman recommends IRS Publication 463.
Whenever possible, take advantage of the loyalty programs offered by airlines, hotels, rental car companies, and even many restaurant chains.
- Airlines and rental cars: Every major airline and rental car company offers a loyalty program that can help your company save on travel. In addition, consider using a credit card from your favorite airline or car company to rack up additional points through everyday purchases.
- Hotels: All the major hotel chains also offer loyalty programs - and many of those programs are even more generous to those who use hotel-branded credit cards. Among the choices are Hilton HHonors, Holiday Inn Priority Club, Hyatt Gold Passport, Marriott Rewards, and Starwood Preferred Guest.
- Restaurants: Among the restaurant chains offering loyalty programs are Outback Steakhouse, T.G.I. Friday's, Red Lobster, Panera Bread, and The Palm Restaurant. With locations in most markets from coast to coast, these chains offer a convenient way to reduce the cost of dining out.
- Business services: If you frequently need business services on the road, also explore loyalty programs from the major service providers, such as Staples Rewards, Office Depot Worklife Rewards, and My FedEx Office Rewards.