There are two distinct mindsets when it comes to work travel: Business travelers who skimp when someone else is picking up the tab and those who splurge on the company dime.
The frugal business traveler is less common. Typically, they’re forced to save money even at the expense of productivity. For example, they may be required to take the cheapest flight possible, even if it means a three-hour layover and multiple connections. Non-profit workers fall into this camp. Then, there are a minority of thrifty and conscientious, “by-the-book” types who follow their company’s expense policies to the letter.
The splurger is more common. Traveling on the company dime has its perks, and many business travelers take full advantage of all of them. For example, employees who eat the breakfast and lunch served at a conference may think this gives them license to spend their entire per diem on dinner alone, opting for the surf and turf rather than the cheaper chicken. Companies need to be on alert for these splurgers whose excessive spending can decimate a travel budget.
Excessive meals can make your stomach turn
Taking a client out for a lavish dinner can sometimes make or break a deal, right? Sometimes, excessive meals are justified. Other times, they’re a sham.
Employers need to develop meal reimbursement policies that ensure employees are not unnecessarily splurging on meals. The maximum amount allotted per day can vary widely, and can be adjusted if the employee is picking up the tab as part of a business meeting with other colleagues or a client.
The key to cutting wasteful spending on meals is to understand what is normal for your travelers and to detect when the meal expenses for certain travelers are wildly out of balance with the rest.
Excessive lodging you’ll lose sleep over
If one traveler’s lodging expenses are consistently higher than his or her peers, you should ask why. Many times, outlier lodging expenses are due to seasonality and last-minute bookings that add unnecessary expense. For example, $250 may cover your company’s preferred hotel rate in Scottsdale, Arizona, in the late summer, but the same room can double or triple in the winter months.
Staying in a preferred hotel is only the beginning of complying with corporate policy. Are claimed expenses at the hotel in addition to the nightly stay valid and do they comply with policy? Again, the secret is understanding what is normal so you can detect irregularities.
Occasionally, there are even positive lessons to be learned from identifying how employees splurge. One Oversight customer determined that company travelers who violated company policy by expensing in-room movies actually spent less per night than other travelers. This led to a change in the company policy.
Personal spend expenses spiral out of control
Most companies strongly discourage the use of the corporate cards for personal purchases, particularly when the purchases aren’t related to an employee’s business travel. But, personal spend happens when employees are on the road, so it is important to monitor transactions for indicators of excess.
If an employee runs up many personal charges on a corporate card, then quits or gets fired before paying for those purchases, the company could get stuck footing the bill. Excessive personal spend can also be an indication that an employee is under personal financial pressure and more likely to commit fraud. That’s why it’s important to identify which employees have the highest dollar amount in personal spend in a given program and when personal spend is trending upward per employee.
The Importance of Benchmarking
One of the benefits of leveraging automated risk management and compliance monitoring solutions like Oversight Insights On Demand is that companies can benchmark travelers against one another. Hotel and meal prices can vary widely by city and country, and by the season. Benchmarking is one of the best ways to get your arms around splurging and adjust spending. To keep your spending in check:
- Catalog all hotels stays by night and city, separating lodging from related taxes and other expenses at hotels like Internet access
- Catalog meals and identify the number of participants for each meal
- Compare hotel and meal expenditures by traveler to the norms in the overall traveler data
- Segment expense by traveler role or position to understand any trends in spending. For instance, those in sales roles may have a higher average meal spend per participant.
- Get alerts when personal spend for employees is a high percentage of total company spend
- Track and manage repeat offenders who have excessive, out-of-policy expenses
Many splurgers subscribe to the “Everyone’s doing it” philosophy. They don’t think twice about spending on things reimbursed by the company. To control spend, companies need to encourage employees to change their behavior.
With an AI-powered risk management and compliance monitoring solution like Oversight, you can analyze all expense transactions, identify wasteful and out-of-policy spending, track repeat offenders, and influence employees’ future spending behavior.
Demo Oversight to see how you can detect and mitigate risk in your corporate spend programs, while influencing employees’ future spending behavior.