There is an increase in business travel once more. According to Statista, it will increase by 38% in 2022 and make a full recovery by 2024. This isn’t unrelated to the fact that in-person meetings had greater success rates, per a Skift finding.
As a travel manager, you have to budget for business travel while taking the needs of the company and the staff into account. Your business trip budget needs to balance keeping the company’s finances in check and optimizing return on investment with providing enough money for flights, lodging, and other services that employees need to be comfortable with.
Therefore, the following article will help you set a budget for business travel so that you maximize return on investment and maintain employee satisfaction.
How Much Does A Business Trip Cost?
The length and destination of a business trip can significantly affect the overall cost. Making an adequate budget includes knowing the kind of travel your company needs.
There are several things to take into account when estimating travel expenses to Indonesia. Based on Trip.com, flights to the nation can cost anything from $500 to $1500 for a round-trip ticket, depending on the carrier and season. The cost of lodging varies as well; although luxury hotels can cost up to $300 per night, budget hotels and hostels can start as low as $10. In terms of transit, Indonesia boasts a vast and effective public transportation network that includes trains and subways. These transportation options provide one-way tickets that range in price from $0.50 to $5.
It’s critical to prepare ahead of time and do cost and activity analyses to develop a budget that suits your needs. You may have an incredible trip to Indonesia without going over budget if you plan wisely and keep an eye on your spending!
How Should A Business Trip Budget Be Made?
A travel manager can develop a business travel budget plan by taking the needs of the staff and the organization into account. To maximize the return on each business trip, your budget for travel must not only account for the cost of the aircraft and other comfortable lodgings for the staff but also uphold the company’s travel policy.
Look for Options to Reduce Costs
Once you have benchmarked your travel costs and established how much you can reasonably spend on business travel, you need to explore ways to further reduce travel prices. Here are a few typical ways to cut costs when traveling:
- Reservations in Advance: Booking your trip well in advance will help you save money on lodging and airfare. As a result, you should make every effort to maintain a suitable window of time between the dates of your actual trip plans and your bookings.
- Public transport: Rental cars and taxis can occasionally be pricey, particularly when traveling large distances. Therefore, you must motivate your staff to use public transportation, such as buses, trains, and subways.
- Travel Management Software: Using third-party websites to book hotels and flights may be quite time-consuming and does not always result in the best deals. For centralized booking, economical options, and seamless trip administration, think about investing in company travel management software.
Establish Spending Benchmarks
Following your review of the fundamental booking characteristics, you need to benchmark your expenses. Establishing a reasonable cap on the amount you have to spend on business travel is known as expenditure benchmarking. By examining historical travel data and contrasting it with current industry patterns, you may establish a baseline for your travel spending. When examining historical travel patterns, keep an eye out for the following:
- How long a business trip typically lasts
- Preferences for hotels and flights
- The average cost of subsistence (meals and drinks)
- Travel insurance type
- Additional Fees (Visa, TSA pre-check)
To determine how much you will be spending on business travel, you must first analyze the average expenses of these characteristics and then compare them with the industry standards of the present day.
Provide for Emergencies
Your employees encounter a variety of uncertainties when they travel for work. For example, reaching their destination, they could run into a medical emergency or become entangled in societal disturbance. You need to set up a flexible business travel budget that allows for last-minute reservations, cancellations, and rescheduling in cases such as these.
Consult the Guidelines for Your Travel Policy
The first step in developing a corporate travel budget is consulting your travel policy guidelines to determine the fundamentals of booking parameters for various staff members. For example, your travel policy may have different rules for middle-level managers and executives. For the C-level employee, you might need to book a 5-star hotel and business class, while the middle-level manager might be better off with a 3-star hotel and economy class. Therefore, review the policy requirements before creating your business trip budget.
Read more: Ultimate List of 11 Business Trip Essentials: What to Pack and Prepare as a Professional
How Do Trip Expenses Get Calculated?
So what is the breakdown of these average costs by individual expenses? Typically, business travel planning entails four main expenses:
- Flying
- Housing
- Earthmoving
- A daily stipend for meals and other costs such as parking
Establishing precise criteria and using an algorithm that can incorporate current market rates with those parameters is the best approach to forecasting a trip budget. Business class tickets or a first-rate hotel may be preferred by a company organizing a trip for senior personnel. You might base your daily allowance on the General Services Administration’s (GSA) norm in the United States, or you could offer a higher allowance to regular travelers as a kind of appreciation.
Put another way, be more detailed about the kind of arrangements that work well for an average business trip. Companies will have varied needs depending on where they are in their travel program. Use current market rates to obtain the most accurate cost estimates after you know what’s best for you.
What Should Be Included in A Business Trip Budget?
You need to factor in all of your business travel costs when creating a thorough budget for travel. Employee costs incurred when traveling for work to achieve business objectives are known as business travel expenses. Businesses have different policies about what they will and won’t compensate for business travel expenses. However, while creating your business trip budget, you should generally include the following costs:
Transportation
The fees that employees pay for their flights or trains when they travel for work are included in their transportation expenses. It also covers the price of their transportation from their accommodation to the location of the meeting. Therefore, you need to factor in planes, trains, and taxis when figuring out how much transportation will cost for business travel.
On the other hand, staff may occasionally use their cars for shorter business travels. In these situations, you have to factor in the price of petrol, parking, and upkeep when creating your business travel budget. You can establish separate policy guidelines in your company’s business travel budget, or you can reimburse these costs based on the annual standard mileage rates.
Accommodation
While booking accommodations for staff to stay during business trips, expenses are incurred. These expenses account for 30–50% of the total cost of travel. They therefore account for a sizable portion of your business travel budget.
You also need to factor in the total amount of money your employee may spend each year on business travel lodging in motels, resorts, lodges, or other commercial locations. You are not required to include any clauses about private accommodations, though.
Meals and Drinks
Drinks and meals are necessary for staff members to stay hydrated when traveling for work. Additionally, it may occasionally be necessary for your staff to serve lunch or dinner to clients as part of their job duties. These costs are sometimes referred to as subsistence costs. The full cost of the trip’s subsistence is your responsibility as long as:
- The expenses were borne by your staff while on a business trip.
- The costs weren’t exorbitant.
- During the meal, a business associate or employee of yours was there.
You can establish a per diem cap in your business travel budget and compute an approximate daily food allowance for your staff. As an alternative, you can give your staff instructions to gather all of the meal receipts and turn them in for reimbursement after the trip. When creating your business travel budget, don’t forget to factor in the maximum amount for meals, and inform your staff about it as well, to prevent overspending.
Unexpected Costs
The extra costs that employees have when using services while traveling for work are known as incidentals. These costs are borne by employees in addition to the main service fees. For example, if tipping is expected according to the customs of the restaurant they are visiting, then staff may be required to do so. In this instance, the cost of the dinner is considered a subsistence item, and the gratuity is classified as an incidental expense.
Avoid These 3 Business Travel Mistakes
Put Less Money
What is the largest expense that businesses incur when traveling for business? Meal costs account for more than 20% of the average business travel expenditure, surpassing those of airfare, lodging, and vehicle rentals. Reducing your daily rate or adjusting it for more expensive versus less expensive locations could be beneficial.
This also applies to revising your travel policy to make it explicit when it makes sense to host customers or business partners, allow staff to buy alcohol, and other similar matters. When staff members reside in apartments, you may also want to monitor their grocery purchases and make a distinction between their grocery expenses and their per diem meal costs.
Ignoring The Airfare Tax
One common mistake made by travelers and business travel managers is to look for flight fares on a travel aggregator website but to overlook adding taxes to the total cost. Over 25% of the cost may be covered by sales tax and other taxes! You run the risk of going over your budget if you’ve already determined how much the ticket will cost at face value.
Overpaying for a hotel
When trying to save travel expenses, airfare may seem like the largest line item to concentrate on. Although an airline ticket usually costs more than a hotel stay for one night, the cost of the hotel might add up considerably more. Rewarding guests who stay under budget is a simple way to get them on board with cutting hotel costs. A travel rewards program is a terrific way to encourage staff members to go above and beyond in their search for affordable solutions.
Remember to keep an eye out for daily resort fees and hotel taxes as well, as these can unintentionally push your traveler over budget, particularly if the nightly rate was paid in advance and the resort fee is assessed at the time of check-out.
Read more: Know the Key to a Successful Business Trip: A Complete Guide and Effective Tips
5 Tips for Creating A Budget for Business Trips
You should make sure that spending on business travel is in line with the goals, requirements, and bottom line of the company when creating your budget. We suggest doing the following actions to make it simple:
Establish A Reasonable Budget for Your Company
Finding out how much you can spend on business travel without compromising other necessities like rent and payroll is the first step. To determine reasonable travel expenses if business travel for your firm is beginning to pick up again, it’s a good idea to look into previous travel trends, such as:
- The average duration of the visit
- Travel
- Ground transportation and transfers
- meal costs
- Accommodations and amusement
- conference costs
- Visas
- Coverage
From here, you can start estimating the cost of an ordinary business trip and determine what kind of budget would be reasonable given your present travel requirements and the future objectives of the firm. In the end, every expense you incur for business travel must be weighed against the possible return on investment for your company.
Take Into Account External Influences and Seasonality
Is there a certain period of year when business is particularly busy for your organization? During certain times of the year, do members of your C-Suite or business development teams attend more conferences and networking events? Your corporate travel budget should take all of these things into account.
It is imperative to consider additional exogenous variables that may impact the allocation of funds toward business travel, such as escalating inflation.
Look for methods to Cut Costs
There are lots of practical strategies to cut expenses and maximize your vacation budget. A few of them are:
- Booking in advance: Try to schedule your travel as far in advance as you can, even though last-minute cancellations are occasionally inevitable. You can benefit from early booking discounts on flights, the cheapest hotel rates, and more.
- Encouraging staff members to go by ground instead of hiring a car or hailing a cab by using public transport like buses, trams, and trains.
- Using a travel management app to book your trip: Save time and money by using a travel management platform like TravelPerk, which allows you to book your business trip in one location and offers competitive hotel rates as well as the largest flight inventory in the industry.
- Purchase flexible tickets in case of employee illness, strikes, or canceled meetings. As someone in charge of overseeing the business travel budget for your organization, there are certain factors you cannot control. Thus, be sure to include flexible booking alternatives so that you may get your money back in case something unforeseen comes up.
Provide A Clear Policy for Business Travel and Notify Staff of It
Once you’ve determined what cost-saving strategies and budgets are reasonable for your company, it’s critical to ensure that everyone agrees. We naturally agree that business travel is viewed as a benefit by many employees! However, controlling expenses is crucial, particularly for small businesses.
Having an easily accessible and unambiguous corporate travel policy is the best approach to do this. Travel policies usually include instructions on how to book, what kinds of expenses to record, how much to spend, and—above all—what items are reimbursed and those that aren’t. This guarantees that staff members know the costs that can be deducted from their business travel expenses.
Make adjustments to your budget
While creating a budget is crucial for your company, don’t forget to account for unforeseen expenses. Your company travel budget should be flexible enough to cover unanticipated events like emergencies or incidentals. For this reason, when estimating the cost of your business travel, you should always account for a margin of error.
Conclusion
A comprehensive budget for business trips serves a purpose rather than being a financial plan. It acts as a tool that empowers professionals to make informed decisions, anticipate potential obstacles, and maximize the value of their travel investments. As we delve into the aspects and trends influencing business travel this year it becomes clear that technological advancements, fluctuations, and evolving corporate priorities all play a role in shaping the landscape.
For example, the proliferation of tools provides businesses with capabilities to track expenses, analyze data in real-time, and make necessary adjustments to stay on target while avoiding unexpected costs. Additionally, global trends like travel and the changing dynamics of work are redefining what constitutes a business trip.
That wraps up our deep dive into the business trip budget for 2023. As the world of business continues to evolve, staying informed and adaptable is key. If you found this insight valuable and are eager to explore more topics that can empower your business decisions, we invite you to delve deeper. Visit here to read more of our insightful blogs and stay ahead of the curve in the corporate world.
