As a company grows, so does its corporate reach. Doing business within ever-increasing geographic boundaries is the natural evolution for ambitious CEOs. As this unfolds, business travel expenses escalate. In some organizations, these expenses escalate so quickly, the company loses the ability to effectively track and manage these expenses. This can quickly spin out of control into a genie-out of-the-bottle situation, since the travel budget for many companies represents the second largest controllable expense outside of wages and benefits. In some worst-case scenarios, it becomes a slush fund for personal indulgences masked as fraudulent travel and entertainment expenses.
As with many business challenges, there can be multiple solutions. For most, the implementation of, and adherence to, a Corporate Travel Policy is the first step (this could be an article of its own) and for a fair contingent of these companies, the use of a corporate Travel Management Company (TMC) serves as a crucial step in adhering to an established CTP.
Think of it this way: a TMC functions as the travel department for a company. It works not only to secure bookings for hotels and airlines, but also helps a company control its travel expenses by negotiating corporate rates on travel services. In addition, it can provide logistical support for business travelers, as well as 24/7 emergency management in the event of canceled flights and the other logistical complications that invariably arise during business travel. A TMC can also deliver the crucial data a company needs to effectively track and manage its travel expenses.
As with any business, a TMC is profit motivated and provides these services for a fee. In a perfect world, the fees a TMC charges are offset by the cost reductions achieved through negotiated corporate rates and CTP compliance. The fees and commensurate offsets usually begin to achieve parity when the annual travel budget for a company approaches the $2 million mark.
Although hard-dollar cost considerations drive the bulk of business decisions, it is important to look closely at the soft-dollar impact. Soft dollars are those that, although difficult to account for, have a very real impact on a business. For example, a Human Resources professional who spends an ever-increasing portion of their time arranging and managing travel for key personnel begins to provide less of an HR function. The same holds true for an Administrative Assistant or whoever assumes the role of the de facto corporate travel manager. It is estimated that within a large percentage of businesses, certain employees are required to wear so many hats, they ultimately spend less than 50% of their time performing responsibilities directly related to the role for which they were hired. Although these are “soft” expenses, they can have a significant impact on the growth and profitability of a company over time, not to mention the morale of the overtaxed employee.
Although not a perfect fit for every organization, a TMC can be a tremendous asset to any company relying increasingly on travel to facilitate the face-to-face requirements of its growing business. For most, this will not likely be a dollar-for-dollar offset initially, but rather a combination of cost reductions and overall value, convenience and operational efficiencies gained through this type of professional partnership. If your company’s travel needs and associated logistical demands are placing an increased strain on employees and taking the focus off of the day-to-day business of, well, running the business, it might be time to look a little closer at what a TMC can offer.
For information on AmTrav’s full suite of travel management solutions, please call 1-800-795-8371.
By: Denise D.