COMMENTARY
INTERVIEWS
CHAT
ARCHIVES

The Rediff Business Special/ Business of exec travel

Unusual positioning strategy of business travel management

Saving Rs 25 billion for corporate India

Behind this unusual positioning strategy of business travel management and neatly intertwined into the banks' recommendations is the idea of using the corporate card to pay for all chargeable T&E expenses. "For the corporate, this means doing away with cash advances -- an administrative burden. It also causes a negative flow of funds. The corporate card can help track expense patterns, thus helping the company to better define its T&E budget," explains V Krishnan, manager, corporate communications, Standard Chartered, India.

Corporates are looking for such experts today. And, considering the rapid growth in this segment, they don't have to wait too long. This indirect way of promoting corporate cards, the hottest item in its corporate services basket, is finding its takers. Says Vibha Paul Rishi, executive director, PepsiCo India, "We are very satisfied with our AmEx corporate card programme. It is functioning smoothly." Adds Mathur: "We have made significant investments in technology and training towards delivering similar benefits to the Indian corporations."

AmEx offers a full range of corporate services comprising corporate card system, business travel, forex and consulting services. Over 4,000 corporations have signed on the AmEx corporate card. The card system links up all the cards issued in a corporate even when they are spread across different cities, departments or locations.

For the corporate traveller, using a card offers the advantages of a widely accepted payment vehicle, support services, the generation of receipts for expense reports.

Corporates use their power of negotiation (as a result of bulk buying) to swing better deals with travel related services. For instance, hotel representatives have expressed the desire to offer special deals, say in the area of a single day (no night stay) service.

A case study: an Australian company's total T&E expense was to the tune of US$ 1,86,000. The company was using multiple agents, indulging in multiple payment methods and had not negotiated any special rates. AmEx's recommendations were a written travel policy, one agent, negotiated rates, corporate card and elimination of invoices. Result: the company saved 23 per cent.

The benefits to executives are obvious. There is financial flexibility due to no pre-set spending limit, wide acceptance, emergency card replacement, insurance protection and limited loss liability.

Each of the four phases of the business travel management process -- travel policy, travel arrangements, payment methods and expense processing -- offers opportunities for companies to control T&E costs. Travel policy provides an opportunity to purchase tickets and accommodation at negotiated or discounted rates. In India, comprehensive travel policies are rare and their distribution is limited. Compliance objectives will not be met without proper communication and distribution of the policy.

Specifying a payment method allows companies to streamline expense processing, correct errors or non-compliant activity. Companies can rely on payment methods that maximise cash retention, minimise indirect costs, provide information, promote prompt expense reporting and encourage documentation discipline. By not developing effective business travel management programmes, they are missing out on these key control opportunities.

Corporate cards are issued to benefit from streamlined expense processing and to receive critical management information. Survey results indicate that they are gradually emerging as a method to fund T&E expenditure as companies streamline payment methods.

Four of the top five criteria used to select a corporate card relate directly to the traveller's convenience. But only 52 per cent of companies that issue corporate cards require that employees use the card for all chargeable business expenses.

"The liability in case of business expenses lies with the corporate. For his personal expenses, the individual is liable," explains on official from Citibank. But reliance on cash advances remains high even though cash advances are the most costly T&E payment method.

Expense processing is the final step in the travel management process. Often this step is a time-consuming administrative burden for both travellers and programme administrators.

One would expect travel agencies to be affected by this new trend of banks emerging as travel experts. Is this an encroachment?

Disagrees Dhruv Mukherjee, marketing manager, Northern India, Sita Travels. He says: "We welcome such trends. These policies complement our functions. It's a global trend. In fact, agencies may promote their own plastic to corporate clients. We may tread that path in the future."

Corporate plastic is destined to travel a fair distance for one simple reason. While it seems to be making everyone happy, no dissenting voice feels that banking on it may boomerang.

Facts and figures:

• An average Indian company spent about Rs 16.5 million on T&E in 1997.
• Indian companies rank T&E as the second-largest controllable expense.
• Sixty-six per cent of the companies covered by the survey expect an increase in T&E spending.
• Sixty per cent have formal written travel policies.
• Only 12 per cent of the travellers receive a copy of the travel policy.
• Eleven per cent of the companies that have a written travel policy communicate it through word of mouth.
• Only 24 per cent maximise savings opportunities by requiring travellers to make reservations in hotels with which the companies have negotiated rates.
• Only 56 per cent of the companies that issue a corporate card require use of the card for all chargeable business expenses.
• Eighty-three per cent use temporary card advances to fund T&E expenditure.

How to cut costs:

• Set goals for travel management.
• Negotiate corporate rate programmes.
• Consolidate travel purchasing through a single travel agency.
• Minimise use of cash advance and direct invoicing.
• Rely on corporate card programme.
• Audit only a sample of expense reports.
• Analyse and use spend data that may already exist.
• Measure the costs of expense processing.

Kind courtesy: Sunday magazine

Specials

Business news