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7 Main Leakage Points in a T&E Process and How to fix them

cost leakage in T&E process

In a globalized economy, travel has become a critical lever for companies to unlock revenue growth. More employees book flights and hotels and claim reimbursements today than at any other time in history. Companies are spending more time optimizing Travel & Expense spending, and cost leakage is a major focus area.

In the Travel & Expense world, cost leakage happens because of unnecessary or unauthorized spending while booking travel or traveling. Studies have shown that the leakage could be as much as 10% of the total spend. Hence, in the slowing 2023 economy, reducing this leakage, boosting margins, and meeting shareholder demands is crucial.

This blog highlights the 7 prominent leakage points in Travel & Expense spending and provides practical solutions to fix them.

1.Delayed Approvals

Travel often contributes to 70% of a company’s cumulative T&E spending. Most companies in the market today let employees book from anywhere and approve this spend when the employee reimburses it. Approving reimbursement is hard because no comparison is available to determine if the most cost-effective choice was booked.

A smarter alternative to moving the approval point forward is to ask employees to seek approval before they make the travel booking. An easy way to accomplish this is to onboard Travel Management Software such as ITILITE and other prominent choices. 

2.Unoptimized Travel Budget Policy Guidelines

Travelers often make sub-optimal travel choices, e.g., booking at the last minute, making very costly choices, or not utilizing the company’s tie-ups with airlines and hotels.

You can reduce cost leakage significantly by implementing a tight travel budget guideline. The key elements to cover that are often missed are advance booking rules, budget guidelines for hotels, listing out preferred airlines and hotels, and capturing negotiated rates. 

To draft a detailed travel policy, leverage our easy-to-use template. 

3. Unnecessary Travel 

Travel often is a perk for employees. It is also common to see managers encourage teammates to travel, even when it may be avoidable.

It is nearly impossible for a finance or HR leader to question these travel choices, often defended as ‘Business Needs.’ A simple way to curb unnecessary travel is to set up department-specific monthly travel budgets.

Tools like ITILITE make implementing and defining these budgets easy with integrated and real-time travel and expense reporting. 

4. Non-Travel Expense Reimbursement Guidelines

Non-travel reimbursements can make up to 30% of your company’s T&E spending. This is an area that is often neglected, and common items not covered under reimbursement guidelines are- fuel expenses, internet expenses, mileage policy, etc.

A simple cure is reviewing your reimbursement guideline yearly and benchmarking with other peers. In addition, make sure that the reimbursement guideline is communicated to the employees and is easily discoverable (e.g., pinning it on the company’s Slack channel).

5. Manual And Inefficient Expense Reporting 

Manual expense reporting processes are prone to errors, delays, and manipulation. Employees may inadvertently make mistakes, such as double-entry or wrong entry (for example, entering 1009 instead of 1008), resulting in inaccurate reimbursement claims. Such data entry errors can lead to cost leakages. 

Adopting automated expense management systems such as ITILITE can streamline the reporting process, reducing the likelihood of errors and delays. Additionally, these systems can enforce policy compliance, provide real-time visibility into expenses, and enable efficient auditing and approval workflows. 

6. Non-Compliant Expenses

Non-compliant expenses can be a significant source of cost leakage in the T&E process. For example, employees may submit expenses that do not align with company policies or are not directly related to business activities. Since the finance team, daily, receive multiple expense reports, it is difficult for them to verify every expense. Moreover, inadequate auditing can result in cost leakages. For example, a few companies conduct audits on a sample basis. This can result in cost leakages. 

Companies can identify and flag non-compliant expenses for further review by implementing effective expense categorization and validation mechanisms. Regular and in-depth audits and employee training programs can also help raise awareness and reinforce compliance with expense policies.

7. Fraudulent Expenses

Sometimes, employees make fraudulent claims, such as submitting the same expense bill more than once or manipulating the expense amount, which can lead to financial losses. In such scenarios, it is very hard for finance managers to manually verify all the expense receipts submitted. 

Expense management tools for finance can help you improve compliance and reduce expense fraud by enforcing policies and rules and providing visibility into expense data. These tools allow you to set spending limits, define expense categories, and configure approval workflows. They also provide real-time visibility into expenses, allowing you to identify any irregularities or potential fraud quickly.

Reduce your Company’s Cost Leakages with ITILITE

Effective expense management is very crucial for your company’s financial success. While multiple options are available in the market, you must choose the one that fits your business’s needs. 

An exceptional solution such as ITILITE can help you save costs and optimize travel and reimbursement spending. ITILITE is an advanced cloud-based travel and expense management software that automates your T&E process in an easy-to-use manner. It is easy to implement and offers great value for money.

Moreover, the virtual travel consultant gives practical data-driven insights and suggests where you can cut down on travel costs.

To get a first-hand experience with ITILITE, get in touch with our experts now!

Discover a simpler way to manage corporate travel

Corporate travel management can be extremely daunting. Getting travelers to stick to budgets while booking travel, monitoring spends or finding support for travelers – there is always something that needs to be done. That’s why we built a solution that makes corporate travel management simpler.

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