Business travel can be essential to growing your company but, as you’ve probably experienced, travel expenses can quickly get out of control. As with any other part of your business, spending money isn’t a problem but wasting money is. With that in mind, let’s look at some practical ways to tame your travel budget.
Make a Business Travel Budget, Not an Allocation
The number one mistake small business owners make when it comes to business travel is thinking that allocating funds is the same thing as setting a budget. That couldn’t be further from the truth.
By allocating funds, I mean saying, “For this business trip, I can spend $1,000.00.” Is that a budget? No. Is that number too high? Too low? Are you bound to go overspend no matter how frugal you are or have you set aside an amount of money that will encourage waste? The answer is: you don’t know – not if all your doing is allocating funds.
A travel budget, on the other hand, will review all of the expenses likely to be incurred on the business trip. It will also review that those expenses are essential to the trip being a success (making a sale, improving client relationships, learning new skills, etc.). Only after you’ve built a detailed budget and reviewed it with key members of your team should you allocate funds.
Making a travel budget is easy if you follow this simple checklist:
1. Number of People Traveling: The number of people traveling has the biggest impact on your budget and it’s where every budget should start. You want to identify those people that are essential to obtaining the objective of the business trip. The fewer people traveling, the smaller the cost – unless keeping a team member at home costs you business.
2. Flights & Luggage: Include all associated costs of the flight, including airfare and fees for checked bags. Less reliable airlines can have delays or cancellations that can derail your travel schedule. More affordable flight times sometimes come at the cost of your team members’ alertness. Also, most airlines charge fees for checked bags.
3. Hotel: In addition to the room rate, be sure to include taxes and additional fees, such as a resort fee or parking, if applicable. Tips, too, could be a line item depending on the location.
4. Car Rental: Whether you fly or drive to your destination, it’s likely you’ll be renting a car during your business travel. This is absolutely an expense to be included. Budgeting for a rental should include additional insurance and gas. If a rental is not needed, then you will want to replace this line item with “Taxi/Uber” and budget accordingly.
5. Meals: You’ll need to budget for two meals per day, assuming your hotel offers a complimentary breakfast. Not all meals are created equal, so make sure you’re accounting for meals with prospects, clients, or people your team’s networking with.
6. Entertainment: This expense will be especially essential if you are in sales and you need to impress your clients or prospective clients.
7. Allowance for Incidentals: There are bound to be miscellaneous or unforeseen expenses that will come along with business travel. Budgeting for these added costs is a good idea.
Treat your business travel budget like any other budget and do more than write out a list on a scrap piece of paper. Pull up a Google Sheet or Excel spreadsheet so you can easily draft, edit, and share the budget with all relevant parties.
Tips for Taming Your Travel Budget
After you’ve built your budget, it’s time to tame that beast!
You can tame a business travel budget in a number of ways. Most people’s first thought is to save money by identifying the most affordable airfare or accommodations, and that’s not a bad place to start. But there are other way a small business owner can save without turning into coupon clippers or sale sleuths.
Here are the primary ways keep costs to a minimum while travelling for business:
Shop Rates & Be Frugal:
Spending a little time on shopping for the best deals on airfares, hotels, and car rentals can add up to big savings. Also remember that, while you want to be comfortable, you’re not on vacation. You may not need to fly first class, stay in the best hotels, or drive the luxury class rental car.
Take Advantage of Business Credit Cards:
Using business credit cards with rewards programs can save you big time on travel costs.
Points and rewards can accumulate for cash savings or be redeemed for things like airfares, hotel stays, and car rentals. For example, most cash back cards reward users between 1-5% of purchases. If you could reduce you’re business travel budget by 5% without spending any additional time hunting for deals, shouldn’t you do it?
In addition to credit card rewards, business credit cards often have other perks than can reduce your trip’s total cost. Many cards will have rental car insurance coverage if you use the card to pay for the rental. Many rewards programs will also allow holders to use member clubs at airports which may reduce the line item for meals.
Track Expenses to Reduce Tax Bills:
Another travel hacking technique with business credit cards is to use them for tracking expenses for tax purposes. Not only will you accumulate rewards for future travel, you’ll have a handy statement to keep track of your deductible expenses.
For soleproprietiers will have a far easier time with the Expenses section of their Schedule C while partnerships and LLCs will have an easier time with the Deductions section of their 1065. Ensuring that you maximize deductions means you’ll be reducing your tax bill.
Incentivize Employees to Stick to the Budget:
A creative way to encourage frugal travel among your employees is to incentivize them. Incentives tell employees where business owners are placing focus and if you focus is reducing your travel expenses, incentives can be very effective. Offering employees a reward (or a percentage of the savings) for coming in under budget will encourage them to be cost conscious travelers and help your bottom line.
You can’t tame a budget if you haven’t made a budget. With a little bit of care and diligence, your budget can help you control costs while also allowing your team to achieve the goals of the trip. When you think about saving money on business trips, don’t get fixated on price points alone. Instead, be smart about maximizing credit card rewards, tracking tax deductible expenses, and incentivize your employees to be as thrifty as possible.
If you do this, you can ensure that you’ll keep costs to a minimum while maintaining focus on the reason for your business travel in the first place, which is to grow your amazing business!
ABOUT THE AUTHOR- Kent Thune is a staff writer at Fit Small Business, specializing in small business insurance, small business finance, and personal finance for small business owners. Kent holds the distinction of holding a CFP(R) and an MBA, along with 20 years’ experience in finance and 12 years as a small business owner. When not writing or advising clients on their finances, Kent spends time with his wife and two young boys at his home in Hilton Head Island, SC.