Can you account for business travel by project, customer or cost centre?
A manufacturer wins an important new contract. The customer is overseas. The order is valuable, the relationship has potential and delivering the project will require people from several parts of the business to spend time at the customer's site.
The sales team has already travelled there to develop the opportunity. Once the contract is signed, project managers will attend planning meetings. Engineers will travel for installation and commissioning. Technical specialists may need to return for training, maintenance or troubleshooting. All perfectly normal. And every journey will cost money.
The question is: will anybody know how much all that travel ultimately cost the project?
The project begins
At first, the travel requirements are straightforward. A project manager flies out for a planning meeting. The flights, hotel and ground transport cost £850. A few weeks later, two engineers travel for the first stage of the installation. Their trip costs £2,400. Then another engineer needs to visit a supplier. A technical specialist travels to the customer's factory. The project manager returns for a progress meeting.
Each journey is booked, paid for and recorded. Finance can see the expenditure. The employees know why they travelled. The project team knows which customer they visited. But are those three pieces of information connected? In many businesses, they may not be.
The costs begin to accumulate
The project becomes more complicated. An installation date changes and two flights have to be rebooked. An engineer stays an additional night. A specialist makes an unexpected visit to resolve a technical problem. Nobody has necessarily done anything wrong. These are simply the realities of delivering a manufacturing project. But the travel expenditure is growing. Perhaps some bookings were made by a PA. Others were arranged by the travellers themselves. Some costs were paid centrally and others appeared later as expenses.
The company can still answer the question: How much are we spending on business travel?
Its finance system can provide an annual or monthly total. But another question is becoming increasingly important: How much are we spending on this project? That may be considerably harder to answer.
Then somebody asks the commercial question
Months later, the contract is reviewed. The project has been delivered and the customer is happy. Management wants to understand its profitability before discussing the next piece of work. Materials are accounted for. Manufacturing costs are known. Freight is allocated. Engineering hours have been recorded.
Then somebody asks: What did we spend on travel? There is no immediate answer.
Finance knows what the company spent on flights and hotels during the period, but not every booking carries the project number. The project manager remembers several journeys but not necessarily their exact cost. Expense claims have to be checked. Hotel invoices need to be identified. Somebody needs to establish whether particular flights related to this customer, another project or something else entirely. Eventually, the business may reconstruct the figure.
Perhaps it discovers that £18,000 of travel was associated with a contract that everybody had assumed involved £10,000. That does not necessarily mean the project was unprofitable. It does mean the business understood its economics less clearly than it thought. And that is the point at which travel reporting stops being merely a finance issue. It becomes business information.
A total travel figure is no longer enough
Knowing that the company spent £100,000 on business travel last year is useful. But imagine being able to see that figure differently. Perhaps £18,000 supported one major customer. Another £12,000 related to an overseas installation. £20,000 was generated by sales activity. £15,000 resulted from engineers providing technical support.
The remaining expenditure was divided between supplier visits, exhibitions, training and internal activity. The total is still £100,000. But management now knows something fundamentally different about it. It can see why the money was spent.
That creates better questions.
Does one customer require significantly more travel support than another?
Are travel costs being included properly when contracts are priced?
Is a particular project generating more journeys than anticipated?
Are engineers repeatedly travelling to the same destination at short notice?
Could visits be planned or combined differently?
None of those questions automatically means travel should be reduced. The travel may be essential to winning the work and serving the customer. But the business can make better decisions when it understands the cost.
The answer can be surprisingly simple
Better visibility does not necessarily require a complicated new accounting system. The crucial information can often be captured when the journey is arranged. If an employee is travelling for Project 4527, that project number can be associated with the booking. If the journey relates to a particular customer, contract, division or cost centre, that information can be recorded too.
A manufacturer might choose to report travel by:
project number
customer
contract
cost centre
department or division
business location
reason for travel, such as sales, installation, maintenance or supplier visit
Not every business needs every category. The objective is not to collect data for its own sake. It is to capture the information that reflects how the company actually operates. And capturing it at the beginning is usually much easier than reconstructing it months later.
The picture becomes clearer
Once travel expenditure is connected to business activity, patterns begin to emerge.
Management can see which projects generate the most travel. Finance can allocate costs more accurately. Sales can understand the level of travel support required by particular customers. Project managers can compare actual travel expenditure with what was anticipated.
The business may discover that one overseas installation required far more travel than expected. That knowledge can inform the pricing of the next contract. It may find that engineers regularly make separate trips to the same customer. Better coordination might allow some journeys to be combined. Or it may discover that a major customer generates substantial travel expenditure – but that the expenditure is entirely justified by the value of the relationship. That is useful information too.
The purpose of visibility is not always to find something to cut. It is to understand what is happening.
From knowing the cost to understanding the value
So return to that original manufacturing contract.
The next time the customer asks for a proposal, the business is in a stronger position. It knows approximately how much travel the previous project required. It understands which stages generated that travel. It can budget more accurately, price more intelligently and decide how the next project should be supported.
The flights and hotels have not changed. What has changed is the information surrounding them. That is the difference between recording business travel expenditure and understanding it.
For manufacturers, a total travel figure can tell you what you spent. Connecting that expenditure to projects, customers, contracts and cost centres can tell you why you spent it – and what it actually cost to do the work.
So perhaps the question should not simply be: How much does our company spend on business travel? It should be: Can we see what our business travel is costing each project, customer or contract?
If the answer is no, there may be an important part of the commercial picture that is currently missing.