How CFOs think about travel spend.
"You'll sit in the middle seat, and you'll like it"
Before we get crackin’ - one quick question to keep the content crispy:
Today I want to talk about travel and entertainment spend (or as the QuickBook boyz call it, “T&E”). But first I have to get something off my chest - although you have the budget to do so, there’s no reason why one person should spend $32 at Chipotle.
Yes, I approved it, but I’m deeply worried about you.
Now that we’ve got that budgeting / medical disclaimer out of the way, here are the bus stops we’ll make on this T&E saga:
I. Internal vs External Travel
II. Flight Classes and Alcohol
III. Visibility and Approvals
IV. Budget Timing and Expense Submission
I. Internal vs External travel
The first lens I view travel through is if it’s for Internal (team building) or External (revenue generating) activities. The second bucket gets more latitude, but it also has a different set of guardrails and expectations.
Internal travel includes:
Departmental meetings (small hands)
Large company events (sales kickoff, all hands, president’s club)
Educational stuff (conferences specific to your role)
Board meetings (four per year)
Executive offsites (quarterly planning)
External travel includes:
Sales meetings (close the deal!)
Conferences (collect those leads!)
Partner meetings (1 +1 = 3, I think?!)
You want to forecast each of the buckets by:
Department x Employee Type x Activity x Frequency
To make that more tangible, here’s an (ugly) snapshot, using the Sales and Engineering departments, for both Execs and Staff, across Internal and External Travel buckets, by quarter.
Mostly advice: I’ve found that any travel forecast that negates to take an “activity based” lens will vastly underestimate spend. Furthermore, coming up with an estimate for Flights, Hotels, and Food for each “trip” is helpful for extrapolating across the 13 potential travel weeks per quarter.
II. Where you sit, what you drink
The biggest points of friction in a company’s travel and entertainment policy are typically flight class and alcohol.
There are typically three schools of thought when it comes to where you sit:
The “We’ll all sit in coach, and it will MAKE US STRONGER!” philosophy: I’ve worked at organizations where zero employees were able to book anything other than coach…. all the way down to the CEO (unless execs were flying private lol).
The “Count your rungs in Workday” philosophy: I’ve worked at other places where the N-1 of each person determined what they could book. For example, if you are a direct report of the CEO, you could always book business class. If you were N-3 from the CEO, you could book extra leg room. If you were an FP&A analyst, you were lucky to fly in the cargo hold.
The “How long is your trip” philosophy: This typically falls into three sub buckets
Length: I’ve worked at places where the flight class is more dependent on time in seat, rather than title. For example, anything over 6.5 hours (conveniently JUST long enough to rule out the cross country Boston to San Fran trek) could book business class. Anything under that time sat in coach.
Domestic vs International: Or if you are traveling over the pond, you could book extra leg room.
Time of Day: Or if you were taking a red eye you were able to book a class where you could recline the chair enough to (kinda) sleep (a GENEROUS consolation prize for saving the company the extra night in a hotel room!)
Which one do I like the best? Probably the third philosophy. It’s pretty cut and dry based on where or how long you are traveling. Plus, it’s more humane to our six foot four colleagues than the first policy. And it’s less complicated to track and police than the second, where there are ALWAYS exceptions popping up.
Mostly Advice: Document your chosen policy VERY clearly. And use your travel booking system as an automated choke point that does the bulk of the work based on employee selections.
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There are a few ways to look at this policy:
Number of drinks per person per day: The average I’ve seen this hover at is 2. After that, it’s on the employee’s tab. This is when you see employees do the credit card shuffle a few hours into an outing.
Time of day you can order alcohol: Not to be Captain Obvious, but all receipts are timestamped. And at one company I worked at we were extremely strict about no alcohol before 4PM. This was a big point of contention with sales reps, who would bring clients out to steak houses for lunch. This was also a big point of contention for our employees in Europe, where it’s normal to wash down lunchtime Sushi with Pinot.
Dollar amount per client: I’ve typically seen external per diem’s run at about 150% of internal per employee allowances, plus a flat dollar amount for the “event” to do some sort of activity (like an escape room, or something lame like that).
Mostly advice: If you’re going to take clients out for an expensive night on the town, give your accounting team a heads up. They’ll usually just give you a ballpark number to stay below if you’re doing it for a revenue generating opportunity. This makes it easier on everyone.
III. Visibility and Approval process
I think they’ll write this on my FP&A tombstone when I die someday:
“Sometimes companies have the perception that the best way to reduce travel costs is to get people to get cheaper flights or cheaper hotels and make two stops on the way... We believe that the best way to manage it is by actually helping some trips to not happen at all.”
-Brex co-CEO and co-founder Henrique Dubugras
The best way to curb travel spend is not to force people to sit in the middle seat on three layovers en-route to Detroit, and then sleep on crusty covers at La Quinta Inn. It’s to make sure trips that don’t need to happen don’t ever leave the station. Doing so leaves more travel budget for the more meaningful trips, so employees can sit in an aisle seat (on a Delta flight instead of a Spirit Air lawn chair) and stay at a Marriott (no offense, La Quinta - the continental breakfast looks wholesome).
When it comes to tracking those trips that do need to happen, where it typically falls off the rails is when there’s a lengthy lag time between swiping a credit card and it getting reflected in the budget.
I’ve spent some cold, hard hours in the likes of Ramp, Travelperk, Navan (the artist previously known as TripActions), Concur, and Brex over my career. And over the past three years there’s been a quiet renaissance in the T&E lifecycle.
FP&A teams now have the ability to input a department’s budget, approve or deny trips, see travel charges on both virtual and physical credit cards, and link that spend back (in real time) to dollars remaining in budget.
This last part - the live budget reconciliation - is a huge “aha” moment for both FP&A leaders and budget owners alike. Giving functional owners the chance to play “god”, approving and denying specific trips, not only allows them to feel empowered, but also creates a culture of accountability where they can check their budgets.
IV. Budget timing and expense submission
Three things you may not have realized about budget timing and expense submission:
Even though you booked your flight to LA for a March departure during the month of January, it doesn’t hit the P&L until you actually take that trip.
There’s a 90% chance the FP&A team only cares about your quarterly travel spend; the monthly amounts are less important. So if you want to burn through it all in one month, that’s fine. Just keep track.
Other than poor performance, travel violations are the #1 reason people get let go. If you are walking a thin line and you think your company is looking for an excuse to tell you to hit the road, don’t F’around with expenses.
And finally - never attempt the fabled Wade Boggs Challenge and try to expense it.
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