As we head into the remaining months of 2020, businesses will be busy either budgeting or reforecasting for 2021 – and possibly feeling more confused than ever.
2020 has had a huge impact on so many areas, and finance has not been immune to it. Businesses of all sizes have had immense pressure to continually reforecast budgets with each major announcement made as a result of COVID-19.
What (and how) should I budget for 2021?
With domestic and international border reopenings still a while away, setting a budget for business travel will feel like looking into a crystal ball to try and see the future. It’s blurry and you aren’t quite sure what you are seeing – but the good news is that you are not alone in feeling that way.
In our recent State of the Market survey respondents advised the following in relation to their forecast travel spend in 2021 compared to pre-COVID-19 travel volumes:
- 39% were UNSURE of volumes
- 31% of respondents said their spend will DECREASE by an average of -40%
- 24% of respondents said their spend remain the SAME
- 6% of respondents will see an INCREASE in travel by an average of +17%
So while travel is viewed as the number one cost item that businesses can quickly dial back when the economic climate starts to soften, the negative impact is when business travel is a core source of revenue growth and retention. As a business you will need to be careful to temper the duration for reduced or stopped business travel without having a negative impact.
So how do you find the middle ground when it comes to budgeting for travel in 2021?
It’s no doubt a big decision to make when it comes time to press go on travel. The main reason is that there is no precedent to something like this pandemic. But one thing remains the same – getting people together face-to-face is ultimately the only way to achieve success in business, and those businesses that get a jump start on returning to this, will have a huge advantage on their competitors.
Where to start with your travel budget for 2021:
1. Run a report on your previous year of travel spend
While next year isn’t guaranteed to be a ‘normal year’ when it comes to your employees travelling, it’s still good practice to review where you have been spending money on travel in the past.
For example how much of last year’s spend was for sales? How much was for conference and events, or managing a crisis?
A reputable Travel Management Company (TMC) will have a reporting functionality in place for this. For example FCM’s exclusive reporting and budgeting capabilities help organisations gain optimal visibility of their travel spend and greater control travel expenditure to meet their overarching business needs. FCM customers can gain valuable insights by uploading their current travel budget for divisions, departments or cost-centres and then comparing those against actual travel spend.
2. Get your travel policy sorted
All roads lead back to your travel policy. If you don’t have one yet, you need to make this your priority. If you have an existing policy, get it out, dust it off and review every section of it.
The idea isn’t to lock employees into a rigid set of rules. Instead, travel policies should help you prepare for the unpredictable and provide consistency for your traveling employees. A clear set of travel policies can provide important behavioral guidelines that prevent confusion and overspending.
3. Know what travel your organisation is expecting to do in 2021
Are there any conferences, trade shows, trainings, or other major events that you send people to every year? Be sure to ask each of your departments on the likelihood of those events going ahead in 2021. You can budget for these, and if they do get cancelled, you can factor the cancellation in to your reforecasting process.
4. Control business travel costs
Having a budget is great, but it’s not so great if you blow it out of the water in the first half of the year.
Work with your TMC to check if you are getting the best deal possible with airlines, hotel providers and ground transportation. FCM’s Return to Travel Framework also provides great advice on vendor management and cost considerations.
5. Build in a contingency
2021 is going to be the great unknown. It’s a smart move to build in a contingency budget in case borders open up quicker than expected. However it’s important to remember a contingency budget should be for unexpected, can’t be avoided trips – it’s not for employees to overspend or for travel program managers to become lax on managing costs.
The final tip – don’t stress!
The most important point is to not get too stressed over planning for 2021. What this year has taught us all is that nothing is certain, and things can change rapidly.