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 had a huge impact on 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. While we have seen China lead recovery through domestic travel and encouraging developments on border re-openings through green lane arrangements, it will still take a while for travel to return to pre-COVID-19 levels.
Setting a budget for business travel will feel like you are looking into a crystal ball to 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 one of the first items that businesses try to dial back on when its performance starts to slow down, it can drive a negative impact on your bottom-line if business travel is a core source of revenue growth and retention. As a business, you will need to be mindful about the duration for reduced or stopped travel and ensure that its negative impact can be managed.
Finding the middle ground when it comes to budgeting for travel in 2021
No doubt this is a big decision to make when the time comes for businesses to kickstart travel again. But one thing is clear – getting people together face-to-face is ultimately one of the best ways to achieve success in businesses in the long run, and those businesses that get a head start on this will have a huge advantage over 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 is a good practice to review where you have spent money on travel in the past.
For example, how much of last year’s spend was for sales or business retention? How much was for conference and events, managing a crisis, or simply internal meetings?
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 to gain optimal visibility of their travel spend and greater control over their travel expenditure to meet the overarching business needs. You will gain valuable insights by reviewing your 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 travelling employees. A clear set of travel policies can provide important behavioural guidelines that prevent confusion and overspending.
FCM’s Return to Travel Framework provides helpful advice on the key considerations to focus on when it comes to your travel policy.
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 year of the great unknown. It’s a smart move to build in a contingency budget in case borders open up more quickly than expected. However it’s important to remember a contingency travel budget should be for the unexpected, trips that cannot be avoided – it’s not for employees to overspend or for travel programme managers to become lax on managing costs.
The final tip – don’t stress!
The most important point is to not get too stressed and over-plan for 2021. What this year has taught us all is that nothing is certain, and things can change rapidly.
When it comes to budgeting, you need to be proactive, and reactive at the same time. Plan as much as you can, and lean on your TMC for expert advice and guidance when the travel landscape starts to shift.
To help you make decisions on next year’s travel spend, check out our 2020 State of the Market Report. You can learn what over 2,500 businesses from around the world are thinking, and most importantly planning, for the year ahead.