MT Expert - Finance: Being more intelligent about business travel

How can cash-strapped SMEs get more bang for their buck when it comes to business travel? This week's expert tells us...

by Paul McLoughlin
Last Updated: 12 Aug 2011
This month brings more gloomy news of small businesses being forced over the edge into administration due to harsh economic conditions. Public belt tightening, price inflation and high corporation tax have created new challenges for small businesses. SMEs have never had to evaluate so acutely how they can streamline costs.

One cost that many small companies often overlook is the price of travel. In this climate, business owners and managers need to be asking the question: Do we really need to travel?

Most small business will retort with an unequivocal ‘yes’. However, we should constantly challenge how business travel can be carried out in the most sustainable, cost effective, and convenient way possible. It might not sound groundbreaking, but with the majority of small businesses spending more money on travel than on rent, re-evaluating travel costs could mean significant cost savings.

On top of the cost implications, we must be reminded of the hassle, stress and time wasted while travelling. It’s phenomenal how much time is actually squandered by sitting in traffic jams or waiting for delayed trains. A shocking three days a year are lost by British drivers stuck in traffic jams due to road works. Can small businesses really afford to waste time in the current climate?

If journeys really do need to be made, we need to make sure we’re researching our options. If you can book in advance and travel off peak, then a train might be best. Company-owned cars can also be effective as long as they’re well-maintained and fuel efficient. Where companies go wrong is when they use a grey fleet – a scheme which allows employees to drive their own cars as part of their work. Grey fleets can pose a liability for companies who have no way of knowing the conditions, safety rating and environmental impact the cars of their employees are driving – and when paying out as much as 40p per mile, grey fleets can also prove to be quite costly.

One of the alternatives for business wanting to save money on travel is car hire. Renting vehicles can be an effective strategy, as they may be better maintained, safer and more fuel efficient. The goal is to help small businesses save money on a longer term basis.       

Whatever the case, when drawing up a strategy, it’s important to focus on priorities – do you really need to visit that client or could a conference call suffice?  A video conferencing kit will set you back as little as £20, enabling a whole meeting room full of people to speak to anyone, anywhere in the world. The market for video conferencing is expanding rapidly, set to grow by 35% over the next year. This is not surprising when video has been reported to boost productivity by 20% due to the potential for more frequent communication with your clients.*

Admittedly, it’s hard to beat being in a room together, thrashing out a deal or plan across the table. However, we mustn’t forget the environmental impact frequent travel can have. Transport accounts for 29% of the UK’s total carbon emissions - 38% of which is work related. Frankly, it’s unsustainable. If necessary, introduce agreements into contracts with your clients about the frequency of face to face meetings as part of your CSR plan – it is doubtful they would object.

The future of business travel must be focused on intelligent mobility. It’s vital that we think through our options carefully and ensure a bespoke treatment is given to each journey; doing so can only keep costs to a minimum and productivity to a maximum.

Paul McLoughlin is the UK managing director of Sixt

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