Forecasting Business Travel

By Tim Devaney and Tom Stein

The cost of traveling is constantly changing. Companies that send employees on the road are trying to figure out how much return they are going to get and how much it will cost. 

Depending on what's happening in the economy, the cash flows derived from business travel can vary significantly. That can make managing business travel extremely difficult. A business travel forecast helps companies plan for expenses and deploy employees effectively.

Making A Business Travel Forecast
When businesses forecast the travel season, they aren't talking about the weather. Within each monthly and annual budget, every small business should factor in a business travel forecast for:

• Projected sales income - Revenue coming in the door as a result of business travel is a key projection that businesses must make. Travel expenses should never exceed revenue, or potential revenue. Potential revenue may be the result of synergies achieved as a result of business travel. An example such synergies would be if employees traveled to a marketing convention that will help improve the company's sales.
• Travel expenses - The price of flights, rental cars, trains, subways, cabs, and any other means of transportation can fluctuate based upon a number of factors including the city, price of oil, state of the economy, and the time of year, day, or hour.
• Hotel expenses - Like travel expenses, the price of lodging fluctuates. Time of year, day of the week, and vacancy rate are just a few of the factors that impact the cost of hotels. Managers must also base their forecasts for hotel expenses upon special requests of employees. Executives, board members, and high profile sales members may require better, more costly accommodations than other employees.
• Food expenses - Food prices are subject to inflation too. The decision to reimburse employees or allot a per diem cap has a direct impact on a forecast for food expenses.
• Tax implications - A business travel forecast should reflect the impact of taxes. Businesses should manage travel so that profit is maximized and taxable income is minimized. Accounting should advise managers as to the tax implications of what business expenses can be deducted as well.

These estimates can be made based upon previous years, plus or minus projections for incremental revenues and expenses. If the business does not have a track record to base estimates on, use discretion and adjust future forecasts to reflect actual cash flows. Use these forecasts to plan for the future and smooth out cash flow.