With the ability to seamlessly calculate ROI in real-time, businesses can not only manage their spend better, but can also make informed decisions that will undoubtedly impact business growth, says Eoin Landers, VP product at travel expenses specialist SalesTrip.
If you were to search online for ‘business travel ROI’ right now, you’d likely find a range of articles about the concept of business travel ROI. But click on one of these and you’ll realise that none are able to provide the mathematical formula necessary to calculate the ROI of travel and expense spend.
From travelling to visit customers to connecting with prospects over coffee at trade shows, businesses incur a range of expenses throughout the customer lifecycle. So why is it that organisations are still unable to understand the financial return from the millions of trips booked and expenses claimed across their financial year?
It’s the industry’s most elusive goal with Business Travel News claiming it as the Holy Grail of business travel. This is due in part to how it’s been done in the past. Typically, organisations have used historical data to retrospectively calculate the ROI of business travel; a painstaking process far removed from the real-time demands of today’s business environment. Piecing together this data is like attempting to glue back together a crystal vase that has been broken. It’s not impossible, but is extremely difficult and rarely gets done.
Extend this to the fact that around 80% of an organisation’s expenditure is incurred by commercial and executive teams – those who spend money in order to acquire and retain customers and business relationships – and it’s clear why companies need to get smarter with their spend.
If these team members had clear visibility around the amount of money already spent on a customer or prospect, their forward decision-making around whether it makes economic sense to continue spending would be based on data not gut instinct. In other words, as soon as ROI is calculated, sales leaders can see the financial value that the customer brings to the organisation, and can therefore decide exactly to what extent the company should invest in nurturing that relationship.
Why Finance no longer needs to fly blind
Being able to calculate business travel ROI is not only of concern to the sales function, however, it will also see Finance leaders jumping for joy. With total visibility of all business travel and expense spend, for the first time Finance will have an overview of expenditure for the month, quarter or year, and can consequently forecast travel and expense budgets much more intelligently.
If the finance team knows the close rate, pipeline and average expenses per deal, then they will know exactly how much money they will need to spend to win the expected revenue – and avoid imposing unwanted travel bans that hinder sales activity and revenue growth in the meantime.
This is a revolution when you compare it to the traditional ways in which Finance has guessed business travel and expense budgets, largely taking stabs in the dark and hoping for the best.
The question every finance team should be asking is: how much will this business travel expense add to my bottom line? If you can’t answer that, you haven’t been able to calculate the ROI of business travel.
Although finance teams often worry about how much is being spent across the business, especially on travel and expenses, in order to make money, you will always have to spend money. Because of this, there is often a friction between finance and sales teams and it’s an age old tale that goes something like this: Sales team spends money to win and close business; finance team is lumped with unpredictable expenses that they can’t reconcile and justify. Since the finance department typically doesn’t operate in a CRM system, they are unable to see the potential revenue associated to incurred expenses.
The ability to calculate ROI offers a new and unique opportunity to bridge this gap. Instead of Finance telling Sales to “spend less and win more” (without specific details of how much less or how much more), the finance team can now produce a specific budget in relation to a sales rep’s and/or sales team’s revenue target. The Sales leader can also look at historical data determine whether a team member should travel to a prospect according to what stage of the sales cycle they’re at.
For the sales team in particular, this level of visibility will empower and enable an altogether smarter way of working. There will be no more vague and random travel budget allocation. Travel decisions will be dynamically driven by their CRM data, allowing sales teams to do what they do best: sell. Finance teams will be able to accurately forecast and predict future spend, while having a clear view of the current and forecast expenditure.
By providing an accurate forecast of future spend, alongside the ability to seamlessly calculate ROI in real-time, businesses can not only manage their spend better, but can also make informed decisions that will undoubtedly impact business growth. Business travel ROI might have been a Holy Grail in the past, but today it is a reality that can remove the need for travel and expense spend ‘guesstimation’ once and for all.