Quarter 1 Corporate Travel Budget Setting Guide

As we near the end of the last quarter of 2022, our minds may be focused on meeting our year-end goals and staying on budget. However, now is the time to be thinking about your budget for the year ahead. Every organization, large or small, must create a budget.

A budget helps leaders estimate how much they need to spend on resources and required travel, while adding in extra funds to cover the increase in costs from inflation. Some budgets may also account for any wish list items if extra funds become available, such as trainings, offsite meetings, and team-building activities. Most budgets are set for the entire year but are also broken down into quarters and months so that leaders can determine if they are on track, or where they need to adjust to meet budgeting goals.

Let’s explore the basics of how to make a budget, as well as how creating a business travel program can help alleviate budgeting stress, save money, and keep your budget on track.

What is a budget?

In the simplest terms, a budget is a document that organizations use to track their income and expenses to make informed decisions about day-to-day operations. Budgets are built with a timeframe in mind – most organizations use a calendar year, while some use a fiscal year that usually runs from July 1 – June 30.

Identify your income

First, start with projections in income. Income is made up of things such as company sales, returns on investment, asset sales, and bonds or share offerings. This estimate is usually based on the prior years’ results and estimates about upcoming projects or other potential income sources.

This will also help you determine your cashflow for the designated period. You’ll want to make sure your outgoing spend doesn’t exceed your incoming dollars. Sometimes this means that difficult decisions must be made if your income is not what you’ve projected it to be.

Identify your expenses

A budget can be built in a spreadsheet so that you can easily track the actuals as each month passes. An actual budget helps you realize where you’ve underspent or overspent, and what kind of adjustments you need to make for the months ahead. Most companies have the goal to have a balanced budget at year-end.

Expenses are typically divided into three categories:

• Fixed costs
• Variable costs
• One-time expenses

Fixed costs

Fixed costs are any expenses that remain constant over time with little to no variation in amount. They are often locked-in via contracts. Essentially, if you are expecting these costs each month they are considered fixed costs. These can be items like lease payments, software or copy equipment, mobile and landline agreements, and regular debt payments.  

Variable costs

Variable costs are just like they sound – costs that vary over time, dependent on outside factors. Anything that is related to shipping and distribution is considered variable, as well as utilities such as water, gas, and electricity, as they are dependent on your usage. Other examples of variable costs include sales commissions, material costs, and labor costs. While these costs are also recurring and easy to plan for, they are likely to adjust regularly. 

We also consider travel costs as variable. While they are easy to plan for and occur regularly, things like airfare, lodging, rental car fees, meals, and entertainment costs can change by the day. What you spent last year is a good estimate, but not likely to be the exact same cost for the upcoming year.

One-time expenses

Finally, one-time expenses are those that occur infrequently. They include expenses such as purchasing equipment, facilities or other capital expenses, or hiring an executive coach or business consultant.

What is your profit? Do you have a budget surplus or deficit?

An organization’s profit is a simple calculation: Revenue – Expenses – Cost of Goods Sold = Profit. Of course, the goal should be growing your business, which essentially means growing your profit.

Determining your budget surplus or deficit is simple. After you’ve accounted for all your income and expenses, you apply them to your budget. If you have more money than you’ve accounted for, you are in a surplus with a profit; if your expenses exceed your budget, you are in a deficit.

If you are in a deficit, you’ll want to consider the best avenue to close the gap. Where can you lower your fixed or variable expenses? Can you bring in additional funds more aggressively? This is also the time to evaluate the one-off expenses. What can be put off for another year, or can wait to see if your income changes?

What makes a good budget and how do I build one?

A good budget is simple and flexible. If done correctly, you’ll always have a quick snapshot of where you stand. To quickly recap, each budget needs these six components:

• Your estimated revenue or income
• Your fixed costs
• Your variable costs
• Your one-off costs
• Your cashflow
• Your profit
   

Don’t let the formality of a budget intimidate you. Creating a budget is as simple as opening a spreadsheet. A quick internet search can lead you to numerous templates that can help get you started based on the type of business you have and the expenses you’ll encounter. It’s as simple as creating line items for your income sources, for your expenses, and tracking the dollars by month. You’ll be able to set a budget, and track your actual spend, and quickly see where you’re over or under. It will take a little bit of effort to create the first sheet, but then you can quickly replicate it year over year.

How can CLC help?

Our goal at CLC is to help you create a billing and business travel management system to help your finance team prevent errors and ensure travel policy adherence.

We offer the ability to analyze every transaction your company makes utilizing travel and expense tools. This allows you to see your spending trends and determine where you can optimize those trends to save money and stay within budget.

Our comprehensive reporting system offers complete visibility into your travel spend. You’ll be able to see where your direct costs are coming from by breaking down reports by dates, locations, divisions, and projects.

Travel costs are more than just airfare and hotel stays. You need to consider extras such as paid parking, rental cars, rideshares, gas, meals, and other expenses that add up over the course of your trip. Additionally, hidden, indirect costs come into play like time spent researching options, negotiating and booking fares, making changes to reservations, last-minute cancellations and tracking expenses and reimbursements.

With CLC, we’ll streamline and manage all the details so you can focus solely on the savings and watch your bottom line grow.