As the pandemic crisis unfolded and most employees began working from home, chances are your accounts payable team focused on how to best pay the bills. But another type of issue has been building and it could come with a big price tag: cancelled business trips. Does your business continuity plan (BCP) address how to handle this? Airfare purchases, hotel deposits, and event registrations are notable expenses that your organization risks eating unless you have the right processes and controls established. Following are key steps for managing the issue and the influential factors that will either help or hurt your efforts.
Key Steps for Managing the Issue
Identify all travel- and event-related expenses already prepaid for 2020. Some might have occurred in 2019.
Determine what has been cancelled, as well as what is postponed, and how the refund occurred or will occur. Has your organization communicated any rules or guidelines to employees? For example, the NAPCP cancelled its annual conference and offered two different options to registrants; only one involves a monetary refund. What would your organization want the employee to do?
Develop a way to monitor credits, following up as necessary.
Ensure there are accurate accounting entries for the payments and credits. It could get messy, depending on various factors, which leads to the next point.
Influential Factors
Factors that will either help or hurt your efforts include the: reservation tool used, payment method applied, information captured internally, type of credit/refund provided, and status of the applicable employees. Following are a few example scenarios.
Personal Credit Card Use
If employees are allowed to use personal credit cards, then they have probably been reimbursed already for airfare and/or an event registration fee purchased for an upcoming trip. Imagine: The employee cancels the flight and receives credit on their personal card, which they pocket. Does your organization have controls to prevent and/or detect this? A good solution is to mandate Commercial Cards for travel expenses; see related content.
Accounts payable expert Mary Schaeffer, founder of AP Now, weighed in on this issue, sharing, “In AP Now’s 2018 survey on lesser-known frauds, 17% of the survey participants reported having a problem with employees cancelling flights and ‘forgetting’ to return the refund to the company. Additionally, 8% reported cancelled events with the employee not remembering to return the refund to their organization. And, these figures only reflect instances where the deception was uncovered. Likely, they are higher.”
Vouchers Instead of Monetary Refunds
Some airlines (like Delta) default to issuing credit in the form of a voucher/e-credit for future travel. Your organization may lose out completely, especially if an employee is laid off during this crisis; the voucher remains with the individual. However, if your organization mandates the usage of a designated travel management company (TMC) for airfare, then the TMC might be able to intervene and secure a positive outcome for your organization. Overall, whenever possible, require a monetary refund, so you do not have to manage an outstanding voucher, which typically has an expiration date. Plus, your organization will not have to worry about a current or former employee using a voucher for their personal benefit.
TMC + a Central Travel Account
In contrast to the first two examples, there are organizations that use a TMC and direct all airfare reservations to be charged to a central travel account or Ghost Card. Further, the purchase details (e.g., traveler name, travel dates, etc.) might be captured in an internal system for accounting purposes. Such organizations are better equipped to easily see what has been purchased (step 1 noted earlier), so they can move on to step 2.
Final Thoughts
As Mary Schaeffer remarked, “The scenario will continue to play out when organizations return to their physical work location. This will be a time when there is lots of catch-up work and double checking going on.”
If your organization is not already tackling the issue of cancelled trips, the sooner you start, the better. It might be beneficial to map out your organization’s processes—all the ways in which travel reservations and event registrations are made, paid, and captured—in order to identify where problems may arise. You might quickly find that your existing approach to travel expense management is a control nightmare, especially during a crisis, and warrants future improvements.
See more content about business continuity plans and disaster recovery.
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About the Author
Blog post author Lynn Larson, CPCP, launched Recharged Education in 2014. With 20 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more…