UHY Hacker Young | Chartered Accountants

Keeping control of your business travel costs

12 September 2018

You spend 124 hours in traffic jams each year. What is the cost to your business?

The increasingly slow commute

It’s that time of year again. The children have gone back to school, and the traffic is back to normal. We have had six weeks of easy commuting, and now we’re back to spending precious time in traffic jams. Your real travelling costs are much more than the figure on your profit and loss account. What is the true cost of the unproductive time spent by you and your staff in slow-moving traffic or standing on a station platform waiting for a delayed or cancelled train?

A recent survey by In-car Cleverness reported unsurprisingly that London has the slowest average driving speeds in the UK within five miles of the city centre. Sheffield has the eighth slowest of all the major cities with an average speed of 13.28 mph within 5 miles of the city centre. This was the average for 2017, which was slightly slower than the previous year. In fact nearly all the major conurbations saw a slow-down of commuter traffic over this period.

The costs of gridlock

The costs to the economy of congestion are immense. INRIX, an international provider of real-time traffic information and transportation analytics carried out a study in conjunction with the Centre for Economics and Business Research into the future economic costs of gridlock in the UK. The study found that in 2013 the total cost of congestion was £13.1 billion, but that this would rise to £21.4 billion annually by 2030. This forecast might turn out to be a little exaggerated as it was based on the assumption that GDP growth would continue at 2014 rates. Nevertheless, the problem will continue to worsen even at the currently more modest rate of growth, as it is due also to population growth and ever-increasing use of private transport.

The same study found that 70% of the UK workforce now travels to work by private car and that the average motorist spends 124 hours per annum stuck in traffic jams. It predicts that by 2030 drivers will spend 136 hours a year gridlocked. The enormous cost of this derives not only from wasted fuel but also from lost productive hours and higher transport costs. There is little prospect of any improvement. According to an OECD survey of 26 advanced economies, the UK spends only 0.2% of GDP on road maintenance and only 0.4% on new construction and improvements to the existing network. This puts this country in 20th place for maintenance and 21st for network improvements.

The average small business might not notice the costs of lengthening commuting times if the employees start out earlier and still arrive at work in time, but even those team members who do not leave the office or factory during the working day will still have their efficiency impaired by the tedium of their journeys to and from work. Obviously though the most prominent effect is on those employees who travel to visit or to deliver to customers.

Can you control your travel costs?

So, how can the average SME keep its travel costs under control? For some of the workforce that come to work by car there are alternatives, although to suggest the train to those living in the North of England (or indeed in the Southern Rail area) might provoke a robust response. The lack of investment in rail travel in this region is nothing short of disgraceful!

You could check out the Cycle to Work Scheme for the fitter employees. It is now possible to obtain a reasonable e-bike for less than £1,500 – electric assistance is almost essential for those of us who reside in the Pennine foothills! This would be a public-spirited contribution towards reducing road congestion, be appreciated (probably) by the staff and might improve the health and productivity of your team.

Those staff who need to travel to visit customers and prospective customers will not so easily be enticed out of their cars. For many businesses travel of this sort is a significant indirect expense, and will probably include not just the costs of motoring but also hotel expenses, rail and airfares. Some savings might be achieved by the judicious use of video conferencing such as Skype, but salesmen will always tell you quite rightly that there is no substitute for face-to-face meetings. If your staff do a lot of long-distance travelling it can sometimes save money and time to have a contract with a travel agent who will find the best deals.

It is a feature of human nature that if you leave a member of staff to book his own accommodation or buy his own tickets, he will favour his own convenience and comfort over the company’s budget, and if you try to rein him in you will demotivate him and reduce his performance. This is where it pays to have a clear company travel policy, agreed with all the relevant employees. You could also consider an incentive scheme, where the proceeds of any genuine savings (obtained for example by using more basic hotels, or by planning ahead and buying tickets early) could be shared with the employee concerned.

Going the extra mile

And just a word on mileage allowances paid to an employee for the use of his own car: a survey by SAP Concur demonstrated that 27% of employees would consider earning a little extra by overstating their mileage claims. As the average European business traveller claims for 1,978 miles per year and mileage claims paid by UK businesses amount to about £170 million, exaggerated claims could be a significant cost, especially as only 56% of them are checked for accuracy. Obviously, we would not recommend a sudden clampdown on mileage claims as it would clearly undermine staff morale, but why not consider acquiring software to make mileage easier to claim and to verify?

If you would like further advice on controlling travelling costs, or indeed any other business expense why not email me at a.hulse@uhy-uk.com or contact your local UHY adviser. Alternatively fill out our contact form here.