Happy Friday!!! Just returning from a business trip to the Northeast (specifically, Boston and Rhode Island) and had some plane time to compose a few thoughts around an area that has been a hot topic for me for quite some time.
Expense forecasting has always bothered me. Being responsible for things like predicting the ever-changing game of flight pricing is nearly as impossible as placing a round peg through a square hole (side note – I generally dislike a lot of the consulting jargon but sometimes the similes just roll off the tongue better when you embrace it). It just doesn’t make sense, and having your project financials hinge on it seems to me as a fairly large gamble that the original forecaster was doing a judicious and thorough job. I always error on the side of caution, of course, but there are simply some forecasts to which clients or internal audits will scream “Too high!”. It’s even worse when expenses are billed as revenue, because it will ultimately impact the perceived delivery bottom-line when you assume your delivery contribution spread to be basically equal to (total project revenue) – (total project direct costs). Because, in this case, every additional dollar billed to the project code as a direct cost (even if it is reimbursed as paid expenses by a client) lowers the effective contribution margin % (even if it does nothing to impact total dollars profit). I have worked for a company that has accounting practices similar to this and it is always an exhausting fight to justify the increase in expenses (e.g. Client demanded I travel there one additional week that was originally meant to be working remote). And before you scream “Change Order!!” just know that my personal opinion on doing something like writing an additional CR to cover unexpected travel expenses per an SOW is childish aside from extreme cases where your company stands to lose substantial money (e.g. Fixed Fee engagements).
I don’t mean for this to be a diatribe on the nature of project accounting or expense policy, but I do feel like it is worth mentioning that I think the way we have course-corrected from the prior days (no budgets, free will travel, thousand dollar dinners) has really handicapped the very people that have to dedicate an already-enormous amount of their time worrying about “real world” problems they face. Cranky clients, long hours, scope creep, overselling/underdelivering are the real things that should keep able-bodied managers and employees up at night. Not whether Mark spent $30 or $35 on his dinner one night. Or the fact that he tipped 19% as opposed to the policy of 18%.
So what is one to do? I personally don’t have the silver bullet, but do have certain rules and tips I follow whenever pricing out or estimating expenses at the outset of a project:
- Look up flights to the city you’ll be traveling to one week, one month, and six months out to get a feeling for the rack rate and the rate that the flight bears when you start to enter airline flight/hotel price increase windows (~3 weeks out, ~1 week out, etc); this will give you a feel as well in case there is any seasonality for the route (e.g. people may fly a lot more to New Orleans during festival season or around Mardi Gras versus December)
- Expect that your flights will typically run at 50% greater than the six month out rate; this will give you a buffer for all the flights you have to either reschedule or book last minute (or for which you have to travel during a seasonal peak)
- Look up hotels to the city according to the same process followed for flights; hotels usually have a little less variability, and with some smooth talking you can usually negotiate a corporate rate (or piggy back another company’s or your client’s) that will typically allow you to normalize the rate you get and avoid any peak increases due to seasonal or surge traffic to a given location
- Do research on your destination to try and get a feel for seasonality or big events (Festivals, Sporting Events, Vacation Windows); this isn’t only helpful for the flight/hotel research mentioned previously, but also lets you plan ahead in case you can get the opportunity to enjoy any of the marquee events in a destination city (if you’re going to be there anyway – why not plan ahead and get good rates and enjoy your time there?)
- Be sure to plan for rental cars; they can have great variability depending upon the city and traffic/time of year, and always be sure to check the mileage from your expected hotel(s) to the office(s) as gas and mileage can impact the budget greatly
- Check out typical taxi or car service prices as you can expect to have these costs every once in a while either for airport transfers or nights out drinking (public service announcement: ALWAYS choose a designated driver, especially when cabs are cheap and easy in a city like New York)
- Look for opportunities to use public transit; not because it saves money but because it generally saves LOADS of time (e.g. MARTA to the airport in Atlanta saves about an hour versus trying to drive from the city to the airport at 4 PM on a Thursday)
- Identify ways, if more accessible, at your home base to park cheaply that gain you rewards because they 1) typically save money on the budget and 2) offer you flexibility and rewards that you may otherwise miss; I started driving myself to the airport several years ago and it has been not only more convenient upon my return, but has allowed me to accumulate airport “offsite parking” rewards that I can then use for personal travel
Yes, I realize that I am probably being entirely too cautious with most of these rules, but I’ve been burned too many times (e.g. traveling to Boston during the week of the World Series which the Red Sox were playing in) by unexpected surges in prices to random areas at random times to adjust my conservative estimating.
One last thing that I’m sure I’ll revisit in another post – if you’re traveling on expenses, ENJOY IT. Don’t let anyone try to force you into anything other than the expense policy of your company/client. You are the ones doing your company and your client a favor by putting yourself on a plane/train/automobile every week to go somewhere you don’t call “home”, so you owe it to yourself to maximize your opportunities to see new places. After all, that’s probably part of why you took the “traveling job”, right?
Til Next Time,