In India in the last seven years Indian companies’ travel and entertainment has seen increase in expenses from Rs 17 lakh on an average in 2001 to over Rs 1 crore by 2007.
A survey was carried out by American Express, quoting a consulting firm Accenture according to its report companies can bring down their travel and entertainment expenses by 9% through effective use of corporate card data.
According to the survey data available the usage of corporate cards have gone up considerably in the country from 33% of companies in 2001 to 79% in 2007 — because of increased benefits being offered by the issuing banks.
Survey report suggests that companies can manipulate in a better way to cut costs if employees spend through corporate cards. As per survey, usage of corporate cards will help companies control the combined spend of their employees in travel and entertainment activities to negotiate better discounts with suppliers.
Prashant Aggarwal, head of American Express consultancy (Japan and Asia-Pacific) pointed out that high levels of travel and entertainment expenses is somewhat a new phenomenon in India and yet firms have to fully exploit the economies of scale through consolidated bargaining with key suppliers like hotel chains, airlines and taxi services.
Issuing banks give high discounts to a big regular customer. In case employees use multiple payment methods like cash and personal cards limits a firm’s ability to bargain for its combined consumption during a year.
However when all the employees of a company use corporate card for their travel and entertainment expenses, their spending behaviors are processed centrally and provide the companies information about their annual spends under different heads. This kind of information helps a company to bargain with service providers for discounted price.
According to survey report now companies have started switching to more usage of corporate card as they have understood the power of using the card and they are even formalizing a travel policy.