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Three Ways the COVID-19 Crisis has Affected Corporate Travel and Entertainment Expense Claims

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Three Ways the COVID-19 Crisis has Affected Corporate Travel and Entertainment Expense Claims

In a few short weeks, COVID-19, also known as the coronavirus, has permeated every aspect of our lives and completely changed how (and which) businesses operate. Business travel and entertainment have come to a standstill. Many companies have switched almost entirely to working from home to enforce social distancing or comply with mandatory shelter-in-place mandates. As the economic landscape becomes increasingly uncertain, many companies have been forced to take difficult actions to cut spending as they endure a severe downturn of unknown length.

As the crisis progressed, the scale and nature of expense claims have changed drastically. As expected, trip cancellations and work-from-home expenses increased dramatically, while business travel expenses dropped.

AppZen wanted to dig even deeper into the data to find out how employee expenses have changed in comparison to this period last year: Which industries’ expenses have been most and least affected by the current environment? What kinds of expenses are changing the most?

The baseline: Strong year over year growth before COVID-19

To contextualize the changes wrought by the current COVID-19 health crisis, let’s first look at what happened before it began. Between January 2019 and January 2020, expenses in the top 10 largest categories grew by 24%. While COVID-19 was causing significant disruptions in Asia and Europe in early February of this year, overall expenses still rose by 8% compared to last year. By March, that percentage had declined to about 7%.

In March, travel expenses began to drop

Unsurprisingly, travel-related expenses such as airfare, hotels, baggage fees, taxis, and trains dropped 9% between March 2019 and 2020. Looking at weekly data shows just how precipitously travel expenses have dropped. Expenses in early March were higher than in 2019, but as the month progressed, expense claims fell dramatically. By the last week of March, travel expense claims were down by 40% compared to the previous year.

However, not all industries are equally affected. Heavily white-collar, digital businesses that have been deemed “non-essential” have dropped off the most. In finance and insurance, for example, expense claims fell by 47% year over year in the last week of March. In information businesses (mostly software and media), claims fell even more – over 63%.

Businesses like construction (whose “essential” status varies by type and location), and life sciences (definitely essential!) were affected to a much lesser extent to date. In the same timeframe, expense claims for construction companies only decreased by 12% compared to last year. Life sciences companies saw an uptick in expenses during this time – a 3% increase from last year, though the trend line in the previous five weeks, if it continues, points toward a decrease in the weeks ahead.

Office expenses have gone up as many employees have shifted to working from home

Expenses in the office supply category have increased across every industry during this timeframe. The most significant spike was during March, where AppZen saw 80% growth in these expenses across sectors.

As companies closed their offices and began encouraging their employees to work from home, many employees needed to expense office supplies such as laptops, monitors, cables, and keyboards. The last week of March was the most significant spike in these expenses, particularly for the construction, information, and professional services industries.

Variations in expense categories by industry

In March, expenses in categories such as subscriptions, training, and internet were 20-25% higher compared to March of last year. Demand for subscription-based services such as video conferencing software rose in March as employees began to work from home. This would explain the additional charges for the internet, as some companies allow remote employees to be reimbursed for internet usage.

AppZen also saw variation by industry. Both life sciences and construction industries show an uptick in transportation mileage during March. This may be because these industries are considered essential, and car travel adheres more strongly to social distancing requirements in the current environment. Finance and insurance companies saw a significant surge in subscription expenses, over seven times higher than 2019. Construction companies saw the most significant rise in office supplies, five times higher than the previous year.

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What Employees Are Expensing During the COVID-19 Outbreak

As the situation surrounding COVID-19 has progressed, more travel restrictions and social distancing practices are being implemented every day. More and more companies are implementing work-from-home policies to adapt to the changing situation.

We’ve been tracking the data since the beginning of the crisis to help your company ensure employee health and safety and make essential decisions around expenses.

Here are a few of the most significant changes we’ve seen.

COVID-19 expenses haven’t shown any sign of slowing down

In our last blog, we noted that COVID-19 expenses skyrocketed, and we expected them to fall as trip cancelations began to taper off. However, these expenses have shown no sign of slowing down. COVID–19–related expenses have doubled from the week ending March 7 to the week ending March 14, with trip cancelation and work-from-home expenses being the primary causes.

Number of claims

Submitted expenses vary by industry

Although changes to travel plans and cancelations still make up over half of all COVID-19-related expense claims overall, the trends change when you look at specific industries.

In the finance and software industries, half of the expenses are related to travel cancelations, and the other half are work-from-home expenses.

In the consumer goods, manufacturing, and pharmaceutical industries, masks still make up 15 to 20% of expenses but are otherwise in the low single digits in other industries.

The growth in expenses also varies by industry.

Work-from-home charges have increased dramatically; masks have fallen

Work from home expenses have grown the most, increasing 3.5x since last week. These charges are mainly related to “remote office setup” or “supplies for remote work,” and include accessories like printers, ink, headphones, and HDMI cables.

In our own workforce, we’ve noticed that everyone has a different set-up at home, ranging from at-home offices to sitting with their spouse at the dining room table or even sitting in bed with their laptops. It’s essential to employee productivity and ergonomics to help everyone make the best of whatever space they have.

Mask expenses have fallen – there was a peak in mid-February, then another dip, and a second peak at the end of February.

What does this data mean for my company’s expense policy?

We hope this data can help you consider the appropriate response to COVID-19 in your organization and how you can best support your employees. It’s clear from the above data that work-from-home expenses are increasingly common, and will likely continue to increase over the next few weeks as more companies continue to close their offices temporarily. We’ve also noticed that several companies have created specific expense types to track COVID-19 spending more closely. Others have created expense categories for their accounts payable departments to pay temporary workers more quickly in times of uncertainty.

If you’re unsure of what you should allow in your expense policy in response to the current climate, we’ve outlined some best practices on work-from-home expense policies from our peers and customers. In the meantime, we hope you and your company are taking the necessary precautions to ensure the health and safety of your employees during this unsettling time.

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Anant Kale is a CEO at AppZen, the world’s leading solution for automated expense report audits that leverages artificial intelligence to audit 100% of expense reports, invoices, and contacts in seconds.