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Is Travel Your Weak Spot?

Can the Sarbanes-Oxley Act positively affect your corporate travel policies and practices? Here’s how — and why.

Much has been written about how the changes in the travel industry affect our companies, our employees, and us, as individuals. Airline and hotel decisions are emotional. The Web empowers us to make our own travel plans. We have clients who are driving 400 miles or forgoing a trip in favor of a phone call or video conference to avoid the rising costs of travel and the hassles at airports.

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We all inherently know that nothing can substitute looking a client in the eye, so we often end up taking the trip for all the right reasons. Once that business decision is made, too often the system starts breaking down.

This is the point where travel becomes an area of vulnerability, a weakness in your well-run business. It is here that brilliant executives become penny wise and pound foolish. Despite all intuitive evidence to the contrary, it is at precisely at this point where the Sarbanes-Oxley Act benefits you.

The Sarbanes-Oxley Act of 2002, which is really H.R. 3763, “The Public Accounting Reform and Investor Protection Act,” but referred to as SOX or SarbOx, is the bane of public companies, which like to blame it for every penny their EPS declines. Private companies, public institutions, and not-for-profits are simply relieved it doesn’t apply to them. But these attitudes toward SOX are wrong, as well as counter-productive. SOX is the opportunity to get your house in order, regardless whether you are public or private. SOX processes and controls are becoming the norm for all enterprises because they define good governance.

But SOX focuses on financial controls, not travel — where does travel fit in?

Travel is typically the second or third largest controllable expense in any enterprise — you cut it when times are tight, and you open it up when markets are growing. The fact that travel is one of the few areas that affects all aspects of your operation means it is a vulnerability, what auditors define as risk.

Risk is not good, say the auditors. We aren’t talking about your chances of getting into an accident while driving to the airport. This kind of risk relates to weak controls that allow corporate funds to become personal piggy banks, a la Enron and Tyco.

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A contrarian’s argument should be that travel may be a big expense — but that it doesn’t have the potential to drag down a corporation the way cooking the books can. True, fudging an expense report for pocket change won’t affect your stock price, but try explaining that to the press, your stockholders, or legislators when your “little lies” hit the front page.

Everybody remembers Dennis Kozlowski’s $6,000 shower curtain, but can you remember why he lost his job and was prosecuted? Now try to explain to me what the Enron abuses were. While travel and expense management may be an afterthought in your SOX compliance methodology, losing control over travel has an impact far beyond its bottom-line effect. Just imagine the distraction when the local paper runs an article on how your travelers upgrade to first class flights, luxury cars and hotel suites just after you announced another round of layoffs. Don’t kid yourself, it’s happening, you just haven’t figured out how to catch it.

Here’s a recipe for disaster: travel policies that have no teeth and managers with no intention of complying with them (anarchy reigns), policies that don’t reflect practice (lip service), and ineffective controls (Where there’s smoke, there’s fire.). Somehow, managers rationalize that because they have policies and procedures, regardless of their effectiveness, everything is fine.

SOX is the remedy.

Businesses that integrate SOX compliance into their travel and expense management practices can see reduced costs, cost avoidance, and satisfied travelers.

Effective controls that support realistic policies, enforced and followed by senior management, are cost-effective. Automated systems for expense control can show an ROI in the first year. Travelers who know the system is fair have no trouble following it and look for ways to keep down costs, rather than looking for ways to benefit.

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Of course there are still people who try to cheat the system. A SOX-compliant travel and expense program will expose them, just as it would flag the $6,000 shower curtain. When employees trust a process to work, they can focus on the reason for their business trip, not what’s in it for them.

The decision is simple: Travel because it’s a good business decision; manage travel because it’s good business practice.