Comment: Anxious about ancillary fees

Barry Padgett, Concur's general manager EMEAEurope, Middle East and Africa, says ancillary fees could be your finance department's worse nightmare.

Motivated by a need to boost revenues in the wake of the recession, operators across the aviation industry are making use of ancillary fees - supplementary fees such as baggage that were previously incorporated into a ticket price - to boost their bottom line.

Today ancillary fees make up about 25% of revenue for low cost airlines such as Ryanair and easyJet. Although this has helped the aviation industry, with carriers in the U.S. set to earn $4 billion in baggage fees alone in 2010, the trend is placing significant burden on finance departments looking to manage air travel expenses.

The fact of the matter is that ancillary fees pose two difficult problems from an accounting perspective. The first is how to properly budget for air travel when so many extra fees are being bolted on. To counteract the problem many organisations are forced to allow a £100 buffer to cover the cost of baggage claim or insurance. Although it is possible to balance budgets in this way, it is a very inaccurate way of accounting for plane travel, and can easily lead to all kinds of forecasting issues.

The second problem is that often flight costs of under £30 or so are often simply written off by finance as an ‘ancillary cost', generating a huge loophole for any employees that want to beat the system and enjoy a few ‘perks' on their short haul business trip.

Imagine a business traveller who flies once a week to Brussels. Times are tight, and given it's a short haul flight his company policy dictates that he shouldn't claim for an in-flight meal. Frustrated that he can't travel first class, the traveller ignores his company policy and enjoys a £10 meal on each flight, in addition to expensing a bottle of £25 aftershave once a quarter. His ‘ancillary fees' are hidden, and he costs his company over £600 per year.

By failing to tackle this issue, businesses across the globe are leaving themselves open to financial irregularities. As the leading expense management software provider in the world, we at Concur are investing time and resources to help organisations automate and overcome the challenge of deciphering between and reporting on ancillary fees by offering a solution that differentiates these fees.

After all, if businesses can't discern between baggage fees, on board meals or upgrades, it is difficult to achieve the transparency required to ensure everyone is playing by the rules.