Two recent studies reveal why companies that cut their travel and entertainment expenses could be making a costly mistake.

Most companies have cut their T&E budgets 10%-15% over the past two years, as a way to rein in spending. But cutting travel expenses for salespeople ends up costing a company much more revenue than it saves, according to recent research by Forbes and IHS Global.

Some findings:

• The Forbes study revealed 80% of prospects prefer face-to-face contact to virtual meetings or phone calls, and
• The IHS Global study, which was conducted over the course of 10 years, revealed that for every 1% a company cuts its travel and expense budget, it experiences a 1.7% decrease in sales.

In addition, the IHS study also projected if travel and expense budgets were increased by 5.3% across the board, overall sales in the U.S. would jump by $894 billion.

Source: “Businesses Underspending on Travel Digs into Profits,” by Jim Dorsey, IHS Global Insights.

Do you agree that reducing the T&E budget would result in fewer sales at your company? Let us know in the Comments Box below.

Tags: cuts, entertainment, Forbes, IHS Global, research, sales, study, T&E budgets, travel