Setting limits is a good idea because it reduces the chances of employees “accidentally” overspending or submitting receipts for expenses that shouldn’t be reimbursed. Without a policy in place, employees tend to rely on the excuse: “If it doesn’t say I can’t, I guess that means I can.”

And there’s no better time than now to take a second look at T&E expenses. With most companies looking to tighten their belts during the economic downturn, travel expenses are a ripe target for cost-cutting.

For American companies, the average cost of a domestic business trip is expected to increase 1.2% to $1,002, according to American Express Business Travel Advisory Services. The cost of traveling overseas on business will increase by even more — 3.5%, for a total average cost of $3,452.

You can’t eliminate business travel entirely, but there are ways to lessen the impact of increasing costs on your company’s budgets. Here are three proven tactics:

1. Plan travel carefully. Not all travel costs are increasing at the same rates. For instance, rates at mid-price and upscale hotels are expected to stay roughly level — possibly even decreasing slightly. Airfares, including all the extra fees, are expected to increase significantly. So switching from a conference across the country to a regional one that employees can drive or take a train to could save loads of money without sacrificing visibility.
2. Tighten internal policies. If you haven’t already made clear to travelers — and approvers — that certain expenses are frowned on, it’s time to do so. Otherwise, travelers are likely to use the “better to ask forgiveness than permission” theory when they have to make judgment calls about which expenses they can charge. Let’s face it: if Bob’s flight is late and he gets to his hotel room at 9 p.m., he’s ordering room service. And if no one ever told him company policy considers that a “last resort” he’s a lot more likely to get dessert, and maybe a bottle of wine…
3. Avoid rental cars. Rates themselves are expected to hold steady. But rental agencies are using much tighter rental terms — and threatening extra fees for even small infractions, like just missing the return grace period. Throw in still-high gas prices, and it’s worth encouraging staffers to use rental cars only when absolutely necessary.

On average last year, companies paid $157 per night for a domestic hotel and $230 for each domestic airfare. International trip expenses can vary a lot depending on the region traveled to, but they averaged $226 per night for a hotel and $1,836 for airfare.

Of course, if your company’s travelers are posting higher numbers, that doesn’t mean they’re padding the bill. But you may want to recommend to upper management that they take a second look at the T&E policy. Small changes like using preferred travel vendors, not reimbursing for extras like aisle seats, etc., can save a lot of money over time.