Don't Go There

New York Times

Christopher Elliot, Columnist

December 13, 2005

It was a routine request for a business trip. At least that's what Ramsay Chu thought.

Mr. Chu, a vice president with Visa International in San Francisco, asked his travel agent to book a round-trip flight to New York in economy class and three nights at his company's preferred hotel, the Waldorf-Astoria.

But then his agent phoned him to report a problem. With the $275-a-night rooms at the Waldorf all taken, she had followed her usual practice of bumping Mr. Chu to the next room category available, which happened to cost $475. Alas, a software program that Visa had recently installed to comb through its employees' travel plans had detected this deviation from the company's price policy and stopped it.

Pre-trip audits are beginning to catch on in corporate America. Unlike post-trip auditing tools, they can save companies money by spotting unauthorized spending before the employee hits the road. A system like Visa's can save a company a few percentage points of its annual travel and entertainment budget, which is typically the second-largest controllable expense behind payroll.

"I was told that I couldn't stay at the Waldorf and that my best option was to get a room in New Jersey," Mr. Chu recalled. "But that didn't make sense." Instead of a short walk from the Waldorf to the industry conference he planned to attend at the nearby Grand Hyatt, it meant a commute across the Hudson. In the end, he stayed with a college friend in the Chelsea neighborhood of Manhattan and rode a cab to the conference.

Programs that snare business travelers who reserve a plane ticket in business class instead of economy class, or a room in a five-star resort instead of the no-tell motel, are controversial for all the obvious reasons - and a few that aren't. Travelers often resent the added scrutiny and see the system as an example of bean counters running amok.

But even within the corporate travel industry, early audits are the subject of some debate. Many travel executives say that such audits are unnecessary for companies that use other means to enforce their policies. Some developers of expense-management software dismiss the audits as a waste of time and money, though they concede that improvements in the technology could some day make the programs more attractive.

"Very few companies have access to these tools," said Heidi Skatrud, a vice president for Runzheimer International, a consulting firm specializing in corporate travel. "But I think more will be looking at it in the future. And as they become available, you're going to see more companies adding pre-trip audits."

It is unclear how many companies have the systems. But Mr. Chu is in a unique position to judge the effectiveness of his company's programs: not only has he experienced the audit firsthand, he also happens to be the custodian of Visa International's pre-trip auditing system, which is supplied by Ariba Inc., a software developer and consulting firm.

"It definitely has some advantages," he said of the system. "For example, it limits the number of questionable trips or marginal trips - the people who used to travel across the country for a one-hour meeting. You also have a solid audit trail of people and their history of travel."

There are disadvantages, too, he says. The system was at first mandated across the entire company, but it soon became clear that it would be impractical to audit the shorter trips that Visa USA employees typically take. So the company scaled it back to Visa International, where longer, more expensive international trips are more common.

Christa M. Degnan, a research director for the Aberdeen Group, sees other pitfalls. For one thing, she says, travel managers are wary of adding a new layer of bureaucracy. In addition, she said, pre-trip auditing creates unnecessary hassles for companies that already have effective cost controls in place, and it can make travel more expensive because fares might rise while an itinerary is stuck in approval limbo.

But it does have its uses, she said. "This is the kind of tool that would be popular with public-sector organizations or any company that is watching its expenses very closely."

Padmini Ranganathan, a senior product manager at Ariba, says the software has been slow to make inroads in the corporate world, with only one-fourth of her company's clients deciding to adopt it. Even so, she is quick to give a sales pitch for it. "Pre-trip audits are part of a transformational process in corporate America," she said. "It's about looking at expenses before you get to the expense reports. It's asking questions such as, Why aren't you using a preferred airline? and Why are you booking in business class? before the company has already paid for it."

Concur Technologies, one of the largest suppliers of expense-management software, estimates that less than 5 percent of companies with automated expense management systems have a pre-trip auditing system in place. And with good reason, says Christopher Juneau, senior director of product marketing. "Only 10 percent of companies have chosen to automate the expense management process," he said. "So there's a lot of opportunity in just automating that process first."

Mr. Juneau points to another flaw in pre-trip auditing that potential users might do well to mull over. The typical business itinerary changes three times, he says, and tracking all the revisions can be a bit like trying to hit a moving target.

Some travel industry executives predict that pre-trip audits could someday become as common as post-trip audits. Henry Ijams, managing director of PayStream Advisors, which consults with companies on expense management, says that corporations will warm to the idea of the audits when they see how much money it can save them - anywhere from 2 percent to 6 percent of their annual travel budget.

"Once the traveler is out the door, it's very hard to get the money they've spent back," he said. "There are not that many companies demanding pre-trip audit systems yet. But they will."

Source: New York Times