T&E Expense Management: Some Ideas for Innovation

Paper is slowly becoming a thing of the past in the world of travel & entertainment expense management. The emphasis on corporate cost containment and fraud mitigation during the past few years has prompted accounts payable professionals to seek new ways to automate traditionally paper-based and labor intensive expense reimbursement processes. The need to document and secure the intrinsic risks associated with the expense management process within the protocols set forth by the Sarbanes-Oxley Act of 2002 (SOX) has provided additional impetus, especially where senior management has been involved.

Our latest research also indicates that businesses are turning to Travel & Expense Management (TEM) solutions that streamline the expense submission and reimbursement cycle to meet these new requirements for efficiency and control. Consider the results of our 2005 Financial Automation Survey (FAS) of Fortune 1000 finance, treasury, and accounting professionals:

• The passage of the Sarbanes-Oxley Act has increased interest in new financial automation technology at more than 60 percent of respondents’ organizations.
• Almost 75 percent of respondents to the survey are either currently using an automated TEM solution or planning to implement one over the next 12 months.

What are the Innovators Doing?

Most organizations are aware that travel-related expenses represent the second largest controllable cost pool, just behind salaries and employee benefits, yet many companies have only begun to crack the code on implementing high-impact expense management automation. With so many sophisticated control tools and expense monitoring techniques in the marketplace, why aren't companies making headway to better control these costs? The answer lies in execution.

Our latest research indicates that the difference between a winning travel expense management program and a dud comes down to the ability to execute such programs.  Further, the subtleties between a success and a failure are usually based on rather simple principles. This section endeavors to provide the secrets of successful travel and expense management with a look into the best practices of the innovators. What techniques have they employed to better control their costs? How do they monitor their programs? In short, what are they doing that you could be doing?

Think about it: What is your department’s biggest challenge over the next year? Chances are, it’s meeting the board’s demands for tighter controls and improved reporting—whether or not the path to enlightenment is crystal clear. After corporate abuse scandals made the airwaves, business travel has became a lightening rod for control and compliance. The missing link between your program aspirations and results is flawless execution of your management control programs. Here are some tips to help you learn from the experiences of innovative companies and launch ahead of the T&E automation curve:

• Travel policies should be dynamic, updated and disseminated from one centralized source.  When employees know their boundaries and are rewarded through rapid reimbursement of out-of-pocket expenses for compliance, travel policies become part of the corporate culture. Ultimately, adoption of and compliance with travel policies is the best means you have to manage your TEM process.
  
• Integration of corporate card programs with TEM solutions means that spend data is automatically written to G/L and accounting systems and reported in formats that create business intelligence from raw data. Further, our research reveals that rebates from using corporate cards are more than the monthly cost of (some) TEM systems.  We believe that securing substantial commercial card rebates can in effect turn a cost center into a profit center.
  
• A wealth of information can be gleaned from TEM systems. Recent advancements in analytical capabilities allow managers to examine spend at various levels; including type of expense, employee, department and region. One of the richest features in TEM management today is the ability to use existing data to strategically monitor and tailor T&E expenses.  For instance, savvy managers now use the tools at their fingertips to control spend to their advantage, acquiring volume and bulk discounts from preferred vendors.
  
• Electronic payments to employees and vendors represent one of the most important practices a company can employ to drive down the cost of travel-related expenses. Most TEM solutions automate the expense management process from expense reporting to reimbursement via the Internet.  Today, for example, with a Web browser, phone, PDA or even an offline computer, travelers create expense reports that are routed for approval and electronic payment to corporate card issuers and employers alike, saving both time and money.
  
• Imaging technology hasn’t changed much recently, however, outsourcing of the process as well as a preference for "verified original documentation integrated  with expense reporting” is growing rapidly. Imaged, verified originals facilitate SOX process control requirements and IRS receipt archive standards. And just as specialty providers assist companies with utility bill or freight bill processing, outsourcing of receipt management can yield considerable savings and can make auditing 100 percent of the receipts affordable.
  
• TEM solutions also deliver the ability to expose patterns of waste & fraud, two areas of growing concern for companies all over the world.  It’s not so much that fraud has grown through the generations, but rather, thanks to advanced TEM systems, the ability to detect it has changed. Estimates vary, but perhaps as many as one third of expense reports contain erroneous or fraudulent charges. Companies that are ahead of the automation curve are those that are proactively using fraud detection and prevention tools as well as audit services offered by their TEM vendors.

The market for Travel & Expense Management solutions has been growing rapidly over the last few years driven by organizations’ drive to contain costs and reduce occurrences of fraud. Our research indicates that TEM adoption is almost 40 percent among large companies (those with annual revenues in excess of $500 million), while adoption rates vary between 10 to 25 percent for small and mid-size companies (those with annual revenues between $10 million and $500 million).

If your organization has not already automated the TEM process, now is the time to do so.

PayStream Advisors’ latest Corporate Insights Report titled, “Travel & Expense Management: A Buyer’s Guide to Expense Management Solutions”is available for download from our online store.  This report, profiling seven of the solution providers, offers valuable insights into TEM and helps managers compare and contrast different solutions to identify the one that bests suits their organizations' requirements. Vendors profiled in this report areConcur, CyberShift (Necho), expensewatch.com, Extensity, Gelco, Inlogik and InterplX.