How to excel at processing business travel expenses has never been a sexy topic, but it's become a more urgent one. Problems in business travel expense -- often called travel and entertainment (T&E) -- procedures have grown to the point that CFOs and controllers are planning remedial actions.
According to a recent report by CFO Research Services,
On the road
With slow economies in the U.S. and Europe, the hunt for revenue has grown hectic. Senior executives have been pushing hard on their sales teams to find new deals and renew expired contracts. Unsurprisingly, the majority of finance managers surveyed in March by PayStream Advisors said spending on business travel rose over the past three years. This has been a challenge for firms that have always believed their business travel expense processes to be adequate and in no need of repair. However, three elements of process management now scream for attention:
Cost: The costs of processing have risen due to more reimbursement requests, disbursements and audits. APQC research shows that 90% of firms perform audits of expense reimbursement requests manually and/or need manual intervention at some stage or another. For example, clerks may add up hard-copy taxi receipts and check their totals against the automated totals for accuracy. Although a company may say it is using automation because a traveler emails a spreadsheet to the AP department, most firms in the PayStream Advisors' survey still require hard-copy receipts for all expenses. When volumes increase, this archaic compliance policy becomes a budget killer. A clerk earning $20 an hour may spend 30 minutes combing a reimbursement request trying to catch a $10 mistake.
Meanwhile, APQC research showed that 60% of all costs related to accounts payable stem from labor and benefits. More transactions require more processors, and that means more cost, especially when a high level of manual processing steps is involved. In Figure 1, the worst performers (the bottom quartile) in this benchmarking survey need at least nine times as many people as the top performers (the top quartile) to process business travel expense reimbursements.
Compliance: With higher volumes of business travel expense activity, chief financial officers (CFOs) and controllers find it harder to analyze spend patterns; for example, whether travelers are mostly booking hotels that have agreed to give volume discounts. Less visibility on spend patterns hampers the ability to drive policy compliance. In turn, policy violations cause exception handling and manager hand-slapping; in all, more wasted time and resources. One response could be to make it easier for travelers to adhere to travel policies by providing online booking tools that steer travelers to approved vendors. Another possibility is to deploy automated workflow software so that, in essence, software "robots" check expense receipts against totals, with both the receipts and expense reports digitized and sent to the AP department via mobile devices. The CFO Research Report said that "three-quarters of those surveyed agreed that [making bookings], travel expense submission and reimbursement less time consuming and error prone would yield a meaningful financial benefit for their companies." But streamlining processes and switching to thinner paper trails might eliminate the more detailed data that finance executives need for better spend analysis and control. Trade-offs like that are tough to wrangle with.
For more on expense management
Learn about expense report software
Adopting expense management software
Slowdowns: Higher processing volumes burden managers -- many of whom are also on the go -- when it comes to approving payments. Slowdowns in approval cycle times are likely to upset accounting protocols and throw month-end reporting into disarray. Beyond that, slow-downs in reimbursements make travelers grumpy; that's not going to help them close deals.
The business case for automation
The PayStream Advisors' report is a must-read for any finance team curious about automating of business travel expense processes. The report explains clearly how software offerings currently on the market work to "provide extraordinary savings for business travel through rules-based travel policy enforcement. To take enforcement of company travel policies a step further, many [current offerings] provide online booking for airfare, hotel reservations and transportation (such as car rental service through approved corporate vendors), which prohibits employees from booking with outside vendors or going over the spending limit. These functions work to enforce corporate compliance and to overcome one of the biggest challenges organizations face in the expense management process -- the inability to enforce corporate travel policies."
The report also explains how automation of business travel expense reimbursement lowers processing costs incurred by the finance team and boosts labor productivity. These are the best practices that, together with ongoing process measurement, can improve administrative functions and ultimately support the warriors at the front lines of the business.