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Toting up travel-and-entertainment expenses is hardly entertaining, but new technology can help.
Connie Winkler, CFO IT
June 22, 2005
As technological endorsements go, "we didn't realize the ROI would be so great" is as good as it gets, particularly when it's coming from a finance person. And that's exactly how Bob Mendence, finance manager for corporate services at Applera, describes his company's adoption of a new travel-and-entertainment expense software system from Concur Technologies.
T&E software is not new, and it already enjoys decent market penetration (40 percent of large companies and 10 to 25 percent of small and midsize companies, according to PayStream Advisors). But analysts say the software is now playing a role in overall E-procurement and expense management, versus more-limited use as workflow systems that facilitate employee reimbursement. Data capture is the driving force, according to research firm Aberdeen Group, although the benefits of T&E systems don't end there.
"Our main goal was to streamline the process," says Mendence, "and develop a system with rules to enforce our policies. With the demands of Sarbanes-Oxley legislation, we knew we were going to be tested on internal controls."
These days, says A. G. Lambert, senior director of product management at Geac, compliance issues do help vendors get a foot in the door, but ultimately the promise of cost savings seals the deal. Companies using T&E software often eliminate unnecessary staff positions (one organization cut 10 people who did nothing but decode expense accounts, saving $500,000 annually) and rein in substantial overnight shipping and postage costs (another firm let employees overnight their expense reports, then did the same with the employees' reimbursement checks). They can also receive prompt-payment rebates from credit- and procurement-card companies (usually banks) that can be integrated into the system. And once travel data has been captured and analyzed, companies can use it to negotiate better deals with preferred airlines, hotels, and other providers.
Make no mistake, T&E software isn't cheap — a traditionally licensed in-house version could cost up to $1 million, while a hosted service might run in the low six figures annually, according to Lambert. But if you have thousands of road warriors, like the $20 billion pharmaceutical company AstraZeneca, the payback can be impressive. And, as with most other categories of software, hosted pay-as-you-go options can make the software accessible to companies with smaller IT budgets (see "Software as a Service").
Proponents also point to soft benefits such as employee satisfaction. T&E software usually enables companies to reimburse employees within two to three days after they submit expenses, versus the weeks or even months it typically takes when using manual processes. Employees can either enter or verify expenses (a credit-card link lets major items be entered directly into an online expense report) via the Internet or a company intranet. They simply add in out-of-pocket expenses and hit "Send." In many cases, employees are then reimbursed via direct deposit.
If that makes employees happy, it should also generate smiles in the finance department. "Finance executives are trying to get a clear picture of their expense cycles and how they are going to control them from division to division," explains Albert Pang, director of enterprise-applications research at IDC. The accounting and reporting capabilities that are built into T&E systems provide much-needed transparency and accountability for a category of spending that can sometimes be an organization's largest after payroll and benefits.
This can help clean up what Pang describes as "years of neglect" affecting a substantial expense category. As added incentive, credit-card companies now routinely break out more and more details from each transaction — dividing a hotel charge into meals, movie rentals, and spa treatments (for the truly fortunate travelers), for example. The IRS has responded positively to this increasing reliance on automated systems. Among its efforts: accepting electronic documentation versus paper receipts for individual line items (this is part of a "level three" program that the IRS is expected to expand next year). Capturing data at a much more detailed level can give companies plenty of insight into where exactly their expense dollars are going.
This new focus on data capture and cost reduction stands in stark contrast to the old days of business travel, when the corporate travel department received commissions from airlines and effectively operated as a profit center. And, says Lane Dubin, vice president at American Express Business Travel, there was a time when T&E was the ultimate type of "rogue spending": emotional, hard to control, decentralized, and handled very differently from one company to another.
No more. Today, a growing list of vendors offers a range of T&E service options, from licensed or hosted software to online services, with credit-card companies and banks either partnering with or competing with IT vendors and travel-booking firms. Necho Systems, Concur Technologies, and Outtask provide Web-based software; Geac offers licensed and hosted options; Gelco Information Network has a hosted product; and Ariba offers T&E among its spend-management applications, as do the big ERP and enterprise providers — SAP, IBM, Microsoft, and Oracle. Online-booking companies, including Orbitz, Expedia, e-Travel, Travelocity, Navigant, and Travelport, offer T&E spend-management services, along with American Express, Visa, MasterCard, and other financial-services firms.
The Web-enabling of T&E systems has been a boon for all customers, since it allows employees to use such systems from almost anywhere. "If there was ever an application that lends itself to the Web, this is it," says Laurie McCabe, vice president at AMI Partners, a research firm that specializes in the small and midsize business (SMB) market. "Data security issues are low, as expense information isn't valuable intellectual property, it's data on what people spend. In addition, these solutions make it easier for companies to comply with Sarbanes-Oxley and other regulatory requirements." And Web-based systems tend to incorporate current best practices, which can help SMBs to move away from highly customized expense procedures that can drain their limited IT resources.
Web capabilities were a major selling point for Canadian clothing retailer Reitmans, which says it is taking a cautious approach in rolling out a T&E system, in hopes of winning employee acceptance. Analysts agree that for all the advantages T&E systems offer, it can be hard to get employees to adapt to new procedures, especially when newly codified rules result in automatic rejections or red flags. "We're very much committed to the Web with all our applications, and we wanted a T&E program that would fit in, be easy to deploy, and mesh with our other systems, including our Web-based PeopleSoft financials," says vice president and comptroller Richard Wait. Reitmans, which has 876 women's apparel stores across Canada, is just beginning to test and implement Necho Expense. As is often the case, the new T&E system will replace an in-house process — in this instance, one in which data was entered into Microsoft Excel spreadsheets and then rekeyed into a PeopleSoft application.
Deploy Quickly and Walk Away
For Hormel Foods, a hosted T&E solution proved a "quick win" as part of an outsourcing initiative affecting noncore processes, says James Sheehan, vice president and controller of the company. The system, from Gelco Expense Management, was up and running in 60 days and required little involvement from Hormel's internal IT staff. "We wanted something that worked well and would provide both savings and analytical tools, but we wanted it to be a task we could complete quickly and walk away from," adds Sheehan.
Like Reitmans, Hormel previously used a manual approach based on spreadsheets that took 14 to 17 days to reimburse employees and frequently resulted in muddled currency exchanges. Today, the system provides reimbursement in just three days, and the T&E data has become a sales tool for the company's major food-services business. "We capture the amount of money we spend with the hotel chains," says Sheehan. "So when we call on customers, we are able to show not only that they are good clients, but that we are supporting them by staying at their hotels." And by linking the Gelco system to Hormel's corporate credit-card account, Hormel has smoothed foreign-exchange transactions for international travelers. "Before this system, we were constantly going back and redoing expense reports, trying to recover payments and make them fair to employees," Sheehan says.
At AstraZeneca, T&E is so "humongous," says Mike Herubin, manager of expense reimbursement, that it calls for heavy-duty in-house T&E management. Herubin serves an 8,000-strong pharmaceutical sales force in the United States that is constantly on the road wooing doctors. Following the 2000 merger that created the firm, AstraZeneca played with the T&E systems in place at both Astra and Zeneca, but ultimately decided to go with a new system from Geac. The company needed workflow capabilities to electronically route reports for manager approvals, along with the ability to embed travel policies and rules into the process to improve compliance — all while keeping costs down.
But Herubin says the biggest benefit proved to be increased visibility. "Once we got the data, it enabled us to do data mining, looking at the information and providing more meaningful reports, even electronically monitoring what's going on in the system," says Herubin. Now he monitors a variety of expense metrics, such as American Express credit-card delinquencies (employees have individual liability for the cards they use) and potential errant charges, such as one made at a home-center retailer. Reductions in delinquencies have resulted in six-figure gains for AstraZeneca, while rebates based on the volume of charges have returned $1 million to the company this past year alone.
"Doing these things, and letting people know that we're looking at their spending, makes them think twice...and helps a little with mitigating fraud," says Herubin. "Data mining is the real benefit companies should tap into. Utilize your data — get in there and look at it. Don't let it sit meaninglessly."
Next up at AstraZeneca: an imaging system that will allow sales reps to fax their paper receipts to the T&E system, where they will be digitized and attached via bar codes to the actual expense reports. "This brings the receipts back to the manager's desktop, versus the old system with just an electronic version of the receipt, not the actual image," says Herubin.
Experts say the next frontier is for greater integration between online booking and the T&E systems that track and manage spending. Online travel provides its own forms of savings (see "Travelin' On(line)," Winter 2004). By combining the two, companies will begin to approach a closed-loop system that may make today's manual processes as outmoded as the biplane.