Counting the expense

What is the tipping point at which a company should consider integrating its booking tool with its expense reporting software?
There are two factors that should drive integration between a booking tool and expense reporting: pre-trip approval and end-to-end travel analysis. These factors need to be analyzed in conjunction with the overall travel environment, and the services that can be provided by an external travel agency.

For companies that require approval before employees travel, the use of a single system for travel planning and expense reporting presents many advantages. First, there is a common interface for submission and approval of travel requests and expense reports. This simplifies training and ease-of-use for employees and managers across the company. Second, trips that have been pre-approved can have expedited expense report approval, since the expenses can be compared automatically for each category of travel spending, and immediately sent for payment if within the pre-approved amount and business policy. This saves time and speeds reimbursement. Third, IT costs can be reduced, with a single extract from back-end systems of user, accounting, and approval hierarchy data used for the booking tool, pre-trip approval, expense reporting, and other employee-initiated payment requests. The combination of these benefits means that any company with pre-trip approval requirements and a corporate or agency provided online booking tool should consider integration.

End-to-end travel analysis has the potential for even greater benefits, since the combination of booking and expense report data gives companies the ability to truly enforce compliance and understand spending trends to negotiate the best possible supplier contracts. Booking data by itself misses the potential policy violations and expense impacts from employees changing trips after booking or doing so outside the system, as well as unrelated spending such as air, hotel, car and other pre-booked travel. Expense reporting data provides analysis of what actually happened, but doesn’t provide insight into unselected options that are necessary to understand potential savings and compliance. Combined, this data gives finance and travel management insight across the travel process and can drive significant reductions in external travel costs.

When determining whether or not to integrate booking tools with expense management, companies should carefully consider their current and future travel environment. How much of the travel data is already available from their travel agency, and how much is really being used? Will future M&A or vendor evaluations drive changes to the travel agency, the booking tool (often provided by the travel agency), or the expense management system? What will integration cost, both upfront and in future transaction fees? It is critical that organizations preserve flexibility to select their travel agent, booking tool, and expense system independently so that future opportunities to improve in any area are not constrained by commitments made in order to achieve integration.

As integration becomes increasingly open, inexpensive, and easy-to-use, the tipping point for booking tool and expense reporting integration will become lower and lower.

An end-to-end solution has been talked about for years, but has anyone been successful at full implementation? What practices led to a successful implementation?
Absolutely. In our customer base, we have seen companies integrate to numerous online booking tools, as well as automate a range of employee-related financial processes, including pre-trip travel approval, expense reporting, requests for vendor payments, and project time capture that allows quick, accurate billing of time and expense together for services organizations. AT Kearney is a prime example. This global management consultancy has implemented travel approvals, expense reporting, payment requests, and time capture globally on a single system with common interfaces and user experience.

When I listen to our customers, several practices have recurred in successful end-to-end implementations:

• Rigorous planning. An end-to-end system requires coordination between multiple internal and external groups, including your travel agency, corporate card provider, expense management software or service provider, IT and back-end system managers, and your user community. Coordinating all these groups requires clear plans and timelines.
• Extensive communication. Just as planning is essential, so is communication. This is particularly important with the user community, for travel and expense touches almost every employee in many organizations, and changes to the travel booking and expense reimbursement process can cause significant frustration if not clearly understood and communicated.
• Design for flexibility. Every system changes over time and, when seeking an end-to-end solution, each piece needs to be able to be changed without disrupting the overall goals of the project.
• Executive buy-in. Senior management needs to be visibly behind the project. End-to-end solutions have greater benefits and greater disruption than point solutions, so senior management needs to know this is more than expense reporting and must own driving the cost savings from capturing all employee-spending and changing travel procurement.

How should companies define an end-to-end solution?
Companies should define an end-to-end solution on multiple dimensions:

1. Does the system cover the full process of travel and entertainment spending?
2. Does the system capture all employee-initiated spending?,
3. Is the system global and does it satisfy the various requirements of different groups and subsidiaries worldwide?

An end-to-end travel and entertainment solution will include: employee and agent booked travel; flow of itinerary data to the expense management system for approval or comparison to actuals; integration of a corporate card to expedite expense report creation and policy compliance; online submittal of expense reports with flexible workflow and full global policy compliance; imaging to capture receipts; and payment to corporate cards and employees for valid expenses. Everything from the time the employee realizes they need to travel to archiving the data for tax and regulatory purposes should be included, and analysis should be available across the spectrum.

However, this is only one type of activity where employees need to spend corporate resources and seek approval, and it is just one dimension of an end-to-end solution. Another type of employee initiated spending is request of vendor payment. At one of our customers, 2/3 of clerks in the Accounts Payable department were redeployed when an automated T&E expense report processing system was installed, but ten people remained to manage the manual approval of check requests and vendor payments outside of the corporate PO system. An end-to-end system should also automate this manual process of AP since it involves similar approvers and audit rules. In addition, professional services firms are only halfway there when they capture expenses. In order to bill their clients, they must also capture time worked against the same projects and with the same approvals as their expenses. In this industry, it is important to capture time and expense together to expedite billing, reduce errors, and shorten time to payment. All of these additional aspects of expense management should be considered in defining an end-to-end system.

Finally, an end-to-end system should capture the different rules, workflow, data capture, languages, and capabilities for different organizational units around the world. The expense system should work equally well online or offline, and multiple corporate card feeds and other integrations should be possible to support organizational differences while preserving global management and analysis capability.

What are the challenges presented by attempts to integrate expense management and credit card payment systems?
This is an area where the challenges have mostly been met, and the opportunity of corporate card integration is now a requirement for any significant expense management project. In recent years, leading corporate card processors have introduced global feeds that simplify the integration of corporate cards from multiple countries, and most leading expense management vendors can handle a variety of corporate card formats and policies. There are still project challenges associated with coordinating the different players in the solution, but these are routine in most cases.

The real news with integration of corporate card and expense management systems is the rise in availability of hotel folio data, presenting a new opportunity for automation, ease-of-use, and policy compliance. Visa, MasterCard, and American Express have all introduced new programs to encourage merchants to provide folio data that can be made available in the corporate card feed. Infor Expense Management provides automatic itemization of this folio data, speeding expense report creation, improving policy compliance, and ensuring better data to confirm capture of contract rates with hotel properties. As more and more hotel properties come online with folio data, filing expenses will get easier and easier, and the need for paper receipts for routine travel can be practically eliminated.

How has the Sarbanes-Oxley Act changed the expense reporting industry?
The Sarbanes-Oxley Act was passed to increase investor confidence in the financial statements of public companies by requiring a variety of measures to improve internal controls and reduce the risk of fraud that could materially affect financial statements. In response to requirements of the act, companies audited their financial processes to identify potential control weakness. This was a boon for the expense reporting industry, since manual expense reporting processes have numerous control risks that most companies deemed unacceptable in the era of Sarbanes-Oxley. As companies turned to automated systems, they discovered significant ROI from automating expense management in addition to the increased control provided by an automated system with work item and user action tracking.

In addition, Sarbanes-Oxley has increased the requirements for advanced reporting and fraud detection within expense reporting solutions. New solutions for reporting on potential fraud and detecting patterns of potentially fraudulent activity are now commonplace.

The final impact of Sarbanes-Oxley has been on the control requirements for Expense Reporting solutions themselves. Hosted operations must be demonstrated to be secure, and service providers must provide SAS 70 certifications for their facilities. Insecure technology at the database, server or client level, particularly for offline use, is not acceptable, and administrative actions must be robustly logged to ensure the integrity of the system. As companies prepare evaluations of new systems, the control and security processes of the solution and solution provider are now central.

Where do you see the expense reporting industry in the next five years? Ten years?
Over the next several years, expense reporting systems will become standardized across the globe, and more companies will consider all employee spending, not just T&E, in evaluating expense solutions. Global systems, adapted to local requirements as needed, will provide consistency and cost savings for multinational corporations. Companies will turn to the vendors of their financial systems for solutions that are turnkey, pre-integrated to their existing AP, payroll, and GL systems, while still needing flexibility to adapt to different back-end systems as needed.

Integration across online booking, travel agencies, corporate card programs, expense management and payment systems will be essential, but end-to-end systems will be rare. Companies will need the flexibility to select the right level of cost and service for each step in the travel procurement process, as well as the ability to integrate local requirements and vendors into global expense management systems.

Overall, expense reporting will become commonplace, with automated systems ubiquitous. Companies will recognize strong ROI from low-cost, highly integrated travel and expense systems.