Getting a Grip on Travel Costs

CFOs are seeking practical ways to improve their corporate bottom-line, and to help them better manage their travel costs companies are starting to automate their expense management processes. To find out more, Business Management asked Bill Connors, Executive Director and COO of the National Business Travel Association, to put together some key questions for travel expense management solution providers in order to get some expert perspective on the growth of this field.

Karen Beckwith is President and CEO for Gelco Expense Management. She has held management positions with Ceridian and Deluxe corporations, and was a CPA at Deloitte and Touche. As a former financial executive, Beckwith understands the unique challenges of managing travel and entertainment expenses across the enterprise.

Ashok Dhar is the founder President of Virtual Communications Inc. and has over 15 years’ experience in emerging technologies and entrepreneurship. Under his leadership, VCOM is emerging as a leading provider of third-generation internet-based products for banking and businesses.

AG Lambert is Senior Director of Product Management at Infor, responsible for Infor Expense Management. He has over 12 years’ experience in the software industry, including both packaged and enterprise software applications and has been focused on employee spending and travel since 1999.

Craig Fearon is the Senior Product Director for Necho, a division of CyberShift, Inc. He has been with Necho for more than six years, has more than 13 years’ experience in the ERP and financial software market and has extensive knowledge and experience in the expense management automation market.

President and COO Rajeev Singh co-founded Concur Technologies in August 1993. Prior to this, Mr Singh served roles in engineering and project management at General Motors Corporation and Ford Motors Corporation.

BMUS. What is the tipping point at which a company should consider integrating its booking tool with its expense reporting software?
CF. Integration of travel booking and expense reporting is a complex decision and one that may or may not make sense for your organization. This type of integration can be defined into two levels. The first being consolidation of travel booking, corporate card and expense reporting data, while the second is pre-population of limited itinerary data, such as airfares, from the booking to the expense reporting process.

The first level is a back-office function that is relatively straightforward and can be accomplished quickly without significant expense or user inconvenience. This provides benefits when negotiating with vendors for example.
The pre-population of travel booking itinerary data to the expense reporting system is significantly more complicated and error prone. The following questions should be addressed before considering this second level of integration.

• Is the use of the corporate travel provider and online booking tool mandated?
• Is the travel booking tool suitable?
• How do you reconcile and reimburse travel expenses?
• Do you submit expenses by trip or for a designated time period? How do you reconcile travel booking data spread over multiple periods?

The answers will help show whether this level of integration is convenient for your end users and hence add additional value to your implementation.

AL. 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 an integrated system 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 alike. Second, expenses from pre-approved trips can be compared automatically and immediately paid where appropriate. This saves time and speeds reimbursement. Third, IT costs can be reduced. 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.

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.

KB. Our clients report that they find value in automating both the booking process and the expense reporting process, but the value of integrating the two has proven elusive. While the airfare component is straightforward, car and hotel reservations generally do not have tax and local fee information included in booking. Depending on the location, tax and fees can be anywhere from 15 percent to 60 percent of the total expense. Our clients find this too big a variance.

Utilizing the corporate card as the source of this information is much more effective. With advances in the past year, Gelco clients can have expense reports instantly created off corporate card transactions, ready for submission when the traveler logs into the system. For busy travelers such as myself, this means when I charge 100 percent of my expenses to my card – which is possible on many business trips these days – it is a two-minute exercise to file my expense report.

AD. Having a booking tool integrated with web-based expense management software is a definite plus for companies with thousands of travellers, especially when trip pre-approvals are required as a means of controlling costs. However, most of the mid-to-large size companies can easily benefit by simply requiring pre-travel approval and having their travel desk receive and access such requests from an expense reporting system for follow up actions.

We are currently working to provide booking tools that are available online in real-time, so that travellers can make their travel reservations in conformance with their corporate policies.

RS. The beauty of integrated travel and expense is that virtually all companies can benefit from it and our solutions are accessible to organizations of all sizes. The only ‘tipping point’ for an end-to-end approach to travel and expense is a company’s desire to extract the maximum value from automating their travel and expense process.

BMUS. 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?
AD. Absolutely – we’re getting to the point where every large implementation should be an end-to-end solution. ExpenseAnywhere provides a total solution that automates the entire life-cycle of the expense management process, from pre-travel authorization, to actual expenditure, to reimbursement, consistent with company policies and workflow. It easily integrates with the company’s ERP systems, and thereby keeps the expense report system in-sync with any changes to the HR or ERP systems. It also automatically attaches scanned or faxed receipts to the expense reports, and with its built-in OCR engine helps automatic receipt verification and validation, reducing the requirement for approver review.

The key to any successful implementation is the management buy-in and close collaboration between the client and the vendor. The corporate expense management process has traditionally been a paper-driven process often with layers of manual approvals, and therefore any automation must include process reengineering. It begins by gathering a clear understanding of the client’s processes, requirements and scope definition, with eventual client sign-off on specific process improvements and necessary changes to the application.

Once the system is configured with client specific data, it is important to perform a successful conference room pilot, and the involvement of the client key resources dedicated to the project throughout the implementation process. Client input during the implementation phase is essential and critical to the successful implementation.

RS. We acquired Outtask earlier this year, which had integrated Cliqbook Travel with their Vinnet expense solution, and that expertise is also now enabling customers to get the best of both Cliqbook Travel and Concur Expense Service. The implementation for the client is really a no-brainer since these two applications talk to one another in a way that is completely seamless, so there's really no work for the client to do. Because it’s one complete solution for both ends of the process, and all booking, itinerary and expense data are instantly accessible, it’s a very attractive package for the client.

KB. The end-to-end process for travel has many common elements with the traditional procure-to-pay process for any commodity, and nobody would argue that the cycle of plan-purchase-pay-report-reconcile-audit makes sense for most goods. Travel is a little different in that usually the individual pays the supplier and the company reimburses the individual.

On the procurement side, there are important differences between travel purchases and buying pencils: the price of travel inventory is dynamic; only the largest spenders get the opportunity to negotiate any but the most basic of contracts; and unlike volume AP purchases, travel is rarely delayed or denied.

Nevertheless, pre-trip controls around class of service restrictions, multi-leg airfare purchases and discount vendor selection are all important parts of the expense management process, and the use of an online booking tool is the most cost-effective way to implement service controls. For a large organization with the right business model, integrating the booking and expense processes can be effective in both reducing process cost and overall travel spending.

CF. To begin, success is relative to the organization’s business drivers and goals and can be defined in several different ways. ‘Success’ for one organization may be considered ‘failure’ for another. Therefore, a company must first identify their success criteria before embarking on an end-to-end solution.

Organizations should then consider their implementation and roll-out approach. Drawing upon previous successful implementations, organizations should determine an approach that would best fit their dynamics and culture. This should include a dedicated and empowered team responsible for the successful implementation of the selected solution.

AL. 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. 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. Coordinating all them requires clear plans and timelines.
• Extensive communication. This is important with the user community, as changes to the travel booking and expense reimbursement process can cause significant frustration if not clearly understood and communicated.
• Design for flexibility. 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 drive the process of implementation.

BMUS. How should companies define an end-to-end solution?
AD. A true end-to-end solution should include automation of the entire expense management process from pre-travel authorization, to entry, submission and approval and reimbursement for expenses in conformance with company policies, without any manual re-keying of the data. The automated solution must tightly integrate with the corporate ERP systems to track and update employee changes, hierarchical changes in the approval process or updates to various cost centres and budgets and track and report on regulatory requirements. The system must include receipt imaging and validation. For European and other countries, the system must track category-specific VAT and also generate reports on VAT reclamation reports.

CF. This is dependant upon an organization’s requirements, goals and best practices. For some, an end-to-end solution could simply be the automation of their T&E expense reports, while others may want a fully integrated solution that ties in their corporate and P-cards, CRM, ERP and corporate travel vendors.

One important aspect is that the implementation of an expense management automation (EMA) solution is a definite process and culture change for organizations. Therefore, we usually recommend that clients take a phased approach. This could include corporate card, EMA and reimbursement first. Secondary actions would include integration with their P-Card and other systems such as CRM. Thirdly, rounding out with integration to online booking tool data, corporate travel providers and other employee discretionary spend such as vendor direct billings. Taking a phased approach allows for sufficient training and user acceptance before moving to the next phase.

RS. We define it as one that unites the travel booking process with the expense reporting process into one tightly integrated solution that delivers cost savings, visibility and control. A truly end-to-end solution should leverage every aspect of the travel and expense process and deliver a 360 degree view of the organization’s spend, all while simplifying the process for the business traveller. Anything less is not truly end-to-end.

AL. Companies should define an end-to-end solution on multiple dimensions:

• Does the system cover the full process of travel and entertainment spending?
• Does the system capture all employee-initiated spending?
• 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 should include everything from the time the employee realizes they need to travel to archiving the data for tax and regulatory purposes. 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. An end-to-end system should also automate this manual process of AP since it involves similar approvers and audit rules.

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.

KB. We can use the procure-to-pay model to define the end-to-end solution for travel, if we keep the differences with traditional procurement in mind. Our experience is that a typical expense report, which includes travel and some entertaining, runs about US$1300. Half of the expenses will relate to airfare, hotel room night charges, and rental car charges that may have been booked through a booking tool. The rest typically happen during the expense report period. Gelco streamlines the reporting process by capturing all expenses that take place on the corporate card, automatically creating a pre-populated expense report that the filer simply reviews and submits – taking about two minutes. Our solutions take care of the rest, including paying all parties, digitally imaging all related receipts, and auditing reports for compliance. By managing the entire process from filing through payments, receipt management and audit, we’re able to provide considerably more value to the client – two to three times what a client might see in ROI through just automating the expense filing and routing process.

BMUS. What are the challenges presented by attempts to integrate expense management and credit card payment systems?
KB. We have a long-standing strategy related to tight integration with corporate payment systems. To allow our clients to work with the corporate card program of their choice – domestic or multinational – Gelco has business relationships and technology integration with over 85 percent of the corporate card programs in North America, the leading corporate card providers within each region of the world, and with the global or multinational program teams at Visa, MasterCard and American Express.

CF. There are really no ‘technical’ challenges involved within the integration of corporate card data and an EMA solution. Necho has been integrating corporate card data within our solutions since its inception with corporate card feeds that provide level-3 P-card data and advanced hotel folio data. For a number of years now, we have been receiving these detailed data feeds from MasterCard and Visa, and we’re currently working with American Express to extend this functionality to their data feeds. The ability to pre-populate such items as hotel transactions with full detail of what was spent has made the expense reporting process even easier for travellers.

The real challenge for organizations integrating their corporate card and EMA solution is change management. Many organizations do not mandate the use of a corporate card program. Therefore, many travellers will continue to use their own credit card for points programs and other rewards. This is where we see the primary challenge – in the adoption and traveller use of the corporate card programs. Many organizations have a corporate culture that is not conducive to forcing or mandating a corporate card program.

AD. Generally, it is not an issue to integrate credit card transactions data in to an expense management automation system. However, there are the usual challenges related to the mapping of the data files.

While most of the credit card transactions data files are capable of tracking level-3 transactions details, they are limited by the currently capabilities of the point-of-sale systems that capture and transmit transaction details. Presently only level-2 transaction data is generally available, which implies that expense management users must itemize their credit card folios.

RS. There should be absolutely no challenges for any company wishing to integrate its preferred corporate card with their expense management solution. Our agnostic approach enables us to work with every corporate card out there. In fact, not only does our end-to-end solution leverage the client’s corporate card data to automatically generate pre-populated expense reports, it also matches that data to the employee’s itinerary, enabling management to compare booked travel to actual spend. This unprecedented visibility is only possible through the seamless integration of the corporate credit card data into the overall travel and expense process.

AL. This is an area where the challenges have mostly been met. Leading corporate card processors have introduced global feeds, 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 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.

BMUS. How has the Sarbanes-Oxley Act changed the expense reporting industry?
CF. The Sarbanes-Oxley Act (SOX) has had a tremendous effect on the EMA market. The implication of SOX is not just felt in the US market but around the world. The implementation and controls inherent within an EMA solution provide organizations the framework and tools required for SOX compliance.

Because one of the key areas for fraud within an organization is employee expense reporting SOX has motivated many organizations to look at their expense reporting process. In effect, SOX has made EMA business critical for compliance and monitoring.

AL. SOX has been 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.

RS. With SOX, organizations are now required to not only understand how all of their financial processes work, but they must also be able to produce the data that backs up their assertions that every process is transparent. It is obviously much more difficult to tightly control a manual process so that it holds up to an auditor’s scrutiny, especially when you’re dealing with an organization with thousands of employees located all over the world.

We feel – and more and more companies are agreeing with us – that the best way for an organization to control T&E expense reporting is to institute firm controls based on automation. This enables any organization to standardize each process using a robust workflow that is based on corporate policies, producing complete transparency and traceability, down to the line-item level.

AD. SOX has of course added to every company’s cost of doing business. Fortunately expense management tools fit well into today’s requirements for tightened controls and bullet-proof audit trails. Therefore the demand for our product has increased because they not only control corporate spend and reduce risk and fraud, but they instantly provide a verifiable history of each transaction and executive payment.

KB. Expense reporting is one of a company’s largest indirect costs, second only to salaries and benefits. And T&E has tended to be prone to fraud and inappropriate transactions. For these reasons, many companies, even those not guided by the SOX Act, have reevaluated their expense reporting process and controls. Many businesses find that the best way to improve compliance and deter fraudulent activity is to automate the process and outsource auditing to an objective third party.

We invest twice yearly in a SAS 70 Type II audit, which certifies that controls around the entire expense process – from the technologies and software solutions we provide, to our payment services and audit services – are adequately documented and tested. Our clients find this certification invaluable as it can be presented to their external auditors, saving them considerable time and money during their own year-end audit processes.

It’s notable that we’ve been growing rapidly over the past few years – we attribute some of this growth to the heightened awareness and scrutiny SOX has placed on financial processes.

BMUS. Where do you see the expense reporting industry in the next five years? Ten years?
AL. 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.

KB. We see two large trends shaping the industry’s future. First, because expense reporting is a non-value-added process for most organizations, we continue to strive to make it simple and efficient for our clients. I am sure the time will come when expense reports will require nothing more than a quick review of an e-mail on your Blackberry.

Additionally, as the global business world becomes ‘flat’, an increasing number of organizations are looking to standardize and manage this process centrally. This standardization means best practice is shared and provides tremendous cost efficiencies.

CF. Over the next ten years the adoption of EMA systems will continue to grow exponentially. Transaction based licensing and Software as a Services (SaaS) hosting options make EMA affordable and within the next ten years, EMA solutions will be deployed throughout all size organizations as pervasively as email is today.

In the next five years, EMA solutions will become increasingly easy to use. The availability of hotel folio data from card vendors indicates that increased availability of detailed data is on the horizon. EMA solutions will also expand to all employee discretionary spending. Today, most organizations have only automated T&E related expenses.

Finally, beyond the immediate cost savings of automation, organizations are consolidating their data from their travel booking, corporate card and expense reporting systems for proactive vendor negotiations, compliance and cost reductions. Consolidated data mining and analysis is a trend that will mature and provide valuable savings to an organization.

AD. The requirement for financial controls and analysis is always increasing. Although expense management automation is a recent development, internet technology has made it easily accessible to global travellers, and companies are recognizing immense ROI and improvement in their efficiency, cost control and employee satisfaction.

In the next five years, expense management systems will have matured considerably and many more companies will be utilizing on-demand ASP subscription services to automate their processes.

CFOs will be more and more under pressure to have their arms around total corporate spend, which implies having expense management, alongside procurement card reconciliation and PO & invoicing systems, integrated and accessible through CFO dashboards for instant reporting, control and analysis of their company’s spend.

RS. Concur’s vision is one in which companies have a suite of on-demand services dedicated to corporate expense management. These will give companies the flexibility to choose the services they need to help them streamline their processes, gain control of spending and increase their visibility to further drive cost savings. Innovation is constant, and is delivered automatically, so that every organization is benefiting as these services continue to become even more robust and feature-rich.

I wouldn’t be surprised if in five or ten years, companies out-source entire processes to these expert service providers. Much like ADP has done with payroll, look for companies like ours to lead the way in delivering the services that help companies to continue driving costs out of their businesses.