Frontline individuals can be the weakest link for any business activity – and managing corporate travel and entertainment (T&E) expenses is no exception. Sophisticated tools like automated expense management, commercial card programs or online booking portals can only deliver if they are used effectively, argues Citigroup’s Vincent Eavis.
The problem is that unlike the majority of corporate cost centers, T&E expenses rely on individual choice and discretion, which leads almost inevitably to emotionally driven decisions and often unpredictable behavior. Even with the best tools in place, it is impossible to maintain full visibility (and hence control) of T&E costs if employees are not mandated to use them effectively. Robust policies and procedures are essential – as are the desire and ability of users to comply with them.
So what should be included in a policy? And how should it be mandated? There are no standard answers to these questions. The size of the organization, for example, is a factor, as is the amount of travel that is undertaken. Smaller companies with one or two regular travelers have a far greater level of immediate visibility over expenditure than a company with thousands of frequent flyers on the payroll. As a result, a comprehensive travel policy may not be necessary.
But for larger companies there are areas that should definitely be included. For example, establishing who authorizes travel, what constitutes a legitimate entertainment expense and how T&E expenses are to be reimbursed. It should also cover how bills are to be paid and who will take on liability, as this will inform other elements of the policy.
Nonetheless, the finer details are dependent on the nature of the business. For some, the priority is to provide a clearer view on its choice of suppliers and negotiating preferential rates. For others it is minimizing the minor frauds that plague existing procedures for managing T&E expenses, or establishing a more efficient flow of cash throughout the organization to improve working capital.
So before writing the first draft organizations need to ask, “what are we trying to achieve?” and ensure that the policy reflects that.
Another key factor for larger companies is geographical spread. As 85 percent of all card spend at global companies is typically generated in 10-15 countries, it may be expedient to introduce the policy in their top ten locations at first, and include other countries later.
It is also important to consider that what may work in one country will not necessarily be effective in another. Laws, regulations and expectations regarding the use of commercial cards change as national boundaries are crossed. The UK, for example, is very comfortable with using commercial cards and maintaining corporate liability. Germany, despite the strong emphasis placed on individual rights and privacy by its workers’ councils, relies on personal liability cards far more.
In fact, cash is preferred to credit in Germany, defying expectation and illustrating exactly why cultural differences need to be considered when drawing up policy. A strict global policy will inevitably result in compromise – they key is to establish where and at what level that compromise is acceptable.
The international issue also illustrates another key point for success: having a policy that is workable. If cards are not widely accepted, or a credit culture is imposed on a traditionally cash economy, users will almost certainly find ways to bypass it completely.
Tools for success
As important as it is to ensure the policy fits the organization and its users, companies also need to put processes in place to measure its effectiveness. 99 percent of companies have a policy, but only 52 percent quantify it. Yet without regular, ongoing assessment, there is no way of knowing whether the policy is delivering against desired outcomes – making the whole program self-defeating.
In addition, a policy is only effective if everyone knows what it is – and whether they are complying. This is not a decision to be left to the people already identified as the weakest link, so regular, straightforward communication is key.
Any new policy should be introduced by a C-level executive – to demonstrate the organization’s commitment to delivering the benefits of the policy. This introduction should highlight the benefits to the organization and, just as importantly, to the individual.
After this the travel manager can send out messages to remind people about the top two policy requirements: for example, individuals must use the company’s online booking tool, and travelers can only use a commercial card for corporate expenses. In addition, senior-level advocacy should continue throughout the program.
However, despite this, there will always be mavericks within any company. Making the program as easy to use as possible, and eliminating reasons to use an alternative is the first step. Organizations also need to stipulate the consequences of non-compliance, and build in control mechanisms: for example, de-prioritizing expense claims that do not conform with the policy.
There are also specific tools available to ensure policy adherence – provided they too are properly mandated. Online booking portals can restrict the choice of hotel and even the room. In addition, expense management software can also apply post-facto limitations, by not recognizing unauthorized expense claims.
Points of view
Finally, organizations should consider who will contribute to developing travel management policy. It is not the sole preserve of senior management, and valuable contributions can be garnered from a number of areas within the company. For example, accounts payable will have an informed opinion on what management data should be generated and how it can be used. Treasury can also assess the potential impact of the policy on financial processes, and make recommendations accordingly.
The legal team, particularly any compliance officials, can also help establish appropriate procedures, while HR and any employee groups can offer the viewpoint of front-line users.
Organizations may also find it useful to gain input from third parties, such as their travel management company, or expense management supplier. If the primary purpose is to streamline suppliers, or negotiate better rates, input and advice from external sources can prove to be particularly important.
In the technology sector, consultants often talk about ‘people, process and technology’ as the holy trinity of any successful IT implementation. It’s an acknowledgement that computers alone won’t solve any problems. The same ethos applies here. Simply issuing employees with another piece of plastic or a new desktop application will not, by itself, lead to any substantial benefits. However, the right tools used according to a well-thought out policy can have a significant and positive impact on the business.
Vincent Eavis is Director of Commercial Cards at Citigroup Global Transaction Services (GTS). For further information, please visit: www.transactionservices.citigroup.com