The T&E Big Squeeze

How does your organization automate T&E expenses? Many still use spreadsheets. Business travelers enter their expenses into Microsoft Excel, print out the spreadsheet, and attach receipts using Scotch tape or staples. From there they pass it to somebody for approval, maybe even overnighting it back to HQ, which adds about $15 more. Once approved, the data gets reentered into the expense management system for processing, and finally a reimbursement payment is generated.

Spreadsheets aren't automation. They represent a slow, costly process that lacks any effective management visibility into the data. At a time when companies are desperate to rein in expenses, the old spreadsheet-based T&E process is counterproductive.

"In the current economy, expense management has been magnified in importance," says Rod Radojevic, director of solution marketing at Infor. And so too has travel and entertainment (T&E) cost control. Yet still, after a decade or longer of sophisticated automated expense management systems, an exclusive Infor/Business Finance study shows that just over one-third of survey respondents either have not automated their T&E systems and processes or are just starting to evaluate such automation.

But the need to automate expense management and T&E has never been greater. "You can't get away from the economy of the past 18 months. It has been particularly hard on cash flow," says Andrew Bartelini, vice president at Aberdeen Research, Boston. Since managers can't count on an economic recovery to boost revenue anytime soon, all they can do is focus on what they can control, such as T&E expenses. Controlling T&E expenses, however, requires automated systems and processes.

T&E managers certainly are struggling with the economic pain. "Across the board, we've seen a 25 percent cut in T&E spend," said one Infor/Business Finance survey respondent. "All nondiscretionary travel and entertainment has been curtailed," complained another. One manager reported: "Business travel has been curtailed to only that which is customer-facing and/or commercially necessary."
And when Infor asked survey respondents about changes in company T&E strategies, their responses were equally dispiriting:

• Reduced travel
• Reduced T&E
• Avoid travel where possible through use of online meeting tools
• Stricter controls and higher-level approvals
• Stricter review and preapproval of international travel

World-class enterprises take a different approach. Hackett Group recently looked at how companies manage T&E costs. It found that world-class companies used automated tools 70 percent of the time. Other companies, by comparison, used automation only 30 percent of the time.

The Business Case for T&E Automation

The difference in bottom-line dollars between the world-class companies and the rest is striking. "World-class companies spent $4 less per expense report to process, which is 40 percent less than the others," says Bret Gelbert, Hackett Group senior business advisor and transformation leader responsible for T&E. For a company processing thousands of expense reports each year, a $4 cost difference can really add up.

For example, Infor recounts the experience of one company that had 12 FTEs handling T&E expense reimbursement when it was only partially automated. "When it was fully automated, they were able to do it with just five FTEs," says Radojevic. That's a savings equivalent to seven FTEs.

On average, the Infor/Business Finance study found that large companies processed over 3,000 expense reports each month. Of all companies, nearly one-quarter reported managing 500 or more regular business travelers and processed 1,000 or more expense reports monthly.

In terms of recouping T&E costs, 24 percent of the companies surveyed capture employee time for recharge internally, while 13 percent capture time spent for chargeback to the client. Surprisingly, 63 percent do not capture employee time at all for T&E expense management purposes.

T&E Automation Drivers

To capture and manage these expenses, the Infor/Business Finance survey shows only 28 percent of the respondents with fully automated and integrated expense management systems and processes. "This suggests that there is considerable room for improvement. Even among larger organizations, less than half were fully automated," says Radojevic. With today's focus on curtailing costs, organizations should be pushing for more automation and integration.

As it turns out, this apparently is happening. Aberdeen, in its latest T&E management automation study, identified four primary drivers. Most important by far was budget reduction, which was a direct response to the global financial downturn. Second was the fluctuating cost of travel, closely followed by the high cost of processing expense reports. Finally, companies turned to T&E expense automation to meet financial reporting and regulatory requirements.

The Infor/Business Finance study identified similar drivers. The top two, statistically tied, were improved visibility and analysis of company spend and expense policy management enforcement, each cited by 26 percent of respondents. Following right behind, cited by 25 percent of respondents, was reducing the time it takes to enter, approve, and pay expenses. The need to control spending came next, cited by 24 percent.

Often corporate credit cards constitute the initial step in management's efforts to understand and control T&E costs. "The corporate card has become the link between travel booking and expense processing," says Gelbert.

Corporate cards certainly loomed large in the Infor study. Among larger companies with over $1 billion in revenue, nearly 80 percent had integrated corporate cards with expense management. Even among smaller organizations, those with less than $100 million in revenue, half had integrated the cards with expense management.