With double-digit top line growth a rarity, profitability can directly relate to how well operating costs are controlled. So better expenses management can be an easy win for businesses as well as politicians, as FSN contributing editor Lesley Meall discovers
A floating duck island. Changing a light bulb. Nappies and nail polish. Non-existent mortgages. Moat cleaning. The mother of all wigs. The Parliamentary expenses scandal has eroded public confidence in politicians and made them a laughing stock across the world - but it hasn’t all been bad news. It could result in a more transparent allowances system for Members of Parliament, and might even encourage a wider cultural trend towards more honesty (only time will tell); but it’s already done wonders for specialist suppliers of expense management software.
“It’s definitely been a talking point,” laughs Pierre-Emmanuel Tetaz, managing director of Etap-On-Line, the travel and expenses management specialist, and although the conversations it’s prompted have been “more jokey” than anything else, the scandal has demonstrated the dangers of lax controls. “The headlines coming out of Westminster illustrate what can happen if you do not have adequate management around the expenses process,” comments Barry Padgett, general manager, EMEA, at Concur Technologies, a pioneer of on-demand employee spend management services.
Although the media is understandably focussed on political shenanigans, the conduct of some in business also merits a closer look, and when YouGov conducted some research on behalf of the expense management specialist GlobalExpense, it had no trouble unearthing some rather questionable behaviour. Apparently, a bribe paid to a border guard by somebody who wanted to get out of Iraq, and hotel charges for nine ‘personal massages’ claimed by somebody who’d experienced ‘a really stressful day’, are just a couple of the many ‘out of policy’ expenses being claimed.
So if you want to better manage employee expense costs during the recession – and they are often the second largest controllable cost, after payroll – it is not enough to have an employee expenses policy; it must be enforced. “Many companies may believe that they have cut spending on employee expenses by changing policy,” warns David Vine, GlobalExpense managing director, but out of policy claims are routinely approved. “The single most important thing companies can do, to stop wasting money on employee expenses, is to make sure that company policy is consistently adhered to,” he suggests.
How easily this feat can be managed depends, to a large extent, on the way an organisation handles expense management. Even a simple policy can be tricky to enforce with just a handful of employees. “The challenge lies in the process rather than the size of the organisation,” suggests Padgett, from Concur, “whether it’s a ten person company that uses the back of a cocktail napkin for expenses, or the government using spreadsheets.” But despite their inadequacy when it comes to enforcing policy (and other shortcomings), paper and spreadsheets remain the preferred approach in an estimated 90 per cent of companies.
Automate to accumulate
Specialist providers of employee expense management tools love to trot out this statistic, along with others about how much money an organisation can save by automating all or part of the T&E process – and estimates seem to range from 40 per cent to 75 per cent. At worst, these figures should be dismissed as meaningless; at best, they should be considered in context.
After all, most people work for small organisations, with fewer than ten employees, and many of them never incur claimable T&E expenses. So handling the process with paper or a spreadsheet is not unreasonable. But it isn’t always the best use of either time or technology, and even a one-man-band can benefit from automating (or outsourcing) some of the expenses management process.
Receipt Farm, for example, offers a basic data entry service. Once a month its users post off an envelope containing receipts and paid invoices, the paper documents are digitised, the useful amounts are extracted, and the resulting expenses information is then made available for viewing online and/or export to a MS Excel spreadsheet or an accounting package. This may be expenses automation at its most basic (and it doesn’t make jaw-droppingly impressive use of technology), but many business people really don’t require anything more sophisticated – or complete.
As businesses grow, however, their T&E spend becomes more extensive and expensive, and products that can automate more of the process increasingly look like viable alternatives to the low-tech approach. Until a couple of years ago, end-to-end expenses automation systems were the preserve of very big organisations, with users such as Commerzbank AG, KPMG and Pfizer, serviced by the likes of Concur and Infor Expense Management (in its earlier incarnation as a Geac product). More recently, the possibilities offered by the on-demand delivery model, have spawned a new wave of web-based solutions (such as ULYSSE and webexpenses.com) and internet-based versions of on-premise systems, and put expense automation within the reach of much smaller entities.
So, how extensively any organisation automates the expense management process is now less to do with having deep pockets than with how much it has to gain. According to a study by American Express and AT Kearney, replacing manual processes and/or spreadsheet-style work sheets with a web-based expense management automation system can reduce processing costs by as much as 75 percent. But even if this means that many organisations will experience less impressive results, they should not be dismissed, because as well as saving money and helping organisations to enforce their T&E policies, automation brings other benefits.
“Automating the process is good for everyone involved,” says Padgett, because streamlining it can reduce the amount of time taken to complete and reimburse expense claims, and centralising it can simplify the management of associated value-added tax and other sales taxes, and provide organisations with the visibility and the tools that they need to need to make better business decisions. But when it comes to choosing a system, there are a lot of options out there, and if you want to find the right one for your particular organisation, you may need to take a lot of factors into account – not least, how much of the process you want to automate.
At their most basic level, all expense management systems perform very similar functions – capturing travel and entertainment (T&E) related charges and expenditure in a variety of ways. Some systems capture the information directly from self-booking systems or via corporate cards or purchasing cards, some allow for information to be scanned and/or photographed (using a mobile phone), others work from paper receipts and provide the data entry process as a service, while some specialist providers offer users a choice from a range of approaches.
The same, but different
The next stage of automation varies depending on the system or systems an organisation is using. It generally involves checking claims against the company rules that have been configured into the system; some support a single ‘default’ policy, while others support the sort of multi-policy guidelines that will be required if the same criteria are not to be applied to everybody in the organisation, or across every single type of group or project. So a system should be able to mirror the sort of structures that the organisation has in place.
Workflow is used to automate the routing, notification, escalation and tracking processes, and all of these should be fully customisable, so that an organisation can define the approval workflow required to help it meet its efficiency goals, and claims can be routed (as appropriate) through approval, accounting, accounts payable, reimbursement, and so on. During these processes, EMA systems will (or will not) offer various levels of flexibility, granularity, security, control and functionality, so it’s important to decide what is essential, and then prioritise.
What graphical reports are included and how easily can the system produce customised reports? The automatic generation of consolidated and detailed reports each month is all very well, but what if you want to do a one-off analysis of a department, individual, type of expense, or attempted policy violations? As well as meals, hotel, air and rental car expenses, what about internet-related expenses, training expenses, professional fees, medical expenses, or fleet costs? Does it include SSL security, multifactor authentication, account lock out features, internet browser fingerprinting, and enforce password complexity?
There are also variables relating to system compatibility and integration. Platform independence isn’t an issue with web-based systems, but not all systems with a traditional on-premise component are compatible with all operating systems or versions of operating systems. Take the desktop version of the Expensable Office system, for example. It is unusual in being compatible with Microsoft Windows and Macintosh operating systems, but it has been designed to work with Inuit QuickBooks, so it outputs expense information to this or Microsoft Excel. If you want to get the best from your investment in a T&E system it may need to function as part of an expenses ecosystem.
As well as integrating with accounting software, or a larger scale Enterprise Resource Planning system, it may need to integrate with self-booking tools (such as Amadeus and Egencia – previously Expedia Corporate Travel), Customer Relationship Management tools, and Human Resources systems. “Clients often change their self-booking systems, and other software applications they have in place,” observes Tetaz, from Etap-On-Line, so the more flexibility a system offers today, the more likely it is to meet your needs tomorrow. As he adds: “Be sure to choose a T&E system that provides highest level of integration with the maximum amount of partners and suppliers.”
