By Andrew K. Reese
Travel and entertainment is often the largest controllable expense for an organization, and yet T&E remains a notoriously difficult category for procurement executives to get under control. In fact, a recent report from analyst firm The Hackett Group revealed that as much as 13 percent of T&E spend is "maverick." And it's no wonder. After all, notes Fay Bales, a senior advisor with Pittsburgh-based consultancy Greybeard Advisors, travel is highly personal.
"Decisions that a company makes as far as what carrier to travel on, or what hotel to stay at, directly impact individuals' daily lives when they are on the road. This makes it much more complicated than other areas of supply management," says Bales, who has more than 20 years of experience in the industry and currently works with Greybeard clients on travel-related procurement issues. "It becomes particularly complicated because companies work hard to increase employee satisfaction, and mandating travel policy can negatively impact that."
Al Jacobs, a vice president with e-procurement solution provider Puridiom, adds that travel procurement is made all the more complicated because of the constantly fluctuating costs, unanticipated interruptions and changes, as well as the complexity of booking multiple domestic and international trips. But Jacobs also says that the prospect of driving substantial savings is prompting increasing numbers of procurement executives to take a hard look at ways to rein in travel spend. "The rule that you can typically save anywhere from 5-20 percent on every dollar that you bring under management applies equally to travel," Jacobs notes.
A report earlier this year from analyst firm Aberdeen Group, "The State of T&E Expense Management," confirms that companies are taking a harder look at travel and expense management. Just over half (53 percent) of the business executives surveyed for a recent Aberdeen report said that their organizations have come to view expense management as a "mid-level strategic function," one that could drive "moderate value" to the organization. A further one-quarter (26 percent) saw expense management as a "high-level strategic function." Aberdeen concludes that "enterprises are beginning to drive from the notion often associated with T&E expenses in which they are merely a 'sunk cost,' and are beginning to think strategically about their expense management processes and capabilities."
Aberdeen found that automation is a crucial step in getting control of T&E. The firm's research reveals that 65 percent of top performing companies defined as "best in class" have automated the processes within T&E management, resulting in a significant drop in expense-processing costs. Notably, according to Aberdeen's definition of "best-in-class," these leading companies incur $6.25 to process a single expense report, against an industry average of $28.91 and $51.35 for "laggard" companies.
Jacobs agrees that technology can play an important role in bringing T&E spend under control. His own company recently rolled out a new T&E offering, Puridiom Travel Management, aimed at providing real-time financial control and accountability for travel spend. Puridiom partnered with ATRIIS Technologies, a developer of on-demand software solutions for the corporate travel industry, to develop the new solution, which includes functionality to address the travel lifecycle from itinerary planning, approval and purchasing through expense reporting. However, Jacobs is quick to point out that technology is not a panacea for T&E woes. "Technology will get you so far," he says. "It will bring efficiencies and put in the necessary controls. But, in addition, to really drive bottom line savings, you need a combination of technology and process improvements. That means new policies and procedures that support the technology."