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."
Indeed, a report from workforce mobility specialist Runzheimer International with CFO magazine, "Insight and Best Practices Drive T&E Savings," found that companies must maintain up-to-date policies as "the primary defense against unnecessary spending" as part of a successful T&E expense management program. Runzheimer further suggested that the best T&E programs provide for both internal and industry/peer benchmarking, including spend information by individual and business unit, information on frequently visited locations and vendors, and policy compliance. Leaders also centralized control over T&E as one way to improve cost control — 29 percent of the organizations in the Runzheimer study reported that Procurement held responsibility for travel, while 34 percent said that Accounting/Finance oversaw T&E, while just 8 percent report multiple departments as running this category (the remainder pointed to HR, Administration, Corporate Services or "Other").
Greybeard's Bales says that the success of a T&E program often depends on the company's culture, and companies should ensure that the policies they put in place align with that culture. That said, she adds, "Some refer to it as 'travel guideline,' and some 'travel policy.' Clearly those with guidelines do not have as much control and at the end won't save as much as those that have policy."
T&E in Practice
For Tewksbury, Mass.-based natural pet food company WellPet (wellpet.com), a primary motivation for moving to a T&E expense management solution was speeding up the reimbursement cycle for its traveling employees. "The business pain was the length of time it took to process T&E for our employees," explains Jill Richards, accounts payable, accounts receivable manager at WellPet. "It was taking anywhere from three to 14 days due to snail mail."
A privately held, midsize firm formed in 2009 from the merger of Old Mother Hubbard/Wellness Natural Pet Food and Eagle Pack Pet Foods/Holistic Select Pet Food, WellPet elected to move its T&E expense management to a platform from Concur that combines online travel booking with automated expense reporting. The company moved on an aggressive six-week initial rollout of the initial Concur platform across the company, and Richards says that moving from a paper-based system to an online system was a cultural shift for WellPet's employees. "They were unsure how it would work," she says, "but once we held training Webinars, our employees felt less anxious and more in control of their T&E."
The ROI for employees came almost immediately, as they began to be reimbursed for their travel in days rather than weeks. "The response from all levels of employees has been very positive," Richards says, adding that she no longer hears complaints from employees about how long it takes to get reimbursed. Asked for advice for other executives looking to implement T&E expense management, Richards offers: "Don't wait too long. The end result is happy employees!"