The Net Best Thing: Expense Reports Made Inexpensive

As corporations look to rein in travel and entertainment costs, some companies are using software to automate expense processing and enable more strategic T&E spending.

[From iSource Business, December 2001] Emeryville, Calif.-based Sybase sells applications that, as the software company itself says, "fuel e-business and enable access to information anytime, anyplace." But until recently the company's processes for handling travel and entertainment (T&E) reporting were somewhat less than "e," involving the use of Excel spreadsheets and interoffice mail. "For crying out loud, here we are a software company," says Sybase's director of purchasing, Tom Carey, in explaining why the company wanted to automate its T&E processes.

To launch itself into the 21st Century, Sybase turned to T&E reporting software from Extensity in a bid to better manage this component of its spend and to reduce the time and costs involved in handling T&E transactions. In undertaking this project, Sybase joined a growing number of companies seeking to squeeze both inefficiencies and greater value out of their expense reporting and reimbursement processes.

Reining in T&E

T&E spending, estimated at $185 billion annually in the United States, is a likely target for cost cutting. Consider this: A study last year by American Express found that T&E costs were the second-largest controllable expense at U.S. companies. That may be so, but a membership poll in August by the Association of Corporate Travel Executives (ACTE) indicated that few companies are using e-procurement tools to control their T&E expenses. In fact, while 83 percent of companies in the poll were implementing a strategic sourcing approach to purchasing in general, and 61 percent were using online auctions for some types of purchasing, only 6 percent were using "e-auctions" to secure travel suppliers.

Of course, the strategic sourcing process for travel comprises much more than just the use of online procurement tools. Scott Gillespie, founder of Cleveland-based consultancy Travel Analytics Inc. and a veteran of A.T. Kearney, breaks the process into four steps: setting travel policy, sourcing suppliers, fulfilling contracts and carrying out monitoring and reporting activities. The latter is the purview of such software companies as Captura, Concur, ExpensAble and Extensity, which offer applications for filing expense reports electronically and for automating the expense management process. Software giants such as Oracle, PeopleSoft and SAP offer similar applications as part of their e-business suites. These applications allow for the aggregation of a company's T&E spend, but they have several additional benefits, as Mike Campagna of Labor Ready found out.

Tacoma, Wash.-headquartered Labor Ready, a supplier of temporary labor, has just over 800 branch offices in North America and the United Kingdom and generated $976.6 million in revenues in 2000. Prior to implementing software from Kirkland, Wash.-based Captura, the company's travel expense reporting and reimbursement processes were entirely manual, according to Campagna, who is director of accounts payable and purchasing at the firm. Labor Ready had five employees at corporate accounts payable processing 2,200 expense reports per month for about 1,000 travelers, totaling about $3.5 million in T&E costs per year. Turnaround times for reimbursement were taking as long as six weeks.

Campagna's goals when he began looking at T&E software in early 2000 included automating the entire process, achieving better cost control and compliance reporting, and allowing the company's business (and therefore travel expenses) to increase without having to increase his accounts payable headcount. After selecting Captura in June 2000, Labor Ready began a pilot in August 2000 before starting a corporate rollout in December and subsequently taking the software out to branch offices in March 2001, reaching a total of about 1,500 users.

Captura hosts the software for Labor Ready, which pays a set monthly fee to use the application. Campagna would not disclose the cost of the software to his company, but Captura's pricing varies from $5 to $25 per user per month, depending on the number of users and additional services involved in an implementation.

In gauging the return on Labor Ready's investment, Campagna says the biggest and most measurable ROI was the three-headcount reduction in accounts payable. However, he also points to less quantifiable benefits: "We're experiencing a high level of employee satisfaction at the branches because it's now possible to submit and be paid on an expense report in the same week. That was totally unheard of before." In addition, Labor Ready is using the Captura system to alert managers with approval authority when they exceed a cap on a certain expense category or when an expense may be unreasonable.

Sybase Gets Strategic

Sybase was pursuing goals similar to those of Labor Ready when it implemented a T&E reporting application: reduced costs, greater auditability, improved employee satisfaction. After selecting a reporting application from Emeryville, Calif.-based Extensity, Sybase, which had 2000 sales of $960.5 million, implemented the software in its European division in the fourth quarter of 1999. Its U.S. division followed suit in Q1 of 2000, bringing the total of number of regular users up to 2,500 in a company with 5,500 employees. Carey, the company's director of purchasing, would not discuss the cost of the application, although Extensity, like Captura, licenses its applications on a per-user basis.

Sybase measured its ROI in terms of the cost and time per transaction for processing expense reports. Carey estimates that by achieving levels of $11 and 12 minutes per transaction, Sybase saw a 200 percent return on investment in the first year. Like the staff at Labor Ready, Sybase employees have seen faster turnaround times for reimbursement.

Sybase also wanted to make use of the data that the Extensity software generates to improve their position in negotiating their T&E spend. "We were trying to understand our spend and, from a travel standpoint, understand who's going where, who's not using our preferred carriers, who's booking travel outside our agencies and direct with carriers," Carey explains. He says that Sybase has been able to achieve that goal to some degree but is looking to get still further value out of the data generated by the system. For example, the company has purchased an upgrade to Extensity's software that will allow managers to drill into their own department spends, giving them a greater degree of control over their travel budgets than is currently possible.

Both Campagna and Carey advocate a healthy dose of change management to accompany the implementation of a T&E expense-reporting tool. "Anytime you go from a manual environment, where the people are comfortable and they understand how it works, and you put in something new, you're going to have resistance," says Campagna. Labor Ready trained its district managers on the Captura system and then used them, when possible, as leads for the implementation in its branch offices. That was sufficient for about 50 percent of the affected staff, while the company established a support hotline for those employees who still had questions after training.

For his part, Carey says that this type of enterprise-wide implementation requires broad management buy-in not just for the solution itself but also for the way in which the solution will be deployed. Sybase's implementation team initially envisioned a passive management role in the system, with division managers and controllers auditing a certain percentage of expense reports and managing by exception based on alerts. But after the implementation began, it turned out that some division-level managers wanted to have the flexibility to audit all reports. The implementation team was able to accommodate these managers, but doing so required recrafting a standard company-wide practice and reselling the deployment to management, causing a delay in rolling out the solution. "So if I had to do it over again," concludes Carey, "I would go back to the executive leadership team and map out for them how exactly we were going to deploy it."

The Future of T&E

In the wake of the September 11 terrorist attacks, travel industry experts were uncertain about the long-term impact that those events would have on business travel. For example, in a poll conducted in mid-September by the National Business Travel association, 58 percent of corporate travel managers said their companies were planning to reduce travel, but some of that travel reduction appeared to be the result of prior cost-cutting measures.

Reflecting on the future of business travel, Gillespie, of Travel Analytics, says that he conducted an informal survey among the top thousand travelers at five major corporations. Half of these road warriors' trips were for internal business purposes rather than customer-related. Furthermore, when asked what percentage of all their trips in the previous 12 months had been of little or no value to themselves and their companies, the travelers responded with estimates ranging from 15 percent to 20 percent. With $185 billion spent on corporate travel every year in the United States alone, the potential for savings reaches into the billions of dollars, provided that companies have the right tools that will allow them to be more strategic about their T&E spend. Clearly the solution providers in this segment are hoping to convince Corporate America that their applications will let companies do just that.
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