Travel expense management

From the April 2019 print edition

Garth Jopling is partner at Nina and Pinta Group and member of the ACTE Canada advisory board.

Do you recall having to use a pre-printed form to handwrite the details of each expense—including the date, amount, vendor and so on—then photocopy the form and the associated receipts, put the originals in an interoffice envelope and send it off into the ether? Remember white-out? How about blotters? Your manager would approve and forward it to payables or question one or more of the expenses and return the whole form to you for rework. Once approved, payables would issue a paper cheque that would be sent to your mail stop or home. And with petty cash, someone had to have a cash box that had to be replenished and reconciled, receipts chased and so on.

Image: Angelica Yiacoupis

There might still be a few organizations managing their travel and incidental expenses this way. Regrettably, many others are still using spreadsheets, a baby step into electronic data formats, in which the forms are completed electronically, receipts scanned and emailed together for approval. The current state offers all-digital processes. The traveller can now launch a smartphone app, have corporate card expenses automatically downloaded into the app, take photos of the receipts and submit for processing.

Spreadsheets facilitate processing of expenses, but that’s all. Expense management systems do that more efficiently, offer greater functionality and cost much less. Some organizations have estimated that their cost to process a manual expense report is over $50. Depending on volume, that cost can be reduced well below $10 in an automated system.

This article is addressed to small and medium enterprises (SMEs) that might be amongst those still using spreadsheets, as well as those that may have signed on with a ‘free’ system such as Divvy or TravelBank and are looking for more capability. We will focus on tips for adopting systems for processing travel and incidental expenses, not inventory management and so on.

To mandate or not?
There is an ongoing debate in the corporate travel world these days about whether or what to mandate in a travel policy. There is no right answer because policy must align with corporate culture—tight margin organizations tend towards cost control and more mandates (use of contracted, low-cost suppliers) while growth-oriented organizations can allow travellers more discretion and be less restrictive. There is an exception to this, in my opinion, and that is to mandate the form of payment.

There is a long list of reasons to do so, but in this context, doing so facilitates accuracy and efficiency in using automated expense systems, as all charges can be routinely downloaded into the expense management system. Travellers validate and allocate the expenses and submit for reimbursement. Approvers review clean information in a standard format—any non-approved expenses can be stripped off and returned to the traveller for explanation and approved expenses go to payroll or payables for electronic deposit, depending on how the organization chooses to reimburse. More organizations use the payroll system to reimburse to tap into the regularity of payments cycle and its ability to manage such taxable expenses as awards.

As with any procurement project, creating a team of stakeholders is critical to success. Typical stakeholders in addressing expense management are, obviously, finance and travel, but also audit (if distinct from finance) IT, HR and potentially risk management. System users, such as budget holders (representing approvers) and top travellers should also be included. Finance typically leads the team. As with any mission-critical project, and this would surely be considered as such, executive involvement and sponsorship is necessary.

With stakeholder input, a complete and accurate map of the current process should be drafted and frustration points identified. Specify the objectives of the project. The expected benefits include process efficiencies with associated accuracy and reduced processing cost; improved audit capabilities; improved reporting due to effective data capture; and, critically, employee satisfaction. Determine how each of these facets would support the objectives.

Also, specify the scope. If you have operations in different countries of varying
size, do you want to implement in all regions, just the home region, or those representing some proportion of overall revenue or activity?

Data security
Data privacy and security are key factors that need to be addressed, especially if there are operations in Europe which introduced its General Data Protection Regulation (GDPR) last May, which provides for material penalties for breaches.
Working from the objectives, a list of requirements should be created and the related specifications ranked or weighted in terms of importance. Using a total cost of ownership model, including direct costs such as transaction fees as well as staff and management time, set targets for cost—determine your baseline and the optimal, midpoint and minimum acceptable cost levels. The lowest cost provider isn’t necessarily the best, and the highest cost isn’t necessarily the worst, when comparing against weighted specifications. This will help you select the most appropriate vendor, as it provides a model for assessing the value of features—some are worth paying for, others might be nice to have but don’t add necessary value.

Once the objectives, scope and requirements are identified, conduct a survey of vendors. You can start with an internet search to identify a range of vendors followed by introductory meetings and/or a Request for Information (RFI) process, in which the objectives and requirements would be used to narrow the field to the most likely candidates.

There are a great number of strong vendors, from industry leader SAP Concur to Chrome River, Coupa, Expensify, and Zeno, each of which has its own strengths, weaknesses and pricing structure.

The next step is to develop and conduct your sourcing strategy. A well-structured Request for Proposal (RFP) is typically the best way to assess the offerings, but there are situations in which it might be best to enter into direct negotiations with a given vendor, such as when they are incumbent suppliers in other functions (SAP, Oracle) or your initial assessment clearly led you to one vendor’s product over all others.
Either way, this is not a short selection cycle. Organizations with unified management structures can expect a minimum of six to nine months for the selection process. Those with diverse operations or fragmented management can expect to need 12 months or more.

The project can also be resource heavy, so it is important that the management allocate sufficient time in advance. Too often organizations look at this as an incremental activity and the project flounders due to lack of availability of team members.

Implementation of a new system is the most critical stage and must be done with a thorough, explicitly detailed project plan. Vendors typically have implementation templates to guide the process, but the organization’s processes, codes, relationships and interdependencies must all be identified and mapped. Many organizations take the opportunity to improve upon existing processes in the objectives and requirements stage. Activities or flows that made sense in one world are no longer necessary in the new world. But such changes require even more attention to how the flows will work in order to minimize unintended consequences.

System testing with pilot groups is an effective way to mitigate risk and ensue the new process works as designed. Once fully implemented, procurement and travel will have access to data that will allow greater vendor analysis for improved negotiations and compliance management. Audit will have improved ability to analyze patterns and focus audits more quickly and reliably.

The future is near. Applications using artificial intelligence, such as AppZen, can perform 100 per cent audits in near real time, further reduce approval time and cost by isolating exceptions and allowing in-policy expenses to flow through without requiring further attention. Also, as with virtually all other areas of business, blockchain applications are being developed to drive further efficiencies and levels of security. Procurement professionals and travel managers would do well to keep an eye on these developments as they unfold. SP