PUTTING MORE “E” IN T&E
Toting up travel and entertainment expenses is hardly entertaining, but new technology can help.
By Connie Winkler

As technological endorsements go, “we didn’t realize the ROI would be so great” is as good as it gets, particularly when it’s coming from a finance person. And that’s exactly how Bob Mendence, finance manager for corporate services at Applera, a biotechnology company based in the US, describes his company’s adoption of a new travel-and-entertainment expense software system from Concur Technologies.

T&E software is not new, and it already enjoys decent market penetration in the US (40% of large companies and 10% to 25% of small- and mid-size companies, according to PayStream Advisors). While the software is only now making an impact in Asia, analysts say that the software is playing a role in overall e-procurement and expense management, versus more-limited use as workflow
systems that facilitate employee
reimbursement. Data capture is the driving force, according to research firm Aberdeen Group, although the benefits of T&E systems don’t end there. Asia’s CFOs, at the very least, should assess the cost savings and control benefits of the software as business travel is set to expand in the region through 2006, tracking the expected growth in China and the ASEAN nations.

A Window on Expense Cycles

These days, says AG Lambert, senior director of product management at Geac, the enterprise software company based in Canada, compliance issues do help vendors get a foot in the door, but ultimately the promise of cost savings seals the deal. Companies using T&E software often eliminate unnecessary staff positions (one organization cut ten people who did nothing but decode expense accounts, saving US$500,000 annually) and rein in substantial overnight shipping and postage costs (another firm let employees overnight their expense reports, then did the same with the employees’ reimbursement checks). They can also receive prompt-payment rebates from credit- and procurement-card companies (usually banks) that can be integrated into the system. And once travel data has been captured and analyzed, companies can use it to negotiate better deals with preferred airlines, hotels, and other providers.

Proponents also point to soft benefits such as employee satisfaction. T&E software usually enables companies to reimburse employees within two to three days after they submit expenses, versus the weeks or even months it typically takes when using manual processes. Employees can either enter or verify expenses (a credit-card link lets major items be entered directly into an on-line expense report) via the internet or a company intranet. They simply add in out-of-pocket expenses and hit “Send”. In many cases, employees are then reimbursed via direct deposit.

If that makes employees happy, it should also generate smiles in the finance department. “Finance executives are trying to get a clear picture of their expense cycles and how they are going to control them from division to division,” explains Albert Pang, director of enterprise-applications research at IDC, a research firm specializing in IT companies. The accounting and reporting capabilities that are built into T&E systems provide much-needed transparency and accountability for a category of spending that can sometimes be an organization’s largest after payroll and benefits.

This can help clean up what Pang describes as “years of neglect” affecting a substantial expense category. As added incentive, credit-card companies now routinely break out more and more details from each transaction – dividing a hotel charge into meals, movie rentals, and spa treatments (for the truly fortunate travelers), for example.

Some regulatory authorities, including the US IRS, have responded positively to this increasing reliance on automated systems. Among its efforts: accepting electronic documentation versus paper receipts for individual line items (this is part of a “level three” program that the IRS is expected to expand next year). Capturing data at a much more detailed level can give companies plenty of insight into where exactly their expense dollars are going.

“The new technology certainly confers an advantage to CFOs,” says John McCann, head of corporate products, Asia, for Diners Club. “It allows you to monitor spending exceptions, such as non-compliance with travel policies, and whether employees are managing their T&E properly.”

This new focus on data capture and cost reduction stands in stark contrast to the old days of business travel, when corporate travel departments received commissions from airlines and effectively operated as a profit center. And, says Lane Dubin, vice president at American Express Business Travel, there was a time when T&E was the ultimate type of “rogue spending”: emotional, hard to control, decentralized, and handled very differently from one company to another.

This is very much the case in China. “The obstacle in China to better travel management,” says Berthold Trenkel, chief operating officer of Carlson Wagonlit Travel for the Asia Pacific region, “is that companies there don’t even have someone in charge of travel, looking over the process as a whole, and apply company standards to travel agreements.”

In China’s growth-at-all-costs environment, the discussion of investing in T&E software can be sidelined. This is even true of multinational companies that have made major investments in travel management software in other regions. “We don’t use it,” says Ng Wailun, CFO of AstraZeneca’s China unit, “and I’m pushing for it.” He adds: “It would be a tremendous boost for efficiency and for controls.” He adds that Sarbanes-Oxley compliance – AstraZeneca China is currently finishing its second round of annual Sarbox reporting – would go more smoothly if an electronic T&E system were connected to the company’s SAP system. AstraZeneca uses a T&E system from Geac in the US.

At its US operations, Mike Herubin, manager of expense reimbursement, says that T&E is so “humongous” that it calls for heavy-duty in-house T&E management. Herubin serves an 8,000-strong pharmaceutical sales force in the United States that is constantly on the road wooing doctors. Herubin says the biggest benefit has proved to be increased visibility. “Once we got the data, it enabled us to do data mining, looking at the information and providing more meaningful reports, even electronically monitoring what’s going on in the system,” says Herubin. Now he monitors a variety of expense metrics, such as American Express credit-card delinquencies (employees have individual liability for the cards they use) and potential errant charges, such as one made at a home-center retailer. Reductions in delinquencies have resulted in six-figure gains for AstraZeneca, while rebates based on the volume of charges have returned US$1 million to the company this past year alone. These figures are the envy of Herubin’s colleague Ng in Shanghai.

Growing Options

Today, a growing list of vendors offers a range of T&E service options, from licensed or hosted software to on-line services, with credit-card companies and banks either partnering with or competing with IT vendors and travel-booking firms. Necho Systems, Concur Technologies, and Outtask provide web-based software; Geac offers licensed and hosted options; Gelco Information Network has a hosted product; and Ariba offers T&E among its spend-management applications, as do the big ERP and enterprise providers – SAP, IBM, Microsoft, and Oracle. On-line booking companies, including Orbitz, Expedia, e-Travel, Travelocity, Navigant, and Travelport,
offer T&E spend-management services. Major credit-card providers, including American Express, Visa, and MasterCard, offer their own on-line systems. One such offering is Diners Club’s Global Vision, a system that offers consolidated information on worldwide T&E expenses, identifies spending patterns, and gives finance executives information for negotiation with vendors as well as data that can be used in compliance reports.

The web-enabling of T&E systems has been a boon for all customers, since it allows employees to use such systems from almost anywhere. “If there was ever an application that lends itself to the web, this is it,” says Laurie McCabe, vice president at AMI Partners, a research firm that specializes in the small- and mid-size enterprise (SME) market. “Data security issues are low, as expense information isn’t valuable intellectual property, it’s data on what people spend. In addition, these solutions make it easier for companies to comply with Sarbanes-Oxley and other regulatory requirements.”

And web-based systems tend to incorporate current best practices, which can help SMEs to move away from highly customized expense procedures that can drain their limited IT resources.

Experts say the next frontier is for greater integration between on-line booking and the T&E systems that track and manage spending. By combining the two, companies will begin to approach a closed-loop system that may make today’s manual processes as outmoded as the biplane.

Niles Lo in Hong Kong contributed to this story.