Expense management systems can save companies millions of pounds and thousands of man hours, so why aren't we using them and what exactly is on offer? Catherine Chetwynd examines the options
Construction of a duck island, a little light moat cleaning and claims for mortgages already paid off comprise just some of the expenses claims made by our esteemed MPs. Clearly the House of Commons is not using an expense management system (EMS).
But if there were any doubt about the savings opportunities missed by using manual expense systems, research undertaken by American Express Commercial Card this year shows that nearly half the companies polled (47 per cent) still operate a manual process, wasting 843,682 man hours or the equivalent of £9.8 million a year in potential savings. And this figure does not account for expensive mistakes often made through manual intervention, nor the time employees spend filling in expenses forms instead of doing their jobs.
"While many decision makers appreciate that the manual handling of purchasing and expenses is expensive and time-consuming, our research indicates that many companies are not aware of the alternatives," says vice president and general manager at American Express Commercial Card, Mimi Kung. To address this, Amex has taken a 13 per cent stake in Concur and as a result, each company exclusively promotes the other's services to clients.
Meanwhile, management solution company Global Expense is seeing a keener corporate eye being passed over expenses, which is exposing the abuse allowed by inadequate or inconsistently enforced controls and checks. "We have seen much greater interest in the reporting capability of the system. Clients are now analysing their expenses and taking action to deal with those who flout the rules," says managing director David Vine.
"However, companies shouldn't start a witch hunt," he says. "Most expenses fraud or abuse stems from a culture of acceptability within the business and this comes from the top. Executives and management must lead by example if they are to change the culture of expense fiddling. "More and more of our clients are working to educate their claimants and authorisers about expenses policy and the rules that apply to claims. Anecdotal evidence suggests that engaging employees in this way is leading to improved policy compliance and consequently, a reduction in spending."
Business travel payment solutions company AirPlus is finding that companies are mandating travel policies more strictly. "And as a result, companies are looking for reporting and analysis tools that will help them monitor compliance and gain helpful travel data for supplier negotiations," says managing director Yael Klein. "Since the start of the economic downturn, we have seen increased demand for our MIS [management information system] tool, the AirPlus Information Manager. Customers that use the tool for basic reporting have also expressed interest in learning how to optimise its use to tap into further savings potential and police travellers' booking behaviour, ensuring that corporate travel guidelines are followed."
Integrate to accumulate
The Amex research shows that only nine per cent of UK businesses have wholly automated EMS but the exigencies of spurred a greater need for clarity. "Over recent months, our clients have started to request that transaction data is fed directly from card suppliers into their EMS, to ensure all spend is captured and analysed," says head of consulting mainland Europe for HRG (Hogg Robinson Group), Marion Klar.
"HRG launched a global corporate card review programme in December to help clients review travel and entertainment payment methods and assess the card solutions available," she says. "Our programme can help companies deliver cost savings of up to 20 per cent and cut by half the time taken to implement a solution."
Expense management solution company ETAP-On-Line, recently acquired by Concur, has a new relationship with GetThere that also reflects greater demand for an integrated system. "We did not have the scope to do a self-booking tool, which is why we decided to opt for integration with GetThere," says ETAP general manager Pierre-Emmanuel Tetaz. "Our strategy is to promote inter-operability with any booking engine, so the client has 100 per cent choice." Meanwhile, more than 80 per cent of Concur's new business combines online booking tool and expenses together.
Getting tough
Add greater clarity to the new and upgraded services recently introduced by the main EMS suppliers and dodgy expense claims become increasingly difficult to hide. The harder climate has also spawned a tougher attitude towards implementation of EMS.
"In the past, it was done to improve employees' work life," says general manager and senior vice president European operations for Concur, Barry Padgett. "Now it is driven from CFO [chief financial officer] level and is analytical. Companies are looking at who spends what, where, when, why and how; and at control, compliance, trying to prevent fraud, reducing costs and making sure preferred players are delivering the rates negotiated. The buying decision is made purely around reducing operating costs - and according to The Gartner Group, a five per cent reduction in operating costs can have the same impact as a 30 per cent increase in sales."
Padgett has also seen greater interest from small and medium enterprises (SMEs). "We would not have thought they would be first to implement one of these systems but they are probably one of the sectors that stands to gain most," he says.
Expense management software firm Spendvision makes major changes to its platform every six weeks and recent enhancements include language packs in Brazilian Portuguese and South American Spanish, an additional compliance measure that allows companies to alert employees and managers to which rules were broken and how each breached rule has contributed to an overall demerit score, inclusion of source currency in reports, and updates to payment management tools, including a facility to manage individual card limits.
The outstanding area that has remained manual has been multi-leg trips, where the complexity of fares has meant speaking to a TMC. No longer, however. Travel and expense (T&E) management company KDS has launched KDS Total Travel, an online module that allows users to make more complex requests online. These are routed to an agent, who proposes options within the online tool. By routing all bookings through KDS Corporate, policy is enforced, costs monitored and data capture completed.
Another new tool, KDS Invoice Reconciliation, automates cost allocation and reconciliation for imported supplier invoices. These can be viewed and matched against existing trip data, obviating the need to cross check each line item manually
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And finally, now that CSR has reached the board agenda and we all prefer to do business with companies with at least a vestige of a social conscience, KDS leads the way by adopting a refugee duck from the infamous duck island, as the mascot for its expenses awareness-raising campaign. As CEO Yves Weisselberger puts it: "When it comes to poor expense management, surely an oeuf is an oeuf."
Customer ratings
However, no number of new or enhanced services are of any use if customers are not satisfied - and it seems they are. Energy expert Areva looked for a way to manage the 200,000 trips its staff made in France, within Europe and internationally, while improving internal controls. An international call for tenders resulted in the deployment of ETAP's system, Ulysse. "Ulysse T&E met our specifications very well, all the teams involved were convinced: accountants, IT specialists, buyers and human resources," says Anne Vilain from the Areva financial department for cross-company projects. The teams particularly appreciated the user-friendliness and ergonomics of the tool.
Areva worked on the definition of the core model to ensure standardisation across the group and in October 2007, the system went live for 800 staff at HQ. "The approval timescales are considerably shorter and all the travel orders received by the agency are signed electronically. No more fax or phone orders," says manager of the tool's roll-out at Areva, Jean-Luc Martel.
As a result, Areva plans to introduce the tool into all its subsidiaries to manage a total of 250,000 trips per year. "We also plan to capitalise on the opening of Ulysse T&E to use online booking solutions," he says.
Some firms' unmanaged domestic travel is reason enough to take on an EMS, as law firm Weightmans discovered when it looked at the volumes of travel generated by 800 staff moving between offices in Birmingham, Leicester, Liverpool, London and Manchester. "Our spend on travel was going up and up but we had no method of capturing bookings data to allow us to ask suppliers for better deals," says Weightmans' financial controller, Greg McCusker. Similarly, there was no way of seeing what staff was spending on tickets.
Expenses were done on paper and were then inputted by the accounts team, a laborious process that was also at risk of being inaccurate. "We are trying to make our internal processes look and feel more modern and that is also the image we want to portray to our clients," says McCusker.
Weightmans approached a number of suppliers and chose Spendvision because of its relationship with Barclaycard. A select few staff were given a card in November and the system was tested and tweaked for two months, before going live with equity partners on January 1. "By the end of August we will have 200 cards in operation," says McCusker. "Individuals spend on their card and within a couple of days, they receive an email telling them they have incurred this cost and to action it." Previously, some partners were doing their expenses only once a year - a nightmare for forecasting expenses and controlling cash flow.
Barclaycard statements are sent to Weightmans, which pays them by standing order and chases those who are behind with their expense claims. "So we can now see who is spending what and where," says McCusker, who is happy with the service he is getting. "Spendvision appears to be very professional and also calls us to suggest potential solutions to problems we have not even thought about yet.
"We are getting good data out of it and are saving a lot of manual keying in time - at least a couple of days a month - and those staff now have time to work on better MI production, which will help us make better decisions on what we are spending."
Boston Scientific is one of the world's largest medical device companies with 25,000 employees and a marketing and sales force in more than 45 countries. In 2007, for example, its 1,200 travellers clocked up US$30m T&E spend, processed in an aggregate 13,500 reports a year. "The one thing lacking has always been IT infrastructure to generate productivity for the back office," says the company's financial director, Volker Spichal.
He approached a number of EMS providers and chose KDS because "none of the other players provided a pan-European service - or could prove it", he says. Boston Scientific now uses KDS SBT and EMS across 23 European countries. The soft savings were phenomenal: 50 per cent savings in employee time, 60 per cent reduction of processing costs and 50 per cent time savings in trip booking, and Spichal says this time was redeployed in sales analysis, selling or investment decisions. And clearer patterns of spending reaped speedy rewards. "We got good vendor discounts, saving 2.5 per cent on the yearly US$30m." Agency fees were also reduced because Boston Scientific has moved from full service to touchless transactions for point to point and, regarding the rest, "there is a module where we can do it online and in principle, that will be the solution," says Spichal, referring to KDS's new Total Travel service.
Spichal also introduced a more restrictive T&E policy. "We are auditing every single employee receipt. By the end of 2008, we had the entire concept of end-to-end travel and the internal compliance factor is quite strict: if people choose to go outside policy, the request is flagged and they require three levels of approval."
And he changed the company's card policy from lodge card to American Express for each of 1,133 cardholders, with Carlson Wagonlit Travel (CWT) as the incumbent agent. "Cardholders have to claim the full cost of the trip and it makes them accountable. They are reimbursed well ahead of the American Express statement," says Spichal. He is now working closely with KDS to have the percentage of compliance included in reporting.
"We spent three months defining what we wanted from CWT and KDS and we presented all the information surrounding our requirements to all countries in the same format," says Spichal. In other words, defining your requirements and communicating those clearly is crucial.
VAT recovery
An estimated €5 billion-worth of VAT goes unrecovered each year according to international financial advisory service, the Lowendal Group. But if it sounds as though companies are lax in their attitudes to tax reclaim, where local tax recovery is relatively simple, once you get outside your own turf, the tax scene is a Pandora's box of complexity.
"Identifying which taxes are recoverable is not easy. You cannot just take the letter of the directive and automate it, because you have to take into consideration application of the policy in each country and their interpretation of the rules - but we can add an extra layer of expertise to the whole process," says group marketing manager of Meridian Global Services, Derek O'Brien.
"There is one set of rules in France, another in Germany. Then there's Norway, Switzerland and so on. It is not companies' core competency and, therefore, not something they want to be bothered with," he says. "Even with our success in claiming VAT - up to €300m a year - we still manage only the tip of the iceberg.
"The first thing to remember, whether it is local or foreign tax, is a reclaim has to be supported by a hard copy of the invoice and that has to be addressed to the business, not the individual," he says. So if you book a hotel in your name, the tax invoice may also be in your name, possibly rendering the statement ineligible for reclaim purposes.
"We will take out the back office or finance audit and VAT, so that receipts don't come into the client company at all - they come to us and this can be integrated with a self-booking tool and expense management," he says. To this end, Meridian is launching an expense management tool - Expenseflo.
"We apply company policy and we archive paper and extract the potential for local or foreign VAT recovery, feeding the local tax to the client's ERP and taking on foreign VAT to conclude the refund," says O'Brien.
Concur has also recognised the connection between expense management and VAT and in May it teamed up with Ireland-based TBI to facilitate VAT recovery for clients. Similarly, AirPlus plugs into outside expertise in the form of United Cash Back.
ETAP's Ulysse T&E will configure expenses according to type and VAT rate and sort those that are VAT recoverable from those that are not. The system also enables management of complex cases such as two VAT rates per expense. ETAP does not carry out VAT reclaim but works with companies that do. KDS will also calculate VAT according to expense type.
Spendvision has partnerships with VAT reclaim companies, including Meridian Global Services. CEO Robert Kirby highlights the maze of VAT rules through the EU alone. "In Italy you can only claim car rentals and trade show attendance; in France, you cannot claim car rentals but you can claim meals, although not the hotel room; in Germany all expenditure is VAT rebateable.
"The tax rebate itself does not equate to tax charged. In France you can claim back 5.5 per cent on hotels, but not the room itself, and 19.6 per cent on meals. In most countries you need to provide a tax invoice in the name of the company making the claim, not the individual traveller." So, it seems, there are considerable savings to be made - and in this respect, a little help can go a long way.