Expense Management: Principles and Practices

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Expense Management:

Principles and Practices

Mary Miklethun

Senior Program Manager,

Travel & Entertainment North America U.S. Bank

Corporate Payment Systems Tammy Wissing

Controller

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Current Expense Management Processes

We use a third-party outsourcing provider

3%

We are fully automated but use disparate systems

3%

We are fully automated and use a single/ integrated system

24%

21%

42%

We are planning to implement an automated system in 6 months

7%

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Challenges

Manual data entry and inefficient processes

Inability to enforce corporate travel policies

Lack of visibility into spending

Increase in overall T&E expenses

High cost of processing expense reports

Lengthy reimbursement cycles

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Expense Management is Strategic Function

Criticality of Expense Management over the Past 12 Months

Dropped lower in criticality

Moderate criticality

Risen in prominence

Just as critical as other internal functions

Source: Aberdeen, Expense Management for a New Decade, 2011

2%

17%

39% 42%

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Adoption of Expense Automation

0 10 20 30 40 50 60 70 80 2004 2006 2008 2010 Fortune 500 Size

Type of Expense Reporting

Large Market 0 10 20 30 40 50 60 70 2004* 2006 2009 2010

* In 2004 over definition for large and Middle market was different than in this study. In 2004, we defined the large (Middle) Market as competition points with annual sales revenue of $250 million to $1,00 billion

($10 million to $240 million)

Type of Expense Reporting, by Corporations, 2004-2010

Electronic, pre-populated with travel card data Electronic, not pre-populated with travel card data Paper-based Travel card statement in place of expense report Other

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Adoption of Expense Automation

0 10 20 30 40 50 60 70 80 2004 2006 2009 2010 Type of Expense Reporting

Type of Expense Reporting, Government and Not-for-Profit Entities, 2004-2010

Electronic, pre-populated with travel card data Electronic, not pre-populated with travel card data Paper-based Travel card statement in place of expense report Other Middle Market 0 10 20 30 40 50 60 2004* 2006 2009 2010

Government and Not-for-Profit

* In 2004 over definition for large and Middle market was different than in this study. In 2004, we defined the large (Middle) Market as competition points with annual sales revenue of $250 million to $1,00 billion

($10 million to $240 million)

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Benefits of travel expense management

8% 18% 25% 26% 28% 36% 53% 55% 55% 56%

Fewer late payment penalties and interests Ability to negotiate discounts with vendors Better regulatory compliance Increased card usage and rebates Better fraud detection and prevention ability Improved employee satisfaction Quicker reimbursement of employee expenses Better enforcement of travel policies Improved visibility over spend Lower processing cost

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Cost Savings

Type of Company/Level

of Automation Average Processing Cost

Our process is entirely manual $22.15

We have some automation $18.67

We are fully automated $10.68

Breakdown of Processing Costs By Level of Automation

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Efficiency

Electronic Expense Reports,

Pre-Populated with Travel Card Data Paper-Based Expense Reports

35 minutes

76 minutes

Time for traveler/cardholder to fill out an expense report Time for supervisors to review an expense report submitted Time for clerical employees to process and prepare an expense report for payment

Clerical/accounting personnel to reimburse expense report and reconcile payment to bank data

Source: RPMG, 2011 Corporate Travel Card Benchmark Survey Results

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Efficiency (cont’d)

*Based on a fully-loaded cost per hour of $35, representing the average pay rate of the

employee-traveler, supervisor, clerical staff, and accountant involved in the reporting process.

Paper-Based Expense Reports

Electronic Expense Reports, Pre-Populated

with Travel Card Data Cycle Time

Average number of days elapsed

between the date an expense report is submitted and the date

reimbursement is issued

14 days 8 days

Cost and Quality Metrics

Percent of expense reports that are processed without delay or correction

the first time through 69% 78%

Cost to process an expense report * $44 $20

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Administrative Cost Savings from Electronically

Pre-populating Expense Reports with Card Data

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000

Paper-Based Processes Electronic Expense Reporting Pre-Populated with

Travel Card Data

Fortune 500 Size Large Market

0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000

Paper-Based Processes Electronic Expense Reporting Pre-Populated with

Travel Card Data

Hours needed to process expense reports* Cost to process expense reports#

Cost to process expense reports as a percent of travel budget

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Administrative Cost Savings from Electronically

Pre-populating Expense Reports with Card Data

0 20,000 40,000 60,000 80,000 100,000 120,000 140,000

Paper-Based Processes Electronic Expense Reporting Pre-Populated with

Travel Card Data

Middle Market Government and Not-for-Profit

0 100,000 200,000 300,000 400,000 500,000 600,000

Paper-Based Processes Electronic Expense Reporting Pre-Populated with

Travel Card Data

Hours needed to process expense reports* Cost to process expense reports#

Cost to process expense reports as a percent of travel budget

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Control & Visibility

Demonstrated Benefits of automating TEM

• Visibility over spend

– Brings attention to trends (increasing travel costs, potential fraud)

– Allows organizations to benchmark against peers – Makes long-range planning easier

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– Prevents non-sanctioned travel spending before it happens

– Can save thousands per year in needless spending

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Use of Commercial Cards

Use card

for T&E expenses

65%

49%

35%

51%

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Employees are encouraged to

use cards, wherever possible, but not required to do so

46%

33%

21%

Commercial Card Policy

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What to Look for in a TEM System

• Pre-population of expense reports with data from

corporate credit card (eliminates need for data entry, reduces errors and fraud)

• Receipt image capture

• Allocation of expenses to appropriate cost centers

• Automated approval workflow

• Email notifications/reminders

• Electronic expense reimbursement

• Reporting on top vendors, compliance with policy,

spending trends

• Ease of implementation

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Commonly Adopted Features

Which of the Following Features of the Automated T&E Solution Do you Currently

Use or are Planning to Use?

Currently Using Planning in 6 Months

Electronic reimbursement of expenses 68% 2% Automated workflow for approval of expenses 63% 5% Integration with AP and financial systems 58% 8% Reporting and analysis capabilities 56% 10% Imaging/faxing of expense receipts 52% 8%

Offline access to expense reports 26% 5% Integration with online booking tools 24% 12%

Pre-trip authorization 23% 3% Ability to use PDAs/mobile phones for approval 17% 17%

Hotel e-folio data integration 16% 11%

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A Little Bit About

Concordia University Nebraska

Lutheran Church-Missouri Synod

Main campus is 25 miles from Lincoln

2200 students from 43 states, several countries Ranked in the top tier of U.S. News and World

Report's Midwest Regional Colleges rankings

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Concordia’s T&E Process Entirely Manual

in 2004

• Budget owners not monitoring spending

• Difficult to enforce our travel policies

• Could take 2-3 weeks to reimburse employee

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Began Seeking Ways to Automate Our

Expense Management Process

Our Criteria:

• Cost Effective

• User Friendly

• Compatible with Banner Software

• Could be used in and out of the United States and

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Began Seeking Ways to Automate Our

Expense Management Process (con’t.)

Our Criteria:

• Capable of creating an expense report from within

the system that was easy to read and understand

• Provide Cost Savings

• Capable of setting individual card limits/

non-sanctioned travel spending

• Automated allocation of expenses to appropriate

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In 2004 We Chose U.S. Bank One Card

• Put Admissions Counselors on first

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2009 – though Happy with One Card We were Still

Looking to Gain More Automation with Our T&E Process • Began moving employees to another card which promised

more automation

• New system not as user friendly as the U.S. Bank system we were used to

• Vendor required us to open a new bank account with vendor • This added more work duties to the Accounts Payable office

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In 2010 We Again Began Looking for a New

Tool to Provide:

• Pre-population of expense reports

• Email notifications/reminders

• Automated approval workflow

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Became Part of Testing Group for New U.S.

Bank Expense Management Tool

Concordia University is now realizing:

• Lower processing costs

• Improved visibility over spending

• Better enforcement of travel policies

• Quicker reimbursement of employee expenses

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Walk through of a T&E Transaction with the

Expense Management System

• Card is ordered for all new employees and set with

individual limits

• Employee uses the card during business travel for all

expenses and also for purchasing supplies for the University

• Cardholder receives an email each night listing any

transactions that are incomplete and need their review

• Once the transaction is complete – approving manager

is sent an email stating transactions are ready for their approval

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Walk through of a T&E Transaction with the

Expense Management System (con’t.)

• At monthly closing period – automatic email lets

cardholders know it is time to print their expense report and attach receipts

• Within 5-7 days from the period closing, accounting

will perform a “Flush”

• Monthly Financials are generated

• Automatic payment for the total monthly spend is

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Comments Received from Cardholders

System is very easy to use I like being able to search through

the available cost accounts Reports are easy to generate

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Comments Received from Cardholders

(con’t.)

I like that we don’t have to wait 15 minutes to print off our expense reports if we make a change to an account or comment. The change is reflected right

away and the report can be generated I love being able to approve right from within the email reminder (Manager)

Foreign currency is easy to match to receipts because the foreign currency amount is also listed

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Comments Received from Cardholders

(con’t.)

I like that the expense reports reflect the cost centers right on the face of the report and within the emails to the

approving manager

I like that we can choose when we “flush” a period. If there is a holiday involved and we want to give the

cardholders an extra day or two to get in the system and complete and approve, we determine the “flush”

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Where Concordia Wants to Go in Future

• Increased Card Usage and Rebates

• Negotiate Discounts with Vendors

• Spend Wizard Module

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What’s Next?

• Mobile expense reporting is

gaining traction

• Benefits include shorter

processing time due to

increased access to approve expense reports

• Potential concern that using

mobile capabilities to approve expense reports will result in more cursory review

• Supplier optimism about mobile

expense management outpaces that of buyers by 15-20%

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Thank You!