U.S.-based companies, although still largely reliant on in-house systems for expense management, increasingly are turning away from their homegrown systems in favor of automated, vendor-purchased solutions. While expense solutions in many companies remain tied to other internal software systems, such as SAP and other enterprise resource providers, technological advances in online expense tools have driven down costs and facilitated compliance with Sarbanes-Oxley reporting requirements.
Buyers from companies that have adopted automated systems, including BDO Seidman, Logitech, International Sematech and Sybase, recently cited increased efficiencies. Even so, companies employing online tools remain in the minority. According to practices reported by 221 expense managers for Business Travel News' third annual Expense/Payment Manager Survey, little more than one-quarter of respondents said they were using a vendor-purchased solution to handle their expenses. The dominance of homegrown systems has eroded significantly since BTN began the survey in 2004, when 82.5 percent of respondents were using in-house solutions, compared with the 17.5 percent using vendor-purchased tools.
These survey results mirror the trend reported by leading expense management solution providers. Redmond, Wash.-based Concur Technologies has seen a surge in customer growth, from 500 new customers in 2004 to 900 new customers in 2005 and 1,600 new customers in 2006, said CEO Steve Singh. Eden Prairie, Minn.-based Gelco Expense Management, meanwhile, claimed 30 percent year-over-year growth in customers in recent years, and Toronto-based Necho, a division of Parsippany, N.J.-based software company CyberShift, cited similar results. All suppliers said this growth has occurred across the spectrum of company size.
"This is a phenomenon we have seen take place over the last three-plus years," said Troy Thibodeau, Gelco's vice president of marketing. "More companies, as they look at the next evolution of their own expense program, are saying, 'I'm not going to try to do this on my own.' "
Automating expense reporting often is regarded as a best practice, as it can considerably cut costs and time associated with filing and processing. In recent years, these capabilities became more feasible for small and midmarket businesses, which comprised a majority of the survey's respondents. Rather than paying large upfront licenses for the systems, businesses now more commonly pay by transaction, and implementation time has diminished from a matter of months to a matter of weeks, said Craig Fearon, senior product director at Necho.
"It's brought a capital expenditure down to an operating expenditure," Fearon said. "It's now much more affordable for a company to license such a software."
Automation, however, eludes that majority of companies still using in-house methods. Of those surveyed that use such a method, nearly 80 percent are using paper-based expense reports or spreadsheets.
The numbers should not be surprising, said Bob Langsfeld, a consultant with the Incline Village, Nev.-based Corporate Solutions Group. Many companies have been slow to change because expense reporting is not high-profile, he said. While a travel manager might understand the benefits to automation, the associated savings does not always offset the cost of implementation, in the view of upper management.
"A lot of companies are still living with what they have and/or are using their enterprise resource planning solutions," Langsfeld said. "As a general trend, there are more opportunities out there than before, but it tends to be that the decision makers for expense reporting are still located in the finance area and not the travel area."
Only about 4 percent of respondents in BTN's survey said the travel manager wielded the ultimate responsibility in selecting an expense management system. More often, that decision fell to the CEO, president or COO, the case for almost 31 percent of respondents, or the CFO or an owner, each of which were the case for about 20 percent of respondents.
It was the CFO's decision when computer peripheral device producer Logitech in recent years made the switch from an Excel-based expense reporting system to the automated Oracle I-Expense for its 1,500 users, said travel manager Ralph Randle. The CFO was involved throughout the decision-making process but did not require much persuasion, he said. Oracle already was Logitech's ERP.
"The CFO knew this was the right decision in the long term, and this was something that we definitely needed to do," Randle said. "We went through an extensive look at systems out there, and at the end of the day, we chose Oracle. It was the path of least resistance."
Regardless of the final decision maker, however, companies that have made the transition to an automated expense solution said success depends on getting people from all levels involved in the decision. Beginning in 2004, Austin, Texas-based International Sematech began an overhaul of travel processes, creating its own homegrown solution using Oracle's PeopleSoft technology, and the policy evolved from a cross-functional team that included corporate travel and meeting services manager Bill Davidson, representatives from finance and end users.
Chicago-based BDO Seidman director of procurement and travel management Cynthia Gillen this summer said at the National Business Travel Association convention in Chicago that her company's team included representatives from accounts payable, human resources, travel, technology, legal and end-users, as it switched from an Excel to a Concur solution about six years ago.
Dublin, Calif.-based database firm Sybase, which has about $9 million in annual air spend, was one of the early adopters as far as automated expense reporting solutions in the midmarket, said Patricia Carlin, the company's manager for purchasing and global card and travel programs. Sybase has used Extensity's solution, and she said it has worked well for the company. Logitech's Randle said efficiency improvements also accompanied his company's switch.
"It was challenging, because people love their little homegrown system," he said. "It did cut down the reimbursement cycle time quite a bit. It was close to 10 to 14 days, and automation definitely decreased that cycle time down to less than a week."
Even as more companies move toward automation, however, survey respondents indicated that companies still are slow to integrate their expense reporting solutions with other company functions, another best practice recommendation. While about 79 percent of those surveyed indicated that their expense system was integrated with payroll and accounts payable, integration lagged in other areas. The second-strongest area of integration was with the corporate payment system, at about 35 percent.
Logitech employees still are required to enter their own data into expense reports, Randle said, although the company is looking at integrating corporate card charges into the system.
Those companies using homegrown expense systems have a more difficult time integrating their corporate cards, if they even have one in place. BTN's survey shows that corporate cards are used for a mean of 30 percent of travel and entertainment expenses, and more than half in the small market said no expenses were paid for with corporate cards. That, however, is a marked increase from 2005, when cards were used for an average of only 18 percent of T&E expenses. With that in mind, suppliers said it's rare for companies moving to automation not to integrate the corporate card.
"Every deal that we do today, with a couple of minor exceptions, clients have integrated their corporate card program," Necho's Fearon said. "It's very easy to incorporate a corporate card."
Sematech's Davidson was able to achieve additional integration with the ERP system, which only 11 percent of respondents had done. By doing so, he said his company was able to eliminate the cumbersome paper approval process that had been in place.
"There were cost and time savings because it flattened all the approval processes and made the expense report automatically provided,"according to Davidson. "You don't have to chase redundant signatures."
Seidman's Gillen said her firm also is working on ERP integration to have all elements of data consolidated into one database.
Integration with an online booking tool also was low, a practice adopted by only about 13 percent of those surveyed. There still is some disagreement among industry watchers on the importance of such integration.
Some expense suppliers are actively promoting booking and expense integration. Paris-based technology company KDS this month launched a product it claimed would offer a seamless data flow through pre-trip approval, booking and expense reporting
(BTNOnline, Oct. 4). Concur recently has put on the market its expense solution integrated with the Cliqbook booking tool it acquired earlier this year.
Concur's Singh said the integration helps both the company in monitoring data and the traveler in filling out the expense report. In addition, it will drive up use of booking tools, he said. "Adoption rates are low. A rate of 25 percent is not atypical," Singh said. "Customers with both are finding that adoption rates are moving up substantially."
Since the integration, some large companies that use Concur's expense solution, including DuPont and Wachovia, have decided to use the Cliqbook tool, Concur's Singh said.
Sematech's Davidson said his company's next step might include integration with an online booking tool as well.
"We have looked at it, and we have talked to a couple of tool providers," he said. "That would be the true end-to-end system, and that's intriguing for me."
Other major companies, including Xerox and PNC Financial Services Group, have integrated expense and booking into an end-to-end solution. Corporate Solutions Group's Langsfeld said the ability for other companies to join that club continually is increasing.
"It's still the holy grail," Langsfeld said, "but we're moving along well."