Accounting Reengineering Prompts Turn To Tech

<B> Accounting Reengineering Prompts Turn To Tech</B>

By Mary Ann McNulty

<i>Columbus, 0hio</i> - Over the next few months, American Electric Power will begin a simultaneous rollout of a corporate card and automated expense reporting software that it hopes will help control its travel spend.

The launch of both programs come at the end of a comprehensive reengineering of AEP's accounting function that has included the consolidation of five accounting centers, a move to PeopleSoft's financial offering and the conversion from a mainframe to a client-server platform.

Along the way, AEP also has designated a new travel agency and mandated its use, Steve Quincel, AEP's Service Corp. system accounting application administrator, told fellow financial executives at a recent forum sponsored by GE Capital Corporate Card and Necho Systems in Chicago.

Like many companies, AEP grew tremendously in the past decade through acquisitions and joint ventures. Once a regional generator of electric power lines in seven Midwestern states, AEP today has operations in--and travels to--Australia, Canada, China and the United Kingdom.

It knows the aquisitions helped push its travel spend up by more than $8 million, but no one is really sure how much the company is spending on T&E today. Only three units are using its former corporate card program, and until recently, employees used various travel agencies. There are few travel management reports and even fewer negotiated rates.

Reengineering began in earnest at AEP in 1996, after executives decided to migrate to a client-server computing platform and use PeopleSoft financials. As the company plotted strategies for change, its controller suggested the reengineering team look for ways to improve the expense reimbursement process. At the time, the company was using expense report forms that had to be completed, added and cross-tabbed manually. On average, it took employees 20 minutes to complete, and managers five minutes to approve, each form. In addition, "there was a minimum of three reviews of the expense report before it was finalized," Quincel said.

Expense reports are routed through inter-office mail, with the cycle time tracked at nine days. Beyond that, the average daily balance on cash advances and petty cash totals $900,000, as many employees take out a couple of hundred dollars before every trip. Through the reengineering, the accounting team found more than 130 separate petty cash funds.

Said Quincel, "We thought we could better use our money."

The team documented the problems with the existing system and drafted a list of changes and requirements. To make the process easier for employees, AEP negotiated an individually billed, centrally paid option with its corporate card provider. It also needed expense reporting software that could take feeds from the card provider to prepopulate expense reports. In addition, it wanted to eliminate the interoffice routing of all expense reports and reduce paper storage as much as possible.

For the latter, the company is following the Internal Revenue Service's requirements to retain receipts only for charges of $75 or more. It expects GE Capital to provide Necho with electronic expense records whenever possible. For all other receipts, it has implemented an imaging system. Employees will record the expense report number generated by the software, tape receipts to a piece of paper and fax them to a dedicated number, where they will be stored electronically.

As for requirements, AEP determined that decisions regarding its travel agency, corporate card and expense reporting system had to be independent to allow it the flexibility to change vendors as needed, though all systems had to be compatible with the new accounting system. Installations had to be easy and affordable across platforms through its intranet. It also needed vendors willing to conduct pilot tests.

For the card, AEP executives also determined that it had to choose either a MasterCard or Visa platform, as many of its Midwestern travel destinations accept only those brands.

In preparing requests for proposals, AEP also wanted vendors with international experience, and ones that could accommodate value-added tax reclaims and provide references willing to entertain a visit by AEP. For a little extra excitement, the controller also told the team "don't spend your career chasing the next greatest software. Decide from what's in the market today," Quincel said.

After a comprehensive overview of the market, AEP selected the GE Capital Corporate MasterCard and Necho System's NavigatER expense automation. Both will be rolled out to 4,000 users in at least three countries beginning this summer.

To garner management buy-in, the team identified the controller as its champion, since he had the most to gain from the changes. Documenting the financial and customer satisfaction benefits that the combination of a card and automated expense system could bring, the team easily gained approval for the investment. As the company isn't really sure how much it's currently spending on travel, savings estimates are hard to project. However, Quincel said, AEP should be able to negotiate rates later this year and plans to redeploy the accounts payable clerks who currently process its 100,000 annual expense reports.

Employees appear to welcome the technology advances. As it prepared to migrate to PeopleSoft in January, AEP determined that it needed to change its expense report form to ease the data entry process. Unable to implement Necho's system that fast, the department quickly created a new spreadsheet template, distributed it on the network and printed up new forms for those who either didn't have a computer or preferred not to use one.

"AP is seeing virtually none of those forms," Quincel said. Almost all employees instead are completing the spreadsheets and printing them for submission.

About 130 employees have been testing the corporate card and its ATM cash advance functionality over the past few months. Increasingly, they are finding that they don't need as much cash and are using the card for more expenses on the road.

As part of the reengineering, Quincel's team held focus groups with frequent travelers. Here, they learned that some managers were instructing employees to file expense reports only once a quarter to reduce their workload. "We had no idea managers were telling their travelers that," he said.

Another unexpected benefit of the reengineering has emerged during the pilot. The accounting department is garnering much more information from travelers about their expenses, as travelers are more inclined to type in information on spreadsheets. The old forms had little room for writing in detailed notes.