Receipt Imaging Becomes Expense Mgmt. Standard

A majority of companies implementing automated expense reporting systems are including digital receipt imaging technology, prompted by the potential to streamline spend management processes and make them as paperless as possible, maximize savings and increase auditing effectiveness in the wake of the 2002 Sarbanes-Oxley Act.

Meanwhile, other businesses that previously adopted electronic reporting systems but retained old methods of manually collecting, checking and archiving travel receipts are integrating imaging technology into their systems at an increasing rate.

"More and more companies, as they roll out expense management automation, include receipt imaging from the outset," said analyst Christa Degnan, research director for Boston-based Aberdeen Group. "Those who implemented automation early, before imaging was really mature, are adding it."

David Kaufman, partner in New York-based Acquis Consulting Group, agreed. "There has been more of a focus on receipt imaging," he said. "Because of Sarbanes-Oxley, people are re-examining their processes and trying to fit imaging in as an added control."

Such vendors that offer receipt imaging with expense reporting management solutions as Necho Systems, Gelco Information Network and Concur Technologies agreed that demand for receipt imaging is on the rise.

"Demand has exceeded our expectations," said Chris Juneau, senior director of product management for Concur. "We're tracking to capture approximately two million receipt reports annually and it's growing 100 percent per month in terms of volume. We have over 350-plus customers using our imaging service."

"We've seen over 60 percent growth in adoption of imaging systems integrated with expense reporting in the last 12 months," said Jeff Cronin, vice president of solutions marketing for Gelco, which has offered imaging since 1998. "We saw a pretty steady double-digit growth rate previously, but it has really picked up."

Cronin said 40 percent of all Gelco's customers are using receipt imaging in one form or another and that percentage keeps growing.

A few years ago, "receipt imaging was relatively new and people were comparing the cost of imaging to their own in-house receipt applications," said Craig Fearon, senior director of product marketing for Necho. "Pricing has gone down significantly. It's very cost-effective now for clients. Imaging now is part of the standard package."

"We've seen at least a 30 percent jump in companies interested in receipt imaging in the last year," added Lori Fairbrother, Necho's vice president of marketing.

While receipt imaging technology has not changed much in the past year or so, "what has changed is the acceptance of it as the best practice. It's all about driving costs out and capturing savings through audit and other controls," Fairbrother said. "Because of Sarbanes-Oxley, people are looking at it as a way to more accurately review their expense reporting process."

The receipt imaging services offered by Necho, Gelco and Concur, like those offered by other vendors, are similar in that users file expense reports electronically and then submit their receipts, for the most part, by faxing them to a dedicated telephone number accompanied by a cover sheet featuring a special bar code. "Within two to three minutes, those receipts are then linked back to that specific expense report via the bar code," Necho's Fearon explained.

Each expense report and all receipt images associated with it are then stored in a database on a secure server maintained by the vendor or, in a small number of cases, the company itself.

"I still get receipts that show my credit card number, which is a scary thing," Concur's Juneau said. "We made the decision to build our own imaging technology and host it ourselves because if a CEO's receipts are being imaged, the last thing you want is there to be any chance of that information being exposed."

Degnan agreed that access to the data is strictly controlled. "You have more risk dropping a receipt in a taxicab than you would from an online imaged receipt," she said.

While receipt imaging by fax is the most widely used method, Gelco also offers "verified original documentation integrated with expense reporting," Cronin said. "Documents actually come into Gelco and we scan them ourselves. You get a high-quality Tif image and a PDF back. We've seen an even higher growth rate in our verified document imaging than we've seen in the fax imaging service."

By adopting a fax-based receipt imaging solution, Juneau said, a company can reduce its costs as there is no need to pay for a warehouse facility to house boxes and boxes of paper records.

Airbus North America has been using Concur for expense reporting and receipt imaging since January 2004, said Bob Wentworth, director of financial systems and reporting. Archival savings, ease of access for audits and compliance with internal financial controls were among the reasons Airbus made the move to automated expense management, he said.

"By our own analysis, we assume the savings on average is $5 per expense report," Juneau said. "Some customers say its $18 to $20 per expense report. The reason is high real estate costs. One customer kept their records in their offices in a large city in California. Their real estate cost was $3,000 to $5,000 per square foot. Keeping receipts in their office was taking up valuable real estate."

Gelco's Cronin estimated that receipt imaging saves companies a minimum of $2 per report, but that figure could be higher. "The life-cycle of an expense report doesn't end when it gets put into the system or filed," he said. "You start to look at $10 to $15 per report when you look at the full life-cycle. If you get hit with a seven-year audit by the IRS, you'll be able to pull the electronic images instantly as opposed to bringing in file boxes from your storage facility and going through all that paperwork."

Fearon, from Necho, said savings of up to $15 or more per report are realistic "as time wears on, especially for an audit four or five years down the road and a company is doing significant volume. Some of our client warehouses have records from 2002 buried in the far corner in the back. To pull one receipt pile is a fairly significant task."

Degnan agreed those cost-savings estimates are within reason. "While it's hard to calculate what every individual employee's time is worth, if you take the thousands of reports that accounts payable personnel were doing each week and their labor costs and then you take that job away from them—that's where the cost savings come from."

Companies of all sizes can benefit from receipt imaging, Cronin said. For smaller businesses, "the value proposition is a little different. They're storing all their paperwork in their office all the time. For them, it's really about making things easier on the one person whose job it is to manage the travel program, manage payroll, etc. It's not so much cost savings as trying to free up what little time they have."

Although there are some concerns that dishonest employees can take advantage of receipt imaging, "the applications themselves have business rules to flag suspicious expenses," analyst Degnan said. "Some of the systems are so sophisticated that they're tracking vendors. If you're constantly eating at the same place, they might flag you and pull the receipts. In many cases, there still are random audits, and, if an employee does not have the original documentation, then they will be caught."

Another advantage of receipt imaging, she said, is that supervisors who previously never saw receipts because the paper slips were sent to accounts payable can view imaged receipts online at the same time they approve expense reports.

Similarly, Necho's Fearon said, "Most companies mandate that their employees personally save their receipts for a period of time. They know receipts could be called in at any time. We have one customer who specifies you must keep receipts on hand for a period of 12 or 18 months. They regularly call the hard copy receipts in for audit, and it's a dismissible offense if receipts are called and not produced."

Some companies require employees to image not only receipts but, in the case of a business meal, also the business cards of the people they entertained, Concur's Juneau said.

Despite the potential advantages of automated expense management with receipt imaging, some companies are hesitant to adopt the technology.

"The whole challenge in expense management automation has been 'If it's not broke, don't fix it.' That's why you haven't seen 100 percent adoption of automation for expense reporting," analyst Degnan explained. "The receipt processes they have in place work and there is quite a bit of change management companies have to do to get into an online system."

It also explains why some companies that a year or two ago adopted an electronic reporting system without imaging support are hesitant to add such service, she said.

"If they have to tell their people to stop sending packets to accounts payable, keep them at your home and fax them in—there's cost to that training and change management. They're saying that it's not worth it right now to take that on," Degnan said.

Analysts and vendors agreed that as corporate purchasing cards become more sophisticated and credit card companies develop methods to provide greater amounts of data, the number of paper receipts needed will decrease.

Nevertheless, "We're never entirely going to be rid of receipts," Fearon said. "There's always going to be paper receipts required for one item or another on an expense report."