Amex: Europe Embraces Tech
Large European companies have reduced indirect processing costs as a percentage of their total travel and entertainment costs to 4.6 percent, according to the European Expense Management Study 2008 by American Express and A.T. Kearney, down from 5.6 percent in 2003, the last time this research was published, and 7.8 percent in 1996.
The detailed study of 66 companies reports that expense claim processing accounts for 52 percent of indirect costs. Trip planning, including making trip requests, is responsible for a further 23 percent. Fees from travel management companies and other intermediaries are not included in the calculations.
"TMC fees are like any other supplier costs in that they can be negotiated down," said Karen Penney, Europe, Middle East and Africa vice president of business solutions for Amex's commercial card division. "For internal travel management processes, you have to make internal changes to take out costs."
Fifty-two percent of respondents have introduced automation, with the number adopting online booking tools rising from 32 percent in 2003 to 59 percent. Examples it gives include an average cost of $9.12 for manual trip requests against an average of $6.15 for those that are fully automated, while the cost for the best performer was only $2.38. Similarly, non-automated central billing costs are $2.55 per transaction, whereas fully automated central billing is 54 cents per transaction.
The study reports that 59 percent of respondents have a shared service center for some or all of their expense processing activities. It claims that using a shared service center for back-office processing reduces the cost for handling a claim from $11.64 to $3.68. A further 45 percent outsource some of these activities to third parties. For example, 14 percent are using third parties to handle reclamation of value-added tax incurred overseas.
Almost one-quarter—23 percent—are having some of their processes, such as auditing expense claims, handled offshore in low-cost countries. According to Penney, experiences have been mixed. "Some have brought these tasks back in-house," she said.
There is evidence that European businesses are embracing what is generally considered to be good practice with more enthusiasm than in the past. For example, the number of respondents that audit all expense claims has fallen from 64 percent to 39 percent, with the majority sampling between 5 and 10 percent of submissions.
However, they continue to struggle in other areas, one of the most notable being eliminating the use of corporate payment cards for personal expenditure. Although 74 percent forbid this in their travel policy, many respondents admit they are finding it difficult to enforce. In the worst cases, up to 65 percent of spend through corporate cards is for personal reasons, with the integrity of data being severely compromised
Overall, however, Penney said European companies are making good progress but need to bring it to the next level. Amex believes companies that introduce a range of best practices can reduce indirect costs by 2.1 percent of their total travel bill.
"A lot of the low-hanging fruit has been taken," she said. "Companies now need to work with specialists on alternative models like automation and outsourcing if they want to make additional savings."