Freudenberg Slashes Costs, Time With Concur System

<B> Freudenberg Slashes Costs, Time With Concur System</B>

By Lynn Woods

It used to take 15 accountants at the Bristol, N.H., headquarters of Freudenberg-NOK a full day to process a month's worth of expense reports. With the implementation a year ago of Concur Technologies' Xpense Management Solution (XMS), an automated expense report product that's one of the applications in Concur's EmployeeDesktop business portal, processing of the reports now takes a fraction of the time.

A single accountant now oversees expense reporting for the rubber- and plastic-engineered components manufacturer for the automotive, appliance, and aircraft industries, with annual revenues of $900 million and annual T&E spending of $6.2 million by its 6,000 employees, 500 of them frequent travelers.

This reduced workload, along with savings in overnight mail charges, paper and employees' time in writing up the reports, has resulted in the company getting a 50 percent return on its investment in XMS, which resides on the company's intranet, in the first year. The cost of processing an expense report has been reduced by 65 percent.

"The biggest bang is in accounts payable," said Thom Ingram, Freudenberg-NOK's corporate treasury manager. "Before, our accountants had to rekey the data from reports into the general ledger system," a process that involved trying to decipher the barely legible scribblings of some employees. "Now it probably takes half an hour to process all 500 reports. The XMS program extracts the few relative pieces of data we need for the GL."

The standardization of the expense reporting process is part of a broader company initiative to centralize accounts payable, itself part of the firm's "Get Rid Of Waste Through Team Harmony," an effort to reduce paper processes, redundancies and non value-add activities.

Previously, expense reports were processed separately at each of the company's 21 North American plants, but now all are being sent to the Bristol office. An updated expense report form was kept on the company intranet, but many employees didn't use it, resulting in a hodgepodge of formats that created more work in accounting.

For example, when the mileage rate went down, the new rate was incorporated into the intranet form, but since many employees didn't use the updated form, all reports had to be audited.

"There was no set distribution," Ingram said.

Another problem was the large volume of reports that were being Fedexed to the Bristol office. Because the company processes reports received by a certain day each month, with reimbursement payment deposited directly to employee accounts the following Monday, there was a rush to get reports in before the deadline, Ingram said. Yet another inefficiency was the length of time managers spent reviewing reports and the attached receipts. "We didn't feel they had to check each receipt," but some did, he said.

In early 1998, after Ingram had read articles about companies automating the expense report process and decided it would be a good thing for his company, Freudenberg-NOK sent out an RFP to five vendors, three of which ended up giving demonstrations. It selected Concur's XMS mainly because it was Web-based--"we wanted to avoid loading software on PCs"--and seemed "the furthest along" in terms of Web development. Freudenberg-NOK also liked the product's robustness and was reassured by Concur's extensive client list.

To help with the implementation, Concur assigned a consultant to the Freudenberg-NOK account and sent a team that installed the software over three days. A key to the success of the implementation, said Ingram, was the decision to run a pilot in December and January with 15 travelers out of the company's Plymouth, Mich., office before the company-wide rollout. "They gave us a lot of feedback," he said--resulting in a few tweaks to the product before the official rollout.

For example, in the original format, employees were required to input the code of their department. But because "the typical employee doesn't understand the GL, they were messing up the coding," said Ingram. Subsequently, "we took away that functionality. If they need to bill a different department or plant from the one they normally use, they send an e-mail to the accounting person"--an acceptable solution, given that such instances are fairly rare.

Another change Freudenberg-NOK made to the product was a "Flex Drive" feature that provides a lower mileage rate to employees using their own car for travel (they receive a monthly stipend to help pay for the cost). And it added an "education" category, which wasn't part of the standard package. For the most part, however, the company went for the mid-market, out-of-the-box package. "The product can be highly customized, but for us, as a midsize company, we didn't want to spend huge dollars on customization."

XMS was rolled out to travelers between February and May. To help address any initial resistance, Freudenberg-NOK assigned a corporate trainer, who had participated in the pilot, to travel to each plant and hold one-hour training sessions over the course of several days.

All employees were required to attend one of the sessions. The trainer explained why the company was implementing XMS and how it would benefit employees. She demonstrated such time-saving features as the "smart list," in which the last preference, be it a meal or airline, automatically appears. A Concur demo also was posted on the company intranet.

In the course of implementing XMS, Freudenberg-NOK streamlined other aspects of the expense report process. All receipts for amounts over $25 are accompanied by a receipts report printed with an identifying barcode designed to be displayed, along with the employee name and work location, in the window of a special yellow envelope. The barcodes are scanned by the expenses-payable person before being sent to accounts payable, a procedure that represents a time savings over the old process of opening each envelope.

To ensure that employees send in receipts, the company implemented a policy that no one gets reimbursed the following month until the receipts are received. One manager must approve the report, which is tracked by a series of e-mails: An e-mail is generated to the manager upon submission, another one is sent to the employee upon approval, another generated when processed and a final e-mail is sent upon payment.

The XMS system automatically flags expenses out of policy--for example, a meal charge that exceeds the $35 daily limit. The accounting department audits a certain percentage of reports and sends a message to the employee for each audit indicating whether it was "clean" or not. The new procedure has worked well and has introduced consistency to a formerly haphazard process: In the past, some managers required all reports for their department to be audited, while others were more lenient.

Detailed reports that can be run off the database also allow the travel management and finance departments to pinpoint the company's spend by travel segment, location, time period and other criteria--information that ultimately will help the firm negotiate more effectively with its preferred air and car rental vendors. Since the reporting function has been live only since May, it's still too early to get exact figures, said Ingram.

Department heads also can run reports to get a handle on their employees' travel expenses, a feature they particularly value. "Before, we could run reports in accounting, but we didn't have the level of detail," Ingram said. "But now we can see how many people used our preferred car rental vendor"--information that will enable them to get a handle on compliance, also leading to savings.

Using an intranet-based product--employees access XMS by clicking on a link on the company site--has other benefits. For example, when Freudenberg recently implemented its first upgrade of the product, the process took half an hour, and the upgraded version instantly was available to the entire company. "Having an expense reporting system run on the Web means that maintenance is a lot easier," said Ingram.

On the drawing board for next year is prepopulation of the reports with expense data from American Express, the company's corporate card vendor. Ingram said senior management wanted to "get comfortable with the controls in the new system" before making further changes. The company also looked at Concur's human resource and procurement automated products, he said, but it hasn't yet made a decision.

Other companies that have signed on for Concur's EmployeeDesktop are TransAmerica Corp., a financial services company based in San Francisco and a subsidiary of AEGON N.V., and Solvay Pharmaceuticals, a subsidiary of Solvay America Inc., based in Marietta, Ga.

Like Freudenberg, TransAmerica, which has 8,000 employees, expects to save time and money on deployment, as well as maintainence of its expense reporting system by replacing a manual process with the new intranet-based product. Reports will be prepopulated with data from American Express, the supplier of corporate cards.

Solvay Pharmaceuticals recently completed deployment of its T&E expense management solution for 1,100 employees, a process that took only four months. American Express, the provider of the corporate card, is populating reports with expense data.

Solvay sees the benefits of Employee-Desktop as threefold: it eliminates the need to rekey expense data into the company's back-end SAP financial system; it allows the company to audit reports by exception (before, all reports were audited); and it will enable the firm to get reports on spending trends, which in turn will help it get better deals in its negotations with suppliers.