Toronto-based expense reporting vendor Necho Systems is touting a new business model that looks beyond travel expense management to encompass the entire realm of employee business expenses. Necho's move underscores the widely held industry philosophy that all employee spending—whether in T&E or other purchasing areas—can be expensed and processed on the back end in the same manner. "Although our roots are in the automation of travel and entertainment expenses, today Necho automates the entire range of employee business expenses," the company said.
Necho is the first expense vendor to overtly state the leap from T&E expense management to all expense management, but expense vendors have been processing all types of indirect expenses for some time.
"When you take a quick look at Concur, Gelco and the like," said Steve Abrams, MasterCard International senior vice president of corporate payment solutions, "they all started out as travel expense management companies, now they're morphing into total expense management software companies."
President of New York-based consultancy Hillman and Associates David Hillman agreed, adding that the approach should continue to grow as purchasing and travel reporting merge. "More and more you're going to see those best of breed expense reporting systems utilizing or incorporating purchasing cards in their process," Hillman said. "That way, you end up with a similar approach to p-card transactions as you do to T&E, and ultimately it's no different. The difference might be the rules, which can be developed to be appropriate to the type of transaction."
When asked if companies should use different procedures for reporting T&E than purchasing card transactions, Hillman said, "they shouldn't at all. They should be exactly the same with one database for all indirect spend that goes through commercial cards."
Concur vice president of product management Fred Ingham said, "the main thing is you don't have multiple systems to your end users. You get all the benefits of control, all the benefits of visibility and reporting, rapid transaction turnaround and policy compliance through one user interface. You don't have to train your users on multiple interfaces. It's not confusing to them. You just load p-card transactions in with travel transactions, and it just become part of the workflow."
The corporate payment equivalent to this approach has been the one card—"a commercial card program that utilizes a single card for each cardholder in the program and allows for payment of all the spending categories typically incorporated in both a corporate card and purchasing card programs," according to a white paper Hillman wrote with consultant David Blanc for the National Association of Purchasing Card Professionals.
One cards have had limited use but have grown in recent years among companies that want one payment mechanism for a variety of expenses
(BTN, Sept. 22, 2003).When American Electric Power's Steve Quincel put in place a one-card program several years ago, he considered how different expenses had been processed and determined the division was not necessary. "We looked at it basically as these are all expenses incurred by employees doing business on behalf of the company, so we've had good buy-in when we approached the subject of having this kind of card, both from the folks in accounting as well as supply chain. It really wasn't too tough a sell."
Yet, the one card is not the only option to consolidate reporting on various types of indirect spend. Even when using separate purchasing and T&E payment products, Hillman said all card expenses could be downloaded and processed through a single expense reporting system. "Concur or Necho or Geac or any of them can have multiple cards downloaded into them," he said. "So you can download a p-card, which is different from the T&E card. They might be issued by different companies, but they end up in that same database."
While Concur Technologies asserts its focus on T&E expense management, Ingham said about 15 percent to 20 percent of its large-market clients use its system to manage purchasing card transactions, which are prepopulated the same as T&E card transactions.
"The purchasing card transactions that come in just like T&E transactions are vendor coded by merchant category codes," he said. "The system can make a guess and say this looks like office supplies, or this looks like it's auto related for fleet expense. The system can do an initial allocation based on the MCC code. Then you rely on the manager or user to confirm that it's the right classification. The system can definitely make that easier."
Ingham said as more companies move to a shared services environment and the management of all indirect purchasing converges, the trend should accelerate.
Suzanne Fletcher, Weyerhaeuser director of travel and meetings, said her company recently restructured to manage such expenses from a central environment. "In the past, the corporate card was managed by the travel department, but paid out of accounts payable. Now we've consolidated. Accounts payable is now called our transaction center, so now travel card, expense statements and p-card are all managed out of the transaction center."
Lumping together different categories of spend has long been a practice—whether intended or not—as corporate T&E cards often have been used for occasional non-T&E expenses. "If you have a T&E card and you have an occasional purchase to make that would typically go on purchasing, people are just putting that on their T&E card and expensing it with the rest of their travel transactions," said U.S. Bank senior vice president of product and marketing Chris Pieroth.
Preliminary results from the 2004 Corporate Travel Card Benchmark Survey
(see story) found that while 73 percent of all spending on corporate travel cards falls into the categories of air, car, hotel and restaurant, 27 percent of expenses don't fall into the traditional T&E categories.
Necho said in the typical organization, non-T&E expenses comprise the bulk of all employee expenses. "Typically, for every $1 a company spends on travel and entertainment, it spends between $2 and $4 on other employee business expenses," according to Necho's annual report.