Automation and standardization of travel booking and expense processing have helped slash the indirect costs of managing travel by 42 percent during the past decade--to 4.6 percent of the travel and expense tab, down from 5.6 percent in 2003 and 8 percent in 1997--according to a recently released performance and best practices study of 66 European-based companies conducted by American Express and A.T. Kearney. The study also found opportunities to halve those indirect costs.
Adoption of T&E management best practices could help an average company reduce indirect costs to 2.1 percent of T&E spending and thus save $38.66 (€25) on every $1,546 (€1,000) of T&E spending, "a 54 percent reduction in indirect costs," according to the European Expense Management Study 2008. Indirect costs were found to be as low as 1 percent of total T&E, and as high as 34 percent.
While the survey focused only on European multinationals or large companies, American Express Business Travel advisory services vice president of consulting Frank Schnur said the findings are "less about geography and more about" savings afforded by automation. "Savings opportunities on administrative-related costs are greater for companies that embrace automated expense solutions. In the U.S., more companies have implemented such solutions, which streamline the reimbursement process and can dramatically reduce the associated administrative costs. The acceptance of these solutions has not been as fast or widespread in Europe."
Indirect costs were comprised of six core functions: expense claims representing 52 percent of the total indirect T&E costs, trip planning (23 percent), trip booking (17 percent), IT costs (6 percent), cash advances (2 percent) and central billing costs (1 percent).
"Companies that migrate from average performance to best performance can reduce costs by between 47 percent and 87 percent within an individual T&E process," the study found. "Whilst the biggest percentage savings is in central billing (87 percent), the biggest savings in real terms can be achieved by tackling indirect costs in expense claims processing, which represents more than half of overall process costs."
"The hidden nature of administrative travel costs--the indirect expense a company incurs every time an employee books a trip, receives a cash advance or submits an expense claim--can make cost savings difficult to target," said American Express vice president Karen Penney of the business solutions group for commercial card in Europe, Middle East and Africa.
As they did in 1997 and 2003, Amex and management consulting firm A.T. Kearney asked the largest European companies based in Belgium, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom to complete an online survey of more than 100 questions. The companies were in eight industry sectors, led by manufacturing and financial/professional services. Collectively, those companies booked more than 3 million trips last year, processed more than 3.25 million expense claims and spent more than $4 billion (€2.6 billion) on T&E.
The study found six characteristics of the best-performing companies: clearly defined and frequently communicated travel policy and enforcement processes; maximization of supplier process optimization capabilities; investment in, and high adoption of, automation; centralized back-office activities through a shared services center and/or outsourced non-core activities; focus on user satisfaction and cost reduction; and leverage of management information "to continuously refine and improve processes, optimize spend visibility, control direct spend and use as a basis for supplier negotiation."
The study found that fully automated expense reimbursement processes at "best practice" companies helped to slash the cost per expense claim to $14.34 (€9.28), compared with $21.26 (€13.82) for an average company. Automated processes cost 50 percent less than the $42.98 (€27.81) that non-automated survey respondents paid.
One company studied, Finnish power solutions provider Wärtsilä, reduced its "indirect T&E costs to 40 percent below the European average through standardization and automation," the study stated. "The multiple systems and processes being carried out at Wärtsilä across varying countries were not sustainable," stated Wärtsilä travel program head Ann Cleveland-Oey. The company operates shared service centers in Finland, the Americas and Asia for central billing, expense claims handling and processing and trip booking outside of the online booking tools that travelers access. Spend transparency provided by the single process helped Wärtsilä achieve "58 percent lower spend on air and 40 percent lower spend on hotels compared to the company's baseline at the start of the global initiative," the study reported.
Automated, streamlined, standard processes helped an unnamed Swiss financial services provider lower the cost to plan a trip "15 percent relative to the average European" company and slash its trip booking unit costs 58 percent compared with the average company surveyed, despite the fact that one-quarter of its trips involve three or more legs.
Nearly 60 percent of the companies surveyed use some form of shared services model "for at least one of their T&E management processes," and 45 percent use outsourcing--a model of interest during the next 12 to 18 months for one-quarter of survey participants. Led by half of the U.K.-based companies surveyed, 23 percent of those surveyed use offshore shared services centers or outsourced service providers. "Moving to a shared services center model can provide a 71 percent savings on unit cost by consolidating activities," the study found.
But the study noted that 17 percent of respondents indicated that "they have brought some activities back in-house after outsourcing. The principal reasons for the reversals were disappointment with service levels and revisions to initial cost-benefit analyses, suggesting, in some cases, that it was cheaper to provide some services in-house."
One process new to T&E management since the last study is the calculation of carbon emissions. Twenty percent of companies surveyed "incorporate aspects of sustainability in their travel policy." Of 25 respondents, 38 percent calculate carbon emissions of travel, while 17 percent calculate the carbon footprint. The companies spend about 10.5 hours per month on the activity and 36 percent run the calculations quarterly, while 28 percent do so annually.
The most recent study also found "increased prevalence and impact of automation on T&E management practices" as 59 percent of survey respondents said their companies used automated booking. The new study also found that 47 percent of respondents downloaded corporate card activity directly into expense claim systems, up from 27 percent five years ago. Ninety percent of respondents in 2008 said they used central billing, up from 83 percent in 2003. In the new survey, 41 percent of those respondents said they had integrated central billing with automated expense solutions, up from 19 percent in 2003.