The most formidable challenge faced by financial executives and travel managers in managing travel and entertainment costs is non-compliance with corporate policies, according to a vendor-sponsored study issued last month by the Aberdeen Group. The researchers provided benchmarks on various travel program processes and identified other top challenges, including access to sufficient and timely T&E data.
Aberdeen concluded that best-in-class programs followed a total cost management framework (analyze, plan, source, buy and monitor) and outperformed the survey base "largely due to the process efficiencies gained through automation." The survey suggested increased automation can improve all aspects of a managed travel program, from booking tools and expense management processes to policy controls and data collection.
Based on responses from 296 companies of all sizes representing various industries, 61 percent of which were based in North America, the study calculated that T&E accounted for "between 8 percent and 10 percent of total operating expenses" or $50,000 to $100 million among the survey base. On average, roughly 20 percent of that spend is generated outside policy (12 percent among best-in-class companies).
"Considering it's an expense that is not core to nearly all companies, ideally this category should be managed extremely efficiently," Aberdeen researcher Vishal Patel stated in the report. "A formal and successful program will allow any savings to directly hit the bottom line, while reducing time spent on making travel arrangements and reporting expenses, so employees can focus on the really important strategic initiatives."
Aberdeen said surveyed executives were "surprised" that their companies' travel policies oftentimes were not viewed as mandatory. "Therefore, being preventative rather than detective in enforcing policy is a critical step forward," according to the study. "Sourcing and negotiating with travel suppliers mean nothing without compliance."
The researchers concluded that noncompliance largely is a function of poor communication, outdated policies and inefficient traveler tools. For example, 30 percent of respondents said they had not updated their T&E policies in at least a year, while 6 percent reported that their companies have no policy. On the flip side, a quarter of responding companies said their policies had been updated in the past six months.
No matter how recently their companies updated policies, 39 percent of respondents said effectively communicating them is "the top strategic action." More than half (56 percent) said policies are communicated via corporate intranet, but the study noted a "fair amount (15 percent)" still relied on printed handbooks or other paper documents.
Meanwhile, more than a quarter of respondents said their companies use "real-time" monitoring of policy violations while 39 percent "have either no visibility into compliance or conduct ad-hoc reporting." Some best-in-class companies go a step further in their monitoring by using systems that help avoid violations before they happen.
Another method to foster policy compliance is to implement automated systems that make travel booking and expense processing easier for employees--with an equally important by-product of lowering costs.
In terms of reservations, those companies using online systems on average incur transaction costs per booking of $14.30, compared with the $28.70 average incurred for each offline transaction. Though online booking tools are used by most best-in-class companies, only 15 percent of the entire survey base said they use systems that are fully automated and common across their enterprises.
"User friendliness" was the most cited "very important capability" of travel planning and booking tools (87 percent), followed by travel policy management (83 percent) and the ability to track compliance to policy (82 percent).
Regarding expense management, Aberdeen researchers said "considerable growth is expected in use of expense management solutions," with 61 percent of respondents using or planning to use third-party systems by 2008. The study suggested those systems are "more easily mandated" than travel booking tools, since travelers may visit consumer Web sites under the often-false assumption that they can save their companies' money.
The study found that those companies using electronic systems on average incur expense processing costs per report of $18.80, compared with the $30 average incurred for each manual report processed. However, only 26 percent reported using systems that are fully automated and common across their enterprises. Best-in-class companies, 80 percent of which process expense reports online, have a reimbursement cycle from the creation of the expense report to payment of less than five days, compared with an average 15-day cycle reported by the survey base.
Similar to perceptions of travel booking tools, "user friendliness" was the most cited (89 percent) "very important capability" of expense management tools, followed by expense reimbursement (83 percent) and integration with financial systems (81 percent).
"There also seems to be an appetite for outsourcing this process because it is a process that is non-core to most, if not all, businesses," the study said, noting that 20 percent of respondents already outsource expense management processing.
Tying these elements together, 19 percent of survey respondents said their companies currently use an end-to-end T&E solution that covers all processes from pre-trip approval to reimbursement and expense auditing. Another 26 percent plan to adopt such solutions by 2008. "Such closed-loop solutions allow organizations to manage corporate travel while ensuring their expense reporting processes are managed efficiently with accuracy and in compliance with corporate and regulatory policies," researchers concluded.
End-to-end solutions also can help companies build a more comprehensive picture of their T&E expenditures. According to survey results, adopting technology to improve visibility into that spend was listed as a top strategic action by 44 percent of respondents. Currently, 79 percent of survey respondents said they use T&E system reports to collect T&E data. More than half also use corporate card data, spend analysis tools and accounts payable reports.
Aberdeen researchers said thorough understanding of T&E spend can improve negotiating positions when contracting with suppliers and uncover other previously unrecorded spend categories. Airport parking expenses, for example, can be "fairly significant," they wrote.
The study's sponsors included Concur Technologies, Expensable, Gelco and Visa International.