North American companies spend about $205 billion on business travel, but capture only $143 billion of that on corporate cards, according to the 2006 Corporate Travel Card Benchmark Survey by RPMG Research Corp. Formed by professors Richard Palmer of Eastern Illinois University and Mahendra Gupta of Washington University in St. Louis, the research firm surveyed customers of 19 major corporate card issuers, as well as members of the National Business Travel Association and National Association of Purchasing Card Professionals. Based on 1,020 responses, the professors produced a 251-page report that detailed card usage, policies, practices and opportunities to advance card products and programs.
"The typical Fortune500-size company generates savings of over $2 million annually in administrative and travel cost reductions driven by travel card use, before any card issuer financial incentives," the report stated. "Other benefits include employee convenience, enhanced spending, compliance with travel policy, and reduced reimbursement cycle times."
Detailing the $2 million in annual savings that a card program can generate for the average company with $2 billion or more in annual revenues, the authors tabulated savings of more than $1.6 million through leveraging card spending data, $450,000 through improvements in expense report processing efficiencies and $20,000 through the elimination of cash advances. In addition, companies can benefit from reductions in petty cash accounts, fraud avoidance, a 27 percent reduction in reimbursement cycle time and uncalculated savings from conveniences provided to employees, compliance with preferred supplier initiatives and other policies.
The study reported average monthly travel card spending of $1.6 million per organization and $765 per card--representing 70 percent of travel spending--and 4.53 transactions per card.
However, the authors noted "significant variation in travel card statistics across respondents due to differences in their size, industry and organizational type."
For card issuers, the biggest opportunities lie in garnering more business travel volume, which the researchers forecast to grow "12 percent per year over the next five years. This growth reflects the fact that 78 percent of organizations expect travel card spending to increase over the next five years, primarily because of plans to increase the number of cardholders or general expectations of increased travel spending."
But boosting the volume of travel spending on corporate cards also could benefit corporations, the authors suggested, through improved efficiencies, leverage in supplier negotiations and rebates and incentives from card issuers. "About 43 percent of respondents account for only 21 percent of total travel card spending in the sample," they wrote. "If these organizations behaved like the majority of respondents, our estimate of annual travel card spending would increase 23 percent (from $143 billion to $177 billion per year)."
The typical organization provided travel cards to 15 percent of its employee base, down from the 23 percent reported in a similar 2004 study.
What are the keys to a well-managed travel card program? According to the authors, best practices include leadership, policy, technology, use of data, control and program management. "Top management support is sine qua non of a well-functioning travel card program," the report stated. "It is also important that employees understand the benefits it delivers to the organization."
The authors noted that "best practice organizations report on average about 32 percent of employees are given travel cards." Best practitioners are more likely to mandate employee use of the card, and support the card program with a sufficient line of credit, at a median of $10,000, according to the report. Among the largest-volume respondents, 67 percent said their companies mandate travel card use; across the entire survey base, the total was 51 percent.
In their analysis, the authors said best practitioners integrate travel cards with preferred vendor initiatives and technologies that improve the value of the card, such as automated expense reporting solutions. Spend visibility is a "key value addition of travel card programs. ... The same data that helps drive higher vendor discounts can also be used to exert healthy control over the travel spending process and purchase choices."
The 35-page online survey also queried respondents about plans to switch cards and feature improvements on their wish lists. About 16 percent of respondents said they were considering switching vendors, down from 21 percent in 2004. The larger the company, the more likely they were to consider such a move, with the most commonly cited reason being "the desire for better service and support, better reporting capabilities and higher rebates/incentives."
Analyzing expectations and priorities for such elements as data integrity, readability of reports, overall reporting, service and support, the authors found that those organizations considering a switch to different card issuers "expect too much from their card issuer and too little of their own program," and "report high dissatisfaction with the current capabilities of their card issuer's technology." However, this creates a "catch-22" for the issuer to fund enhancements when so much of the revenue stream is required for rebates.