Expense Management Trends Annual T&E Outlook and Benchmarks. Expense management insights from leading finance professionals

Transcription

1 2017 Expense Management Trends Annual T&E Outlook and Benchmarks Expense management insights from leading finance professionals

2 3 Executive summary 4 Expense management systems today 6 Reporting features and system integrations 7 Controlling T&E spending and processing costs 8 Best practices to improve policy compliance rates 10 Organizational pressures on T&E expense reporting 12 What to expect when switching systems 15 Expense management trends to watch 17 Conclusion 18 Buyer s Guide Expense Management Trends: Annual T&E Outlook and Benchmarks

3 Executive summary Global Business Travel Association Foundation estimates U.S. companies will spend $293.1 billion on travel and entertainment (T&E) costs in 2017, a projected 3.8% increase over U.S. T&E spending from the previous year. 1 Considering the average American company also budgets between 6 and 12 percent of total annual revenue for T&E expense spending 2, the systems now used to process and manage employee expense reports play an increasingly important role in an organization s financial performance and profitability. Beginning in 2012, the annual Certify Expense Management Trends study has helped finance and accounting leaders identify best practices for T&E reporting and compare their current processes to those of peer companies. For the 2017 report, Certify collected and analyzed responses from more than 600 CFOs, controllers and accounting professionals from outside of its customer base. Presented in this white paper are the overall 2017 survey results, detailed insights about the state of expense management today, and key T&E trends to watch for among small, midsize and enterprise companies. SURVEY DEMOGRAPHICS 612 finance professionals 30% 27% 16% 38% 43% 46% Small business: less than 100 employees Midsized companies: employees Enterprise: employees Director-level or above with expense reporting responsibility (CEO, CFO, etc.) Manager, controller or accountant Other (accounting staff, consultant, administrative, etc.) Expense Management Trends: Annual T&E Outlook and Benchmarks

4 Expense management systems today Companies today employ a range of expense reporting technologies and processes. These span from basic paper-based templates to Excel spreadsheets to cloud-based automation and ERP systems. Each solution offers its own advantages and limitations depending on the scope of an organization s T&E program and expectations for control, reporting visibility and automated functionality. Forty-six percent of companies surveyed for this report are currently using some form of a manual system, down 4 percent from the 2016 report (Figure 1). Looking at the breakdown of system usage by company size, the enterprise leads the trend toward automation with 56 percent using a web-based system, and an additional 24 percent using an ERP system for expense management (Figure 2). Just 24 percent of small businesses today are using a web-based automated system, and at 12 percent, fewer still are using an ERP. What accounts for this wide disparity in manual and automated expense management system usage? It might be easy to think larger companies are better able to make the investments in software automation over their smaller counterparts. However, many automated solutions today are available on a per-user or per-report fee, making even the most sophisticated technology affordable for the smallest of companies. Conversely, manual systems can often have many hidden costs in the form of paper, postage and office supplies, and, harder to measure, lost employee productivity due to inefficient processes and redundant manual data entry. Figure 1 EXPENSE MANAGEMENT SYSTEMS IN USE Web-based Manual ERP Other % 50% 15% % 46% 17% --- Manual is defined in the study as any process that uses Excel spreadsheets, pen and paper, or homegrown systems, or any combination there of Expense Management Trends: Annual T&E Outlook and Benchmarks

5 Expense management systems today, continued from previous page Whether a process is entirely paper-based or a hybrid of paper and electronic spreadsheets, manual processes present an undue burden to business travelers before, during, and after the trip. These employees must spend a disproportionate amount of time tracking receipts, entering the same data across multiple systems, and physically routing reports through several layers of approval. Figure 2 EXPENSE MANAGEMENT SYSTEMS BY COMPANY SIZE SMALL BUSINESS Less than 100 employees MIDSIZED BUSINESS employees 24% 55% 7% 2% 12% Web-based solution (Concur, IBM, etc.) 33% 37% 8% 6% 16% Microsoft Excel/ spreadsheets Pen and paper Homegrown solution ENTERPRISE employees 56% 10% 2% 8% 24% ERP/accounting package (Oracle, SAP, etc.) Manual processes can also be equally if not more time consuming for accountants and administrators. Reconciling expenses, reviewing for policy compliance and/or violations, checking for approvals, issuing reimbursement for employees, and accounting for expenses in the general ledger every step in a manual process is managed by hand, and the number of touches adds up fast. Also, finding errors on reports or locating missing receipts in a manual system can mean significant delays and rework for everyone involved. Manual processes present an undue burden to business travelers before, during, and after the trip Expense Management Trends: Annual T&E Outlook and Benchmarks

6 Reporting features and system integrations Companies using web-based automated expense management systems have access to a number of features and data integration services that significantly improve the reporting experience overall (Figure 3). Efficiencies can be achieved through every aspect: streamlining travel booking, automating the creation of expense reports, simplifying administrative and financial reporting, and expediting employee reimbursement. For companies using a manual system, the vast majority of these features are simply unavailable. Covering every aspect of the process from receipt capture and report creation, to workflow automation and expense reconciliation, the key to gaining efficiencies in T&E expense management is all about integration (Figure 4). Connecting company systems and data to a central expense reporting platform reduces data entry requirements for employees, and it improves accuracy and access to analytics for accountants and system administrators. Integrating credit card feeds and accounting systems with a capable expense reporting platform also creates greater transparency and efficiency throughout the process, while driving improvements in employee productivity on the road and at the office. Figure 3 EXPENSE MANAGEMENT SYSTEM FEATURES CURRENTLY USED (% reporting) Direct deposit via ACH Automated expense report build technology Mobile receipt-capture technology Mobile report creation and approval Instant reporting and analytics Live and online support for all users Multi-language, multi-currency capabilities Integrated travel booking technology Figure 4 DATA INTEGRATIONS (% reporting) Currently Implemented 32% 28% 31% 30% 21% 19% 18% 18% Will Implement For companies using a manual system, the majority of these features are simply unavailable No Plan to Implement Credit card feed 53% 19% 28% ERP (Oracle, SAP, etc.) 40% 17% 43% CRM (Salesforce, etc.) 15% 11% 74% A/P 62% 16% 22% General ledger 60% 17% 23% Workforce management 20% 13% 67% Meeting/event management 8% 12% 80% Expense Management Trends: Annual T&E Outlook and Benchmarks

7 Controlling T&E spending and processing costs With the average company budgeting as much as 12 percent annually for T&E expenditures, finding ways to control spending is crucial to keeping employees and their expenses in check. Expense category maximums, GSA per diems and hard spending limits (or spending caps) are all methods companies can use to control spending. Nearly 74 percent of survey respondents indicate they use some type of guideline to control spending, while 26 percent have no category limits at all (Figure 5). Of the 25 percent of companies that base T&E budgets on historical spending, it s important to note that regular market fluctuations in costs for fuel or seasonal hotel rates can be difficult to account for. This can lead to inaccurately under or overfunding the T&E budget, in addition to making it harder to track spending. Additionally, many companies make the mistake of believing their manual or homegrown T&E reporting system is free of cost. Far from being free, companies using manual systems often do not consider or are unable to track costs in employee time and materials necessary to process expense reports. These costs can include office supplies, paper and postage costs, employee overhead time needed to create reports, as well as lost productivity and lost opportunity from working with an inefficient system. According to PayStream Advisors, costs to process a single expense report range from $26.63 using a manual process to $6.83 on a fully automated system. From the same PayStream report, 80 percent of companies indicate they do not track expense processing costs (Figure 6). Results from the Certify Trends Report for 2016 and 2017 are similar and show only slight increases at the high and low end of the processing costs ranges. While not the same majority as the PayStream study, results here also suggest most companies are not currently tracking expense report processing costs, or at least not with complete accuracy. Figure 5 HOW DOES YOUR COMPANY SET T&E POLICY MAXIMUMS FOR MEALS, HOTEL AND AIRFARE? We do not have expense category limits Based on internal historical spending Follow U.S. GSA per rate guidelines Determined by annual budgeting process Other 26% 23% 23% 21% 7% Figure 6 EXPENSE REPORT PROCESSING COSTS Under $7 per report $10-$20 per report $25 or more per report We do not track these costs % 19% 5% 48% % 16% 9% 44% Expense Management Trends: Annual T&E Outlook and Benchmarks

8 Best practices to improve policy compliance rates Like the spending limits described in the previous section, hard policy controls specific to a company s travel policy guidelines can also be configured directly into most web-based systems. These controls allow for the automatic enforcement of corporate travel policy including, but not limited to: currency, expense category amount, vendor/merchant code, receipts, meal attendees, approval workflows, and much more. In the 2017 Certify study, 79 percent of all companies report having a written travel and entertainment expense policy in place. However, 75 percent of these companies leave compliance up to the employee or conduct a manual review for policy compliance (Figure 7). Comparing 2016 and 2017 findings overall, manual policy review continues to be a persistent challenge with the majority of companies using a mix of manual processes to review expense reports. Unlike using a system with integrated policy controls and compliance monitoring, this approach essentially leaves enforcement to the hope that every employee will do the right thing, assuming they are aware of policy specifics in the first place. Still, for companies on a web-based expense management system, just 49 percent use an integrated policy feature to automatically check for violations. Given how these systems can also alert employees to out-of-policy expenses as they are entered into the expense report, and notifying managers and administrators to take a closer look at suspicious charges, it appears about half of all companies using a web-based system are missing an opportunity to stop policing employee expense reports and make T&E policy enforcement automatic. When the need to correct violations arises, enforcement then becomes a function of the system, which in turn alleviates tension between employees and supervisors by taking it from a personnel issue to a system issue. Furthermore, when violations do occur, communications features within the system allow for rapid resolution between managers, employees, and accountants, minimizing delays and the need for rework. Figure 7 IF YOU HAVE A TRAVEL POLICY, HOW DOES YOUR COMPANY ENFORCE IT? (% reporting) % +/- Manually check each expense, matching it to corporate policy 43% 41% -2% It is the responsibility of the employee to comply with T&E policy 31% 39% +8% System automatically flags out of policy expenses for review 26% 26% Manually, only reviewing expenses with a high value 20% 15% -5% Our T&E policy is not enforced 6% 7% +1% Expense Management Trends: Annual T&E Outlook and Benchmarks

9 Best practices to improve policy compliance rates, continued from previous page Another effective strategy to automate policy enforcement and control spending is by using an integrated travel-booking tool that syncs with the company expense management platform. While not every business trip requires airfare or other travelrelated services, for those that do, integrated travel booking offers two powerful features that automate different areas of employee compliance. First is lowest logical fare, which works by automatically identifying the best available rates for any given itinerary. The traveler is then offered only those rates and booking options that are within policy, taking into account any additional guidelines for duration of travel, connecting flights, etc. While this can sometimes limit flexibility for the business traveler, it also assures accountants and travel managers the employee did actually purchase the lowest fare available at the time of booking, and not just the most convenient fare. Similarly, another important feature for managing travel policy compliance is pre-trip approval. As the name suggests, pre-trip approval requires manager authorization prior to finalizing proposed travel bookings in the system. This feature can also be configured to meet a range of policy guidelines, whether every itinerary needs to be reviewed and approved by a manager, or just those bookings that deviate from policy. If your business travelers plan a lot of last minute trips or require frequent exceptions to standard policy, pre-trip approval can be especially helpful for keeping spending in check by keeping managers and supervisors informed at every step. The only potential downside to pre-trip approval is ensuring the approver is readily available to process airfare ticket requests, as these typically expire within hours from time of selection. T&E POLICY Does your organization have a written travel policy in place? NOT SURE 4% NO 17% NO 13% YES 79% NOT SURE 2% YES 85% Availability and awareness of company travel policy is critical to compliance and enforcement Figure 8 HOW DOES YOUR COMPANY CURRENTLY MANAGE TRAVEL BOOKINGS? Online travel sites Corporate travel software Travel agency/agent Combination of above 40% 14% 16% 30% Expense Management Trends: Annual T&E Outlook and Benchmarks

10 Organizational pressures on T&E expense reporting Accountants and employee business travelers have equally experienced the pain and frustration of T&E expense reporting, if not for different reasons (Figure 9). Often, the systems or processes used for managing expense reporting rely on arcane paper trails or homegrown legacy systems, neither of which reflect the elevated importance of T&E expense management has the modern workplace. Still, many organizations are resigned to struggle with outdated, inefficient processes rather than risking any disruption by introducing a procedural change with unknown and perceived risks. Figure 9 TOP FIVE EXPENSE MANAGEMENT PAIN POINTS (% reporting) % 51% 36% 28% 26% Employees losing paper receipts/submitting without receipts Employees failure to submit reports on time Time it takes to reconcile, review and approve reports Reviewing for policy violations Errors on expense reports (incorrect codes, amounts, etc.) Without a comprehensive expense management approach, reporting and workflow process challenges remain for accounting and finance professionals. The factors that drive a company to switch to a web-based automated expense management system are unique to each organization (Figure 10). For many using a manual process, company growth, global expansion, or an increase in the number of employees submitting expense reports each month often signal the tipping point for greater efficiency. Others consider a new system as a means to resolve ongoing organizational pain points around employee productivity, process efficiency, reporting errors, or financial accountability (Figure 11) Expense Management Trends: Annual T&E Outlook and Benchmarks

11 Organizational pressures on T&E expense reporting, continued from previous page Figure 10 TOP FIVE ORGANIZATIONAL PRESSURES TO IMPROVE EXPENSE MANAGEMENT 1 Poor visibility into expense data (spending, compliance rates, etc.) Need to reduce expense report processing costs 2 Lack of control over T&E spending Lack of control over T&E spending 3 Need to reduce expense report processing costs 4 Lengthy reimbursement times 5 Frequent instances of non-compliant travel/ expenses Poor visibility into expense data (spending, compliance rates, etc.) Frequent instances of non-compliant travel/expenses Lengthy reimbursement times Companies are looking to expense management automation in 2017 as a way to reduce costs. Figure 11 TOP T&E AREAS OF IMPROVEMENT (% reporting) Expense management process Transparency/visibility into reporting data Travel booking Systems and data integration Employee reimbursement times Mobility/mobile access Software devployment 37% 23% 10% 10% 9% 8% 3% Reducing expense report processing costs is the top reason companies turn to automation Expense Management Trends: Annual T&E Outlook and Benchmarks

12 What to expect when switching systems A number of factors play into a company s decision to move to an automated web-based expense management system. Once the decision to switch is made, it can be difficult to understand exactly what to expect in terms of features and benefits, implementation time, support services, global capabilities, scalability, and time to recoup the initial investment. However, adding a positive note to the relative uncertainty, the actual benefits a company realizes by switching systems surpasses expectation in every category measured in the 2017 report and exceeds findings from the 2016 report (Figure 12). For example, while just 8 percent of companies expected to see employees submitting expense reports more frequently, fully 28 percent achieved this benefit as a result of implementing an automated T&E solution. Figure 12 Expected Benefits Vs. Actual Benefits 15% Faster reimbursement for employees 42% 8% Increased frequency of expense reports submitted by employees 28% 21% Increased insight into travel and entertainment spend 41% 33% Decreased/elimination of manual data entry 40% 41% The reduction or elimination of Excel/spreadsheets 47% 37% Reduced time spent creating and approving expense reports 40% As with most company procurements, projecting return on investment from a new expense management system is a critical part of the internal approval process. Fortunately, there are a number of ways to calculate ROI from the expense reporting process, including a reduction in supplies, increases in employee productivity, administrative overhead and more. The majority of companies surveyed for the 2017 trends report are quickly realizing a return on investment. While rates of return are down slightly in the 2017 survey data compared to 2016, of those companies reporting a return on their investment in expense management automation, 70 percent achieved full ROI in 1 year or less. Fully 89 percent of companies reporting an ROI achieved a full return in 2 years or less (Figure 13, 14) Expense Management Trends: Annual T&E Outlook and Benchmarks

13 What to expect while switching systems, continued from previous page Figure 13 COMPANIES ACHIEVING FULL ROI ROI achieved in 1 year or less ROI achieved in 2 years or less All Companies Small businesses % % % 80 83% Midsized companies Enterprise % % % 60 60% Improvements in technology, training and corporate IT services, as well as employee-friendly design, are likely contributors to survey results reporting an improved time to ROI. Unlike a manual expense reporting process, automated systems can make it significantly easier to track and report on common ROI metrics. In addition, companies using an automated solution typically can pinpoint the sources and system features that provide the greatest return on their investment (Figure 14). The majority of respondents attribute company gains to broad improvements in expense reporting process efficiency, which can in turn reduce overhead and staffing requirements necessary for manually processing expense reports. In addition, specific system such as travel booking controls, mobile tools and elimination of payment for duplicate receipts also rank high on the list of features contributing to ROI Expense Management Trends: Annual T&E Outlook and Benchmarks

14 What to expect while switching systems, continued from previous page Figure 14 FEATURES/SOURCES OF EXPENSE REPORT ROI (% reporting) Improved efficiency/expense reporting process 57% Reduction in processing costs (less paper, postage, storage etc.) 48% Travel booking control (pre-trip authorization, etc.) 22% Mobile accessibility 22% Elimination of payment for duplicate expenses 21% Reduction in overhead/staffing requirements 18% More accurate mileage tracking/mapping 19% Reduction in fraudulent expenses 17% Increased employee productivity 21% Switching to an automated web-based expense management system can also have some very positive if not entirely expected outcomes on other areas of corporate accounting. In the 2017 survey, companies identified they were able to leverage their T&E systems to add value to the process of executing other duties and responsibilities. These include invoicing and payments (44 percent), auditing (40 percent), and annual budgeting and planning (35 percent), as well as financial reporting (SOX, SEC, etc.), vendor negotiations, and more (Figure 15). Figure 15 TOP FIVE VALUE-ADDED ACCOUNTING FUNCTIONS (% reporting) Invoicing and payments Auditing Annual budgeting and planning Regular forecasting (monthly, quarterly, etc.) Financial reporting (Sarbanes-Oxley, SEC, etc.) 44% 40% 35% 26% 23% Expense Management Trends: Annual T&E Outlook and Benchmarks

15 Expense management trends to watch Certify s 2017 Expense Management Trends and Annual T&E Outlook survey identified several key trends that will continue to drive system usage and adoption rates by small, midsized, and enterprise companies. Overall, 47 percent of companies are planning to switch to an automated system. For the enterprise, survey results indicate 75 percent are planning to switch software vendors or move to a new cloud-based expense management system; a rate much greater than small (49 percent) or midsized businesses (45 percent). This follows a trend of larger organizations typically with more users, resources and more complex expense management challenges area migrating to automation at a faster rate (Figure 16). Figure 16 SWITCHING TO A WEB-BASED SYSTEM All Small Business Midsized Companies Enterprise Yes 15% 12% 20% 29% We re evaluating vendors 33% 37% 25% 46% No, we will not be switching 50% 51% 55% 25% Other 2% Regardless of size, the average company planning to make the switch to an automated system will do so within the next in the next 12 months. Small businesses planning to upgrade their expense management systems are more likely to have a shorter time to adoption among all survey respondents; 61 percent will switch systems within the next 6 months, with an additional 22 percent making the switch within the next 12-month period. While frustration from the inefficiencies of paper and spreadsheets are likely drivers for the expedited timeline, the reasons small businesses are switching faster is more likely a result of having fewer users, limited integration requirements, and other factors related to purchase cycles and implementation. Figure 17 TIMELINE FOR SWITCHING All Small Business Midsized Companies Enterprise Within the next 6 months 10% 61% 26% 26% 7-12 months 17% 22% 47% 34% months 13% 6% 21% 23% Small businesses are turning to automation at an accelerated pace compared to their midsized and enterprise counterparts Expense Management Trends: Annual T&E Outlook and Benchmarks

16 What to expect while switching systems, continued from previous page When it comes to selecting the expense management software vendors, simplicity/ease of use for employees (65 percent), automation (50 percent), and integration with HR/finance systems (41 percent) are among the top features companies look for. Given the nature of these top three most-requested features, companies today are looking to leverage efficiencies in the workplace and reduce the burden of manual reporting T&E on business travelers and expense report administrators (Figure 18). Figure 18 MUST-HAVE EXPENSE MANAGEMENT FEATURES Simplicity/ease of use for employees 65% Expense management automation 50% Integration with HR/finance systems 41% Mobile applications/accessibility 36% Reporting and insight into spend 35% Functionality to enforce travel policy 33% Rapid deployment and onboarding 22% Integrated travel booking solution 23% 65% of companies switch to automation to simplify the expense reporting process for employees Expense Management Trends: Annual T&E Outlook and Benchmarks

17 Conclusion Data from the 2017 Expense Management Trends survey illustrates how companies of every size face similar challenges when it comes to managing costs, improving visibility into spending, and ensuring employee compliance with company T&E policy. While smaller businesses are much more likely to experience the struggles inherent to using a manual system, their enterprise counterparts can serve as a guide in how to navigate the challenges of a complex accounting function made more challenging by manual processes and paper trails. Those companies making the switch to an automated expense reporting system are quickly discovering the benefits, and quickly realizing a return on their investment. Mobile applications, accounting, travel and data integrations, and automation features are helping them achieve tremendous time- and money-saving efficiencies in everything from workflow, reconciliation, reimbursement and administrative reporting. All of which has allowed these organizations to overcome long-standing T&E pain points and greatly simplify expense reporting for employees and accountants. With all of its benefits and scalability, web-based expense management still remains an undiscovered opportunity for many. As automation finds wider acceptance in our daily lives in everything from running the home to managing our finances expect more small, midsized and enterprise businesses to look to automated expense management as a way to gain efficiencies, save money and improve workplace systems. SOURCES: 1. GBTA BTI Outlook Annual Global Report & Forecast, revised October 20, Aberdeen Group, Travel and Expense Management Guide for Expense Management Trends: Annual T&E Outlook and Benchmarks

18 Buyer s Guide WHAT TO LOOK FOR IN A WEB-BASED SYSTEM With so many web-based expense management system vendors, it may be difficult to choose. Use this checklist to compare vendor features and services. Reports & Approvals Mobile Auto-generated report creation Line item approval or disapproval Line item internal notations Approval workflow options Duplicate or out-of-policy notifications during expense creation Mobile electronic receipt capture Capture receipts and expenses offline, with automatic synchronization online Remote manager review and approval One-tap access to travel booking and itineraries Integrated online travel booking Reconciliation & Reimbursements Implementation & Support Integrated credit card data Full reporting and analytics Integrated ACH reimbursements Data backup services Global languages / Global currencies Ongoing new user and refresher training User review ratings on products and services Timely post-sale implementation and onboarding Free on-demand support for all users Scalability to grow with your company Accounting and GL integrations Data security and storage services Expense Management Trends: Annual T&E Outlook and Benchmarks

19 About Certify With thousands of users and satisfied customers around the globe, Certify is the leading fully automated travel and expense management solution for companies of every size. Certify s intuitive, easy-to-use web-based interface and advanced mobile application with electronic receipt capture allow organizations to book travel and complete expense reports and reimbursement quickly, easily, and cost-effectively. All while reducing overhead processing costs, increasing compliance with corporate policy, improving visibility into spending and workflow, and greatly simplifying T&E management for all employees, accountants, and administrators. To learn more about Certify: schedule a free demo Expense Management Trends: Annual T&E Outlook and Benchmarks