How much is it to travel from your main headquarters to your satellite office in another state? When you go around and ask your colleagues, odds are, they would have different answers.
This simple experiment shows just how easy and common it is for employees to make honest mistakes on their expense reports. The question is, however, are these really mistakes or deliberate misrepresentations? Read more
The GBTA did a survey of more than 200 travel managers in the US on which expense types they mandate the usage of corporate card
No surprises that Airfare was the top at 67%. This is mainly to better manage the spend related to airfare and utilize programs and partnership with air travel vendors. Plus, in some cases, if tickets are canceled or modified, corporate cards have discounted change-fees for being part of the air travel vendor program. Closely following the Airfare expense type are Lodging and Rentals both of which maintain a similar philosophy.
Charging meals to the corporate card provides greater visibility from a compliance perspective. This is especially true if meals are related to Entertainment type expenses. Companies are also increasingly asking employees to charge misc. business expenses like internet, phone calls, faxes etc. to the corporate card to prevent potential frauds. For sales people on the road all the time, the corporate card is a big convenience for mileage and gas related expenses as well.
So, how do your company stack up compared to this? Which expense types do you mandate your users to use the corporate card for? Let us know in the comments below.
Reference: GBTA April 2014 survey. Chart provided by Travel Procurement, part of BTN Newsletter
According to the Aberdeen Group research, surveys based on millions of expense reports submitted by 3,000 companies reveal that U.S. T&E costs are constantly rising. The largest increases were in airfare (up 5.7%), hotels (up 4.5%), and meetings (up 7.7%).
With T&E spend ranging from 7% to 15% percent of the total budget for the average mid-market company ($50 million to $800 million in revenue), the challenge facing CFOs and Controllers in this area is dramatic with millions of dollars at stake! For most companies, travel related expenses remain a significant area of spend – second only to payroll.
Scope of challenge
Fundamentally, most companies struggle to tackle these challenges because of not knowing where to start, when it comes to managing their T&E Expense reporting process, resulting in thousands of dollars of reckless spending and waste. Aberdeen’s report (Expense Management for a New Decade and The Mid-Market Expense Management Program) says that:
* 56% of mid-market companies have limited visibility into T&E spending
* Less than 45% track their expenses via analytics and business intelligence in real time
* Only 33% leverage cloud-based expense reporting solutions and 28% integrate corporate cards
* Just 15% provide T&E data to C-level executives for financial forecasting purposes
Solutions for a new decade
The good news is that cloud-based solutions have significantly brought down the cost of automating T&E expense reporting. These solutions have been shown to deliver huge reductions in expense processing costs. But the big questions is – where do you start?
The Best-In-Class corporations (a term used by the Aberdeen Group to classify the top 20% of companies that manage their expense related processes by creatively blending technology & strategy) combine strategy, core capabilities, technology, a culture that embraces change and a desire to optimize. The objectives of most Best-In-Class programs include cost savings, enhanced productivity, improved efficiencies and better compliance. This is usually achieved by unifying the different processes in the lifecycle.
By advocating a culture that fosters Best-In-Class programs and by investing in a system that ensures achievement of this status, Best-In-Class companies constantly reap gains and realize immediate ROIs.
Here are the 10 Commandments of Expense Reporting that Best-In-Class companies consistently execute on:
1. Centralize the control and operation of T&E expense management programs
2. Automate the process to greatly reduce unproductive manual work and eliminate errors
3. Integrate the front-end expense reporting system to the ERP system to minimize manual data entries and errors (here is a video of automated integration with Dynamics GP)
4. Establish generally accepted corporate-wide policies and processes
5. Educate employees regularly on expense report related policies and processes and appoint a designee for any questions from employees
6. Encourage usage of corporate cards for better accuracy and mobile device applications for convenience to users (read our blog on Credit Card Integration)
7. Leverage and close the loop on expense management data to fine-tune the system and also provide better deals with travel vendors for the company
8. Develop audit mechanisms that capture errant data and provide real-time visibility into spend
9. Invest in the latest technology to maximize efficiency, provide long term ROI and reduce paper usage
10. Provide flexibility and convenience to the end users to improve productivity, reduce inherent delays and to capture expense data immediately after incurred
For some companies, executing on all 10 steps immediately might prove to be a challenge. In those cases, it would be beneficial to select a few and to focus on those, till the desired results are obtained.
Automating T&E processes does more than just reduce costs. It makes it harder for employees to inflate expenses — and far easier for companies to detect fraud. According to the Association of Certified Fraud Examiners, up to 13% of company fraud arises in this area, so that’s a huge advantage. Expense reporting time is reduced and employees are reimbursed faster which is a major boost to morale. Automation results in an average 28% reduction in expense approval times and 27% reduction in employee expense report creation times according to the latest Aberdeen reports.
To read the complete white paper on ’10 steps towards best-in-class status for expense management’, click HERE
A new breed of CFOs are here – and they are here to stay. It seems that more and more CFOs are now looking beyond just reporting on quarterly results. Today’s CFOs take part in product innovation, come up with breakthrough business ideas, challenge corporate customs and are more involved in front end growth of the company. A recent report titled ‘Managing Innovation’ put together by the AICPA (American Institute of CPAs) and CIMA (Chartered Institute of Management Accountants), corroborates this new trend while providing tips from the CFOs themselves. Here are five areas –
Early stage ideas need to be treated differently
Several CFOs noted that companies, even innovative, make a big mistake by treating early stage concepts and ideas within their R&D departments with traditional financial metrics and guidelines. This saps the innovative spirit while miring the innovative process in more paperwork and justifications. Nurturing success at this stage means applying different rules – right from the beginning. The study notes that ‘Distrust is exacerbated when early-stage ideas are prematurely tested against traditional financial metric, before they can evolve’. Because of this many finance executives call for relaxed P&Ls, reasonable growth metrics and don’t demand too much of new ventures, at least initially.
Creative use of capital
Shell allocates $1.5B every year to R&D, plus sends a further $4B for incubating innovative ideas and solutions across all of its business lines. A good part of it goes to – what it refers to as – ‘the game-changer budget’, a fund used by employees to apply for innovative research projects outside of their daily work. ‘A finance function needs to understand the business well enough to know what is a worthwhile activity’ says Royal Dutch Shell CFO Simon Henry.
How do you define risk?
Risk is inevitable for every business. And no risk means no reward. Common knowledge, correct? Not as common as you think. ‘The perception that risk management is there to apply the brakes is a misconception’, says Anita Menon, Chief Risk Office at Prudential BSN Takaful, a joint venture between Prudential and Bank Simpanan Nasional. ‘The risk function is there to encourage the business to understand that they need balanced strategies or actions in order to grow the company’
CFO is now CIO, as in Controlled Innovation Officer
Simon Henry, CFO of Shell says that the finance department’s visibility and role in monitoring the performance of various business units makes it uniquely positioned to counter risk with planned opportunity. Having that twin outlook brings guidance to gung-ho projects and ideas that are sure to change the world but without a qualified financial base, which is needed to build sustainable businesses. ‘We want to encourage innovation and not stifle it, but not in a totally uncontrolled way’, says Henry.
Inside the belly of the beast
To manage innovation better, many CFOs are inclined to place top lieutenants where the action is – inside new ventures and projects. Giving a top finance exec. this level of visibility and access, where innovation is ripe and unbridled, helps to not only build the business case for funding such projects but also get a more in-the -trenches experience that is uncommon for finance folks. This helps finance understand the process, chaotic as it may be, and that not everything can be qualified in Microsoft Excel. ‘The role of [finance embeds] is decision support, from idea right through to launch’, says Stephen Bolton, group controller at Diageo.
So, as a CFO, do you see yourself employing one or more of these recommendations? Let us know in the comments below or by sending an email to firstname.lastname@example.org
By popular demand from our global customers, we have released a new feature for capturing VAT. Now, users will be able to list the VAT amount(s) for an expense. Since the transaction includes the receipt, companies will be in compliance with typical VAT reclaim requirements. Depending on the country, different VAT rate categories can be configured in the system.
This is really nifty and helps with more T&E visibility for stakeholders. Also it makes VAT reclaim for companies a piece of cake (or a piece of pie if you are from Europe:) Simply compile the expenses, list all the VAT transactions and you are ready to report it! Hope you enjoy this functionality. As always, we love to hear from you – email@example.com
So what is the prognosis for business travel in 2012? Here is the long story short:
1) Companies are expecting more business travel
2) Increased pricing from suppliers across the board
Sounds like more of good news with a little bit of bad news. Companies are looking to grow their businesses and therefore expect more travel. Increased supplier pricing is expected to put a small dent. Companies can expect to see their corporate travel budgets rise.
Here is the numerical breakdown of % price increase in a few key areas:
* North America Short Haul (Economy): 2 – 5%
* North America Long Haul (Economy): 0.5 – 3.5%
* North America Short Haul (Business): 5 – 7%
* North America Long Haul (Business): 3 – 5%
* North America Mid-Range: 2.5 – 6.5%
* North America Upper-Range: 1.5 – 5.5%
* North America Base Rates: (-1)% – 0%
* North America Rate Per Day: 2 – 3%
For detailed information, see the reference article.
(Finance Speak is a new series where we will discuss typical questions & concerns expressed by our customers. We will delve into the logic and analysis behind each discussion. If you’d like to contribute or ask a question, send a message to firstname.lastname@example.org with ‘Finance Speak’ in the subject line.)
Gorilla – Would you like for us to host the application & data or do you want to manage it yourselves?
Executive (Anonymous) – I think we will be going with an On-Premise package because it will be cheaper
G – Do you have a server? Do you have internal experts who can tackle this? Do you plan to host other applications?
E – We don’t really have an IT team or other applications but it shouldn’t be too tricky I imagine
G – Well, firstly you will need IT experts to deploy and manage the application. Secondly, you are handling important data, which will be accessed periodically, so you need to be sure about security, encryption, retrieval etc. Plus you don’t want the system to go down when people are traveling around the clock and using the application
E – In that case, we will let you manage it. But won’t that be more expensive for us?
G – Not really, considering all factors. Let me break it down in more detail………
We get this question every time, 99.9% of the time actually. Most of our customers evaluate On-Premise (OP) vs Cloud (CL) based solely on price which can be misleading. When you go with a CL based solution you get several things – flexibility, scalability, transparency, maintenance, On-Demand expertise etc.
And when it comes to price comparisons, CL can be cheaper than OP in some cases. Most companies don’t consider the TCO of an OP solution and therefore assume CL will be more expensive. Of course in some cases CL may be more expensive. But there are more facets to that discussion than a simple OP costs-divide-by-12-months and compare to a CL monthly rate. In some companies, there may be corporate mandates to use OP for all applications and that makes sense because price is not the sole reason.
For a more in depth analysis, see this article from CIO.com that captures the salient points very well –
One area that many companies struggle with is organizing of expense related data. This is especially important because stakeholders in these companies frequently utilize the data to observe trends, study patterns and take proactive steps towards improving the T&E process. We have guided our customers in this area to use best practices. Here are some anecdotal observations –
The lack of success with data organization & management can be broadly attributed to the following reasons –
Case 1) There are no defined structures – Many companies ‘toss’ expense data into one area. While this expedites the submission process initially, it becomes onerous at a later point when specific information is required. What’s more, without any organization, all T&E related data look the same. If there is ever a case for lack of T&E visibility, this one takes the cake!
Case 2) There are defined structures but no retrieval mechanisms – Here, companies define areas but offer no means to retrieve and analyze the data. This makes any front-end organization pointless because the end goal of analysis and fine-tuning of data cannot be achieved. While this is still a problem, it is better than Case 1
Case 3) Too many structures – The other end of the spectrum includes companies that have defined to many areas. While this may give an impression of better organization, it is really an illusion because of too much granularity. To arrive at meaningful conclusions, several areas must be analyzed concurrently. This makes it burdensome and error-prone. Then again, this is definitely better than Case 1 and Case 2
From these notes, it is very obvious that organization of data is very ‘company specific’. Different companies have different processes and procedures, sometimes even disparate, and therefore need unique solutions to manage this.
A big factor in this is human nature. If something is arduous and complicated, we usually put it off. This leads to forgetfulness, which leads to a mad rush during tax time or at the end of the year to get organized. The implications are huge and the penalties for not managing the data better are substantial. Companies frequently throw away millions of $$ due to –
– Failure to take proactive steps from T&E data on time
– Not realizing all the tax deductions before tax season
– Forget to bill clients because post-deal activities were not categorized
– Lack of spend visibility on runaway projects due to untimely data management
At Gorilla Expense, we assist our clients by first helping them define clear, non-redundant areas. Once this is done, specific advice is provided to create future areas carefully. Everything is defined based on how these areas are managed in the back-end ERP/Accounting systems. Since our application is extremely pliable, it can adapt to varying formats. Only after this is technology employed.
Using unique tagging & mapping mechanisms built into the application, come tax time or end of the year, our customers are fully aware areas of spend, steps for improvement, categories to monitor for the next FY etc. which are broken down further by customer accounts, projects, work-orders and more. Now that’s called successful T&E data management!
As we approach the end of 2011, we have been discussing with our customers about the benefits they have seen from using our system. The feedback we received was plenty and came in several flavors.
Some of our customers loved getting away from the manual systems they used before. Some others loved the mobile app and how it simplified their lives. Others found huge benefits in integrating with their back-end system, which minimized manual work at two places – one at the user level and other at the accounting level.
We found a common theme running through several pages of feedback we received. It is no surprise that this resonated with research published by The Aberdeen Group in 2007.
It all boils down to this – At the end of the day, an expense management system must help a company achieve the following:
Cost reduction: Companies must cut costs associated with the managing of expense reports. With the help of a vendor who knows the game, companies can trim the fat at every step in the lifecycle – creating, submitting, processing, tracking and auditing of expense reports.
Enhance Productivity – By incorporating a system that is user-friendly and intuitive, employee productivity takes a shot in the arm. Using the latest technology, employees spend less time on unbillable work such as expense reports, thereby leaving more time for the important tasks.
Reduce Compliance Risk – Compliance comes in two flavors – internal compliance and government/tax compliance. Internal compliance includes the set up of policies that are lenient in nature, well understood and constantly communicated. Government/Tax compliance includes compliance to Sarbanes-Oxley, receipt capture and expense data as required by the IRS and other regulatory requirements.
Economical to Own – The application must not break the bank. It must be economical for the company to use while providing a modest if not quick ROI.
Seamless Interoperability – The application must be able to seamlessly integrate with the back-end system. Typically, this is less complicated with certain systems such as QuickBooks but can be complex for ERP systems such as SAP, Oracle etc.
Quality Intel – The application must provide access to data that can be used to fine-tune various aspects of the process. Stakeholders should be able to slice and dice the data which should help them take steps that directly improve the bottom-line.
If all of these points can be achieved, the application’s implementation may be considered a success. It is also important to note that the process of selecting and implementing a solution is not linear. There are various dynamic parameters that vary drastically from organization to organization.
We specialize in implementing our application with least disruption to existing processes. We help customers recognize the pertinent level of implementation while evaluating potential risk at every stage. Our expertise in integration with almost every ERP system under the Sun helps customers understand the benefits of going 100% automated.
If you haven’t contacted us yet, lets talk. We can be reached at info AT gorillaexpense.com. We’d love to hear from you and look forward to meeting your requirements.
2011 was great strides and 2012 is going to be greater strides. We are excited!
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