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The Five Challenges of Travel and Expense Management

Business travel is on the rise, and with it, travel spending and related expenses. The Global Business Travel Association (GBTA) projects an increase of up to 8.6% in global business travel spending this year. Macro trends, such as (slowly) improving business confidence and ongoing economic globalisation, are contributing to the rise. Another key driver is the growth of mobile working.

This is an important issue for finance teams. A recent PayStream Advisors report on the state of travel and expense management, which Fraedom co-sponsored, found that 38% of organisations spend $500,000 or more on travel and expenses, and 18% spend more than $5million. Managing an increase in spending in this area is a top management challenge for 43% of the large corporations involved in the study.

In this context, it’s more important than ever for finance professionals to find an easy, accurate and effective way to monitor and control travel and expenses, whilst giving staff the freedom to do their jobs.  

However, as we’ll outline below, the study revealed that many organisations still use traditional manual methods or outdated IT systems to manage travel and expense reporting. This approach may have worked in the past, but in today’s tough corporate environment, it creates problems that can hamper operations and profitability.

Below are five key issues that the traditional approach raises:

Poor data visibility and accuracy

Using manual or disparate IT systems to record, track and predict travel costs and expenses can leave finance teams struggling to ensure data accuracy and to provide senior management with correct and up to date reports. The PayStream Advisors study shows that over one-third (35%) of SME organisations interviewed admit to having little to no clear view of their employees’ expense spend. Obviously, this lack of visibility can lead to mismanagement of budgets and costs spiralling out of control.

Inefficient processes

It’s vital that expenses are reported correctly and within a certain deadline. Among other things, this means that employees can be reimbursed promptly. Yet, employees of over two-thirds (69%) of companies in the report send paper receipts to their finance departments. Similarly, over half of organisations (58%) reimburse employees via cheque.

These processes make it difficult for people to file their expenses, which delays reporting and frustrates employees, who often see the process as unduly laborious. Accuracy and productivity can be eroded by such extended manual processes – receipts or cheques can be lost on the way, and claims can be attributed to the wrong people. Importantly, the re-work finance teams need to do in order to correct such errors can increase processing times and costs.

High costs of processing

Many businesses are unaware of the costs of processing expenses, with four out of five (80%) of those involved in the PayStream study not actively tracking this. However, according to the report, the cost of manually processing an expense report was $23 on average on 2014, increasing to over $26 in 2015. In sharp contrast, this falls to only $7 per expense report amongst businesses using a fully automated travel and expense system.

Increasing travel and expenses spend

Companies need to spend to operate and those costs are growing as confidence increases. Managing this increase in overall travel and expense spending is a top challenge for large organisations in particular. This stands to reason for those with outdated expense management practices: an increase in the volume of expenses means more work for finance teams and even higher processing costs. On top of this, the lack of visibility and accuracy makes it difficult for businesses to control unnecessary spending.

Enforcing travel policies

Finally, a lack of visibility of travel and expenses makes it difficult for finance teams to see when purchases outside of the corporate travel policy are made. Expenses may be approved whether or not they comply. This has obvious consequences in terms of cost control and compliance with relevant regulations.

The bottom line is that travel and expense spending is a major cost for companies and, for many, is likely to increase in line with a rise in business travel. The key challenge for organisations is to control this spending while supporting the traveller who, after all, is helping to extend and enhance business operations. As this article shows, however, travel and expenses can be one of the most difficult areas for a business to control – if manual methods or outdated IT systems are used.

The good news is that newer, automated systems can make things much easier for organisations, and help improve accuracy and visibility, and reduce costs. For example, these tools can give employees mobile access, enabling them to record receipts and approve claims on the move. This means workers can manage receipts in real time and managers can minimise the approval bottleneck and the whole process is made more efficient through automation. They can also help with policy compliance. For example, when booking travel, employees can be offered options that are in policy, and nothing else. For other spending, real-time alerts can be sent to relevant teams when employees attempt to make purchases outside of policy.

In light of increasing business travel, such improvements are important to the future profitability and competiveness of many businesses. It’s vital that businesses take action rather than delaying improvements that could have a big impact on their business.

Kyle Ferguson, CEO, Fraedom

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 07 July, 2015, 12:51Be the first to give this comment the thumbs up 0 likes

Coming at the problem of low adoption of T&E software from the user's side, we found in a study that employees find making T&E claims to be a huge pain. No surprises here but it's a shame that vendor's efforts to reduce pain by introducing OCR scanning and other features have not delivered the expected benefits. It's maybe time that T&E vendors realized the futility of eliminating the pain and instead tried to offset it with novel features e.g. BitCoin settlement that we recommended for one vendor. Adoption and usage of the software went up significantly - partly because of the novelty value of BTC and partly because of the temptation of receiving BTC @ current US$ rate and seeing its value potentially zoom up in future. Surprisingly, the potential of BTC to plunge in value didn't act as a dampener, maybe because most employees tend to view expense reimbursements as "funny money", if and when they bother to claim it.