Industry Best Practices for TE Expense Management and
Industry Best Practices for T&E Expense Management and Automation Presented to: Pittsburgh AFP April 23, 2013 David Enick, CTP Assistant Vice President Treasury Consulting Group
Standard Disclosure This presentation was prepared for general information purposes only and is not intended as legal, tax or accounting advice or as a recommendation to engage in any specific transaction, including with respect to any securities of PNC, and does not purport to be comprehensive. Under no circumstances should any information contained in this presentation be used or considered as an offer or commitment, or a solicitation of an offer or commitment, to participate in any particular transaction or strategy. Any reliance upon the presentation is solely and exclusively at your own risk. Please consult your own counsel, accountant or other professional advisor regarding your specific situation. Any opinions expressed in this presentation are subject to change without notice. 2
Agenda I. T&E Expense Management Trends II. T&E Expense Management Automation Trends III. Bank Offered Expense Management Solutions 3
T&E Expense Management Trends Survey Demographics
T&E Expense Management Trends 2012 IOFO and Aberdeen Group Survey Demographics 2012 Institute of Financial Operations Trends in Expense Management Survey Results Company Industry 5. 0% 3. 3% 0. 8% 11. 6% 1. 7% 3. 3% 0. 8%2. 5% 7. 4% 8. 3% 5. 8% 5. 0% 11. 6% 28. 1% Company Annual Revenue Banking/Financial Services Construction Education Food and Beverage Government Insurance Manufacturing Medical/Dental/Healthcare Not-for-Profit Pharmaceuticals Real Estate Retail Service Software Telecom Transportation Utilities/Communication 9. 2% Less than $50 million 12. 3% 6. 2% $50 million to $250 million to $500 million 23. 8% 26. 9% $500 million to $1 billion to $5 billion 8. 5% 13. 1% $5 billion to $10 billion Greater than $10 billion 2012 Aberdeen Group T&E Expense Management Survey Results Industry 21. 0% 40. 0% Company Size Manufacturing 26. 0% Software Financial Services 11. 0% 10. 0% 8. 0% 47. 0% Annual revenue $50 million to $1 billion Public Sector Transportation/Logistics Annual revenue of $50 million or less 27. 0% Retail 25 Other Industries 5. 0% Source: IOFO 2012 Trends in Expense Management Source: Aberdeen Group 2012 T&E Expense Management Annual revenue greater than $1 billion 5
T&E Expense Management Trends 2012 IOFO Survey Demographics § Please select your company’s total number of employees. Company's Total Number of Employees 2. 1% 4. 3% 5. 0% Less than 250 13. 5% 251 to 1, 000 1, 001 to 5, 000 19. 9% 26. 2% 5, 001 to 25, 000 25, 001 to 50, 000 29. 1% 50, 001 to 100, 000 More than 100, 000 Source: IOFO 2012 Trends in Expense Management 6
T&E Expense Management Trends 2012 IOFO Survey Demographics § Select the number of employees who submit expense reports. Employees who Submit Expense Reports 2. 7% Under 100 10. 9% 24. 5% 12. 7% 101 to 500 501 to 1, 000 1, 001 to 2, 500 15. 5% 33. 6% 2, 501 to 10, 000 More than 10, 000 Source: IOFO 2012 Trends in Expense Management 7
T&E Expense Management Trends Organization
T&E Expense Management Trends Organization § Which department has primary responsibility for expense management processing? Department 2. 0% 4. 1% Accounts Payable Human Resources Purchasing/Travel Management 93. 9% § 96% of survey respondents report anywhere between zero and four full-time equivalent employees (FTEs) who process expense reports on behalf of the organization § 42% of respondents report only one FTE charged with expense reporting responsibilities § Nearly 10% - It appears to be a shared responsibility among various employees, including part-timers Source: IOFO 2012 Trends in Expense Management 9
T&E Expense Management Trends Organization § What percent of total expense reports do you audit? Percent of Audited Expense Reports 6. 5% 0% 20. 6% 34. 6% 1% to 15% 16% to 25% 26% to 50% 51% to 75% 10. 3% 76% to 99% 100% 14. 0% 9. 3% 4. 7% § Nearly half (48. 6%) of respondents report auditing between 76 – 100% of Expense Reports Source: IOFO 2012 Trends in Expense Management 10
T&E Expense Management Trends Organization § Does your company provide cash advances for travel? Cash Advances No 21. 3% Yes, if requested 6. 5% 46. 3% Yes, if employee does not have a corporate card Yes, with management approval 25. 9% Source: IOFO 2012 Trends in Expense Management 11
T&E Expense Management Trends Organization § How do you reimburse employees for out-of-pocket expenses? Reimbursement Method 14. 1% 25. 3% AP Check AP via ACH 21. 2% Attach to payroll Outside provider pays 39. 4% Source: IOFO 2012 Trends in Expense Management 12
T&E Expense Management Trends Organization § What is the frequency of employee reimbursements? Reimbursement Frequency 4. 7% 12. 3% 20. 8% Daily Twice a week 10. 4% Weekly 13. 2% Every two weeks Semi-monthly Monthly 38. 7% Source: IOFO 2012 Trends in Expense Management 13
T&E Expense Management Trends Policies
T&E Expense Management Trends Policies § What is your company’s minimum threshold for receipt requirement? Receipt Requirement 11. 1% 4. 0% Greater than $75 Greater than $50 (but less than $75) 52. 5% 32. 3% Greater than $25 (but less than $50) § The IRS requires receipts for all (non per diem) meals and lodging expenses with amounts over $75. § Down from 61% in 2010, 52. 5% require receipts for all non per diem reimbursements Source: IOFO 2012 Trends in Expense Management 15
T&E Expense Management Trends Policies § How are supporting receipts and related documentation submitted? Receipt Documentation 5. 2% Paper Fax/email 25. 8% 41. 2% Scanned by users Combination fax/email and scan by users Submitted to central scanning facility 19. 6% 8. 2% Source: IOFO 2012 Trends in Expense Management 16
T&E Expense Management Trends Policies § Are approvers expected to review receipts as part of the approval process? Receipt Reviewed 11. 5% Yes No 88. 5% Source: IOFO 2012 Trends in Expense Management 17
T&E Expense Management Trends Policies § Is there a separate policy or exceptions to the standard policy for executives? Separate Policy or Exceptions for Executives 2. 8% 22. 0% No Yes - Exceptions 75. 2% Yes - Separate policy § 75. 2% “they must follow the rules just like everyone else — without exception” Source: IOFO 2012 Trends in Expense Management 18
T&E Expense Management Trends Policies § Are there restrictions related to booking air travel? 4. 7% Air Travel Restriction Lowest price coach class on any airline 13. 2% Lowest price coach class on preferred airline only 5. 7% 15. 1% 61. 3% Lowest price coach (domestic)/business or first class (international) Business or first class if travel time exceeds set number of hours § Lowest price coach up from 51% in 2010 § Business / First Class policy shifts – Lowest price coach (domestic) / Business or first class (international) down from 15% from 2010 – Business or first class if travel time exceeds set number of hours up from 8% in 2010 Source: IOFO 2012 Trends in Expense Management 19
T&E Expense Management Trends Policies § At what rate does your company reimburse for use of personal car? § IRS allowable rate (2012 - 55. 5 cents per mile) Personal Car 1. 9% 2. 8% 0. 9% Reimburse at IRS allowable rate (currently 55. 5 cents per mile) Reimburse at 45 -54. 5 cents per mile 8. 3% Reimburse at 35 - 44. 5 cents per mile 11. 1% Reimburse at less than 35 cents per mile 75. 0% Rate varies for different groups of employees Do not reimburse for use of personal car § Depending on personal tax situation, an individual may be able to deduct the difference from the company reimbursement and the IRS allowable rate as a business mileage expense Source: IOFO 2012 Trends in Expense Management 20
T&E Expense Management Trends Policies § What is the approved class of rental car for non-executive travelers? Approved Class of Rental Car 3. 4% Sub-compact Compact Intermediate/midsize Full size Luxury 43. 8% 49. 4% § What is the approved class of rental car for executive travelers? Approved Class of Rental Car 3. 4%4. 5% 15. 9% 27. 3% 48. 9% Source: IOFO 2012 Trends in Expense Management 21 Sub-compact Compact Intermediate/midsize Full size Luxury
T&E Expense Management Trends Policies § What is your travel meal reimbursement policy? Travel Meal Reimbursement 1. 9% Pay per diem 17. 1% Pay actual (no limit) for all meals Pay actual (with limit) for all meals Pay actual for breakfast and dinner (exclude lunch) 0% 51. 4% 29. 5% Pay actual (with limit) for breakfast and dinner Do not reimburse for meals 0% § Over 80% of companies pay for all meals while traveling, 29. 5% with no limits “go ahead and eat” Source: IOFO 2012 Trends in Expense Management 22
T&E Expense Management Trends Policies § What is your lodging reimbursement policy? Lodging Reimbursement Pay a per diem for lodging 0% 18. 1% Pay actual (no daily limit) 22. 9% Approved/preferred hotels only pay actual (with daily limit) 59. 0% Approved/preferred hotels only (no daily limit) Source: IOFO 2012 Trends in Expense Management 23
T&E Expense Management Trends Policies § What is your policy on frequent traveler or affinity benefits? Frequent Traveler/Affinity Benefits 4. 2% Employee may keep points/miles for personal use Employee must assign points/miles to company Employee must use points/miles for company travel 91. 6% Source: IOFO 2012 Trends in Expense Management 24
T&E Expense Management Trends Travel Management
T&E Expense Management Trends Travel Management § What is the primary type of travel management organization you use? Travel Management Organization Corporate travel agency 36. 8% 49. 5% In-house travel department None - we allow employees to book any way they wish 13. 7% § Does the company mandate use of the company’s travel management process to make travel reservations and purchase? Mandate Company's Travel Management Process 13. 4% 22. 7% 63. 9% Yes Source: IOFO 2012 Trends in Expense Management 26 No Not applicable
T&E Expense Management Trends Travel Management § Does your process offer an online booking tool for employee use? Online Booking Tool 13. 4% 51. 5% 35. 1% Yes No Not applicable § If yes, which tool provider? Tool Provider 8. 1% Cliqbook 5. 4% 8. 1% Get There Res-X 21. 6% Reardon 5. 4% Nu. Travel 0% Egencia/Expedia Orbitz for Business 51. 4% Travelocity Business 0% Source: IOFO 2012 Trends in Expense Management 27
T&E Expense Management Trends Travel Management § Do you pre-populate data into the expense reporting system? Online Booking Tool 11. 6% Yes No 88. 4% § Do you plan to increase integration between the travel management function and the expense management process in the future? Plan to Increase Integration 30. 5% Yes 69. 5% Source: IOFO 2012 Trends in Expense Management 28 No
T&E Expense Management Trends Travel Management § What role does the company travel manager play in expense reporting? Role of Travel Manager In Expense Reporting Manages the expense reporting process 10. 9% 8. 7% 6. 5% 55. 4% 18. 5% Receives data from the expense reporting process Audits expense reports Has a limited role Has no involvement whatsoever Source: IOFO 2012 Trends in Expense Management 29
T&E Expense Management Automation Trends
T&E Expense Management Automation Trends What are companies doing today? § Please select your primary T&E reporting system T&E Reporting System 2. 1% 1. 1% 2. 1% Paper-based Concur 3. 2% Interpl. X Oracle/People. Soft 29. 8% 4. 3% In-house developed software system Corporate card provider system SAP 6. 4% Electronic spreadsheets Infor/Lawson Ariba 9. 6% IBM Sum. Total Databasics 18. 1% Reardon/Expensewire 0% Expenseable 0% 17. 0% Expense. Watch 0% Certify 0% Source: IOFO 2012 Trends in Expense Management 31
T&E Expense Management Automation Trends What does “Paper Based” look like? § Expense Management Process – 33% of companies use a paper or spreadsheet based expense reporting process § Receipt Management – Submission § 41% submit paper receipts – Approvals § 88. 5% require approvers to review receipts – Record Retention § 64. 3% store receipts for 7 years or more § Expense Report Audits – 53% of companies audit 51% 100% of all expense reports Source: IOFO 2012 Trends in Expense Management 32
T&E Expense Management Automation Trends What Does “Paper Based” Cost to Process? Measured Performance Cost Savings Example Best In Class Average § § § 90% compliance to corporate policies concerning T&E 85% business travel spend under management* $7. 91 cost to process a single expense report 77% compliance to corporate policies concerning T&E 64% business travel spend under management * $ 17. 87 cost to process a single expense report § Based on 200 Expense Reports per month § Laggards (Paper Based) – Cost per manual report $25. 72 – Annual Cost 200*12*$25. 72= – $61, 728 Annual Cost § Best in Class (Automated) Laggards § § § 40% compliance to corporate policies concerning T&E 19% business travel spend under management* $25. 72 cost to process a single expense report – Cost per automated report $7. 91 – Annual Cost 200*12*$7. 91= – $18, 984 Annual Cost § Estimated Annual Savings? Best in Class reflects top 20% of respondents, Average reflects middle 50% and laggards reflect bottom 30% of respondents *Business travel spend under management is defined as the percentage of planned travel spend that is actively managed and accounted for in corporate budgeting / planning / forecasting Source: Aberdeen Group, February 2012 33 – Annual savings of $42, 744 – 69% Savings
T&E Expense Management Automation Trends Selecting an Expense Management Solution § Expense Management Priorities and Challenges / Pressures Expense Management Priorities for 2012 Expense Management Challenges / Pressures Improve expense management processes 58% Lack of compliance to travel/expense policies Drive more value out of business travel 57% Must enhance expense management analytics Enhance visibility into overall travel/expense spending Improve intelligence through analytics/reporting 59% 47% Mandate to reduce expenseprocessing costs 55% Inadequate global visibility into supplier base 42% n = 140 38% 25% n = 140 § Theme? – Reporting and visibility into expenditures Source: Aberdeen Group, February 2012 34
T&E Expense Management Automation Trends Selecting an Expense Management Solution § What is the MOST important factor in choosing an expense management solution? 40. 0% 34. 0% 35. 0% 30. 0% 25. 0% 18. 1% 20. 0% 17. 0% 15. 0% 10. 0% 6. 4% 5. 0% 1. 1% 0. 0% 35 s ie lit bi at pa gr ca te in vi ce g in de ok ile ob M O nl in e bo ge an a M rp Co Source: IOFO 2012 Trends in Expense Management io n g rt in po re t en m st bu Ro rd ca e or at fe in te g at ur ra e tio se t n st co t es w Lo gr te in ER P Ea se of at us io n e 0. 0%
T&E Expense Management Automation Trends Selecting an Expense Management Solution § Which of the following do you utilize in your expense management system? Utilized Expense Management Features Ad-hoc management reporting Flexible policy changes (limits, etc. ) Automated integration with HR system Yes Level-3 data for hotel folio, etc. No Offline entry capability No, but I like it Not available Personal card charges pre-populated Map integration for mileage calculation OCR receipt reading/matching Automated integration with CRM/SFA system 0 20 40 60 80 100 § Ad-hoc management reporting is the most commonly utilized tool in an expense management system – who is using this functionality? Source: IOFO 2012 Trends in Expense Management 36
T&E Expense Management Automation Trends Selecting an Expense Management Solution § Which areas use the management information reporting capabilities of your expense management system/process? Reporting Users Accounts payable Travel management Heavy users Senior management Medium users Light users Approvers Don't use End-users/travelers Others 0 50 100 § What can reporting tools be used for? – Best-in-class organizations are 30% more likely to use analytics to identify ways to save money, such as through negotiated discounts with airlines, hotels, and other travel providers Source: IOFO 2012 Trends in Expense Management 37
T&E Expense Management Automation Trends So what are companies planning on doing? Planning on making changes? 2012 IOFO Survey 8. 3% Planning on making changes to expense management program? Yes In the next 6 months 10. 4% § 34. 4% - Yes in the next 18 months Yes after the next 18 months No changes planned 10. 4% 65. 6% 5. 2% 2012 Aberdeen Survey Expense Management Technology Roadmap § 52% Cloud based Saa. S(Software-as-a. Service) § 24% Installed Software § 21% Mix Expense Management Technology Roadmap 29% 24% On-premise/installed 31% 21% Mix of cloud and onpremise Manual and paperbased Source: IOFO 2012 Trends in Expense Management Source: Aberdeen Group 2012 T&E Expense Management 52% Cloud-based/Software -as-a-Service 38 12% 4% 27% Expected Future Deployment Current Deployment
Bank Offered Expense Management Solutions
Bank Offered Expense Management Solutions Selecting an Expense Management Solution § Industry needs vs. bank offered capabilities Bank Offered Solutions* What is the MOST important factor in choosing an expense management solution? § Ease of Use 40. 0% § ERP Integration 34. 0% 35. 0% 30. 0% § Lowest Cost 25. 0% § Corporate Card Integration 18. 1% 20. 0% 17. 0% § Robust Feature Set 15. 0% 10. 0% 6. 4% 1. 1% 0. 0% es lit i § Mobile Device Capabilities bi io n ce g M ob ile de vi in ok bo in e § Online Booking Integration All of top factors supported Source: IOFO 2012 Trends in Expense Management *Not all Bank offered solutions may address each factor ca pa gr te in t en m ge O nl at rt in po re tu r fe a an a M g t se e tio ra st bu Ro e ca rd Lo at or rp Co n st co es w te in P ER in te g t at gr of us io n e 0. 0% § Management Reporting 6. 4% 5. 0% Ea se 40
Bank Offered Expense Management Solutions Selecting an Expense Management Solution § Industry needs vs. bank offered capabilities Bank Offered Solutions* Utilized Expense Management Features § Ad-hoc management reporting § Flexible policy changes (limits, etc. ) § Automated integration with HR system Level-3 data for hotel folio, etc. Offline entry capability Personal card charges prepopulated Yes § Level-3 data for hotel folio, etc. No § Offline entry capability No, but I like it § Personal card charges prepopulated Not available Map integration for mileage calculation 5 of top 6 features supported OCR receipt reading/matching Automated integration with CRM/SFA system 0 50 100 Source: IOFO 2012 Trends in Expense Management *Not all Bank offered solutions may address each factor 41
Bank Offered Expense Management Solutions Industry needs vs. bank offered capabilities § Ease of Use – Solutions are generally designed to be user friendly with one click access to features and easy to use but could vary from provider to provider § ERP Integration – Most banks providers have experience in interfacing with major ERP systems such as SAP, Oracle, Lawson, People. Soft and JD Edwards § Lowest Cost – Fees may be nominal or no cost compared with other solutions § Corporate Card Integration – Card transactions automatically loaded into most bank card platforms every day § Management Reporting – Robust reporting with access to all card and system data elements commonly supported § Robust Feature Set – Default Charge Code Mapping – Custom Approval Flows – Out of Pocket Transactions – Spend Wizards – Delinquency Management – Complex Tax Estimation – Receipt Management – Complex Policy Integration – Automated Integration with HR System and Chart of Accounts – Level 3 data for hotel folio, etc 42
Bank Offered Expense Management Solutions Policy Integration – Policy Rules § Complex Policy Rule Integration for Card and Cash Expenses § Multiple Policy Triggers can be applied simultaneously to create unique Policy Rules Transaction Types Amount Triggers Subject Triggers Violation Level Card Transactions Greater Than Supplier Policy Levels 1 - 4 Cash Expenses Less Than Currency Between Charge Code Segment Charge Code Home Country Merchant Category Merchant Group Transaction Type Day of Week Source Country § Policy Example: – Supplier - Office Depot Card Transactions greater than $100 at Office Depot on a Saturday and Coded to Project 2 is a Policy level 1 Violation Card Transactions Day of Week - Saturday Charge Code – Project 2 Greater Than $100 43 Policy Level 1
Bank Offered Expense Management Solutions Policy Integration – Violation Monitoring § Policy flags highlight suspected policy violations § Cardholders can enter comments to justify policy violations § Managers will have visibility into policy violations and cardholder comments 44
Bank Offered Expense Management Solutions Approval Routing Rules Basic or Complex Approval Routing Transaction Types Amount Triggers Rule Drivers Subject Triggers Card Transactions Greater Than Rule Grouping Supplier Cash Expenses Less Than Rule Behavior Currency Between Process Order Charge Code Segment Charge Code Dependency Order § Basic Approval Routing – Approval can be simply based in hierarchy Merchant Category Transaction Status § Complex Approval Routing – Multiple levels of approval based on certain criteria and can route to other departments or project managers when their budgets are cross -charged by the cardholder § Home Country Approver Grouping Merchant Group Transaction Type Day of Week Source Country Approval Rule Example: – Card Transactions greater than $100 and Coded to Project 2 requires an additional approval Card Transactions Transaction Status – Strictly Coded Greater Than $100 45 Charge Code – Project 2
Bank Offered Expense Management Solutions Policy and Approval Rules – Compliance Audits § To ensure adherence to your company’s travel and entertainment (T&E) policy, it’s crucial to conduct audits on a regular basis § Robust reporting options can simplify policy and approval rule audits by focusing on exceptions Perform company wide searches based on custom approval and policy rules Click on violations to drill into details 46
Bank Offered Expense Management Solutions Spend Wizards – Simplified Charge Code Allocation Customizable Spend Wizards can simplify and automate assignment of charge codes by focusing on question based expense report allocation 2. ) Allocate Amounts 3. )Enter Information 1. ) Select Spend Wizard 4. ) Coding automatically assigned /locked 5. ) Receipt Images can be attached to transaction 47
Bank Offered Expense Management Solutions Program Management - Email Communications § Streamline month end reconciliation management with automated email reminder alerts and the ability send communications directly to certain groups of users Emails can be generated to predefined groups of employees i. e. “Employees with items not submitted”, etc Multiple email alerts can be set for distribution with multiple trigger and distribution frequency options 48
Bank Offered Expense Management Solutions Interactive Program Reporting § Customizable report parameters – user defined filters and output formats § Robust Reporting enables Strong Program Management – Expenditure Analysis § Know what, where, and how your cardholders are spending – Company Administration § Stay on top of month-end reconciliation and approvals – Usage and Monitoring § Identify and correct out-of-compliance spending 49
Bank Offered Expense Management Solutions So what can’t they support? Key potential gaps in functionality supported through bank offered expense management card platforms vs. solutions such as Concur or Interpl. X § Offering of a travel booking system § Robust Mobile Apps – Some bank platforms can offer mobile apps while others may still be in development – However, companies do not consider mobile a decision factor at this point § Automated Out of Pocket Reimbursements to Employees – Bank platforms to not typically support storage of employee bank account information, however, they typically can provide data extracts to clearly identify approved cash out of pocket expenditures by employee § Automated payments to card issuers for Individual Bill/Corporate paid programs – Not applicable for Individual Bill/Pay and Corporate Bill/Pay programs § May support more options for receipt submission (smartphone, fax, scan/upload, email, or US Mail) – Bank platforms can typically support fax, scan/upload, and some support smartphone submission § Ease of use – Bank platforms are typically designed to support p-card and T&E cards and features could be weighted more heavily towards p-card vs. T&E card management 50
Summary - Observations § Increased focus on audit and compliance § Fairly tight controls on Airline Booking § Meal reimbursements are fairly less restrictive compared to other expense categories § DO NOT RENT LAMBORGHINI’S - Chances are they will not be approved § Booking integration is not a top priority § A number of companies are still manual and paper based § Companies are planning on migrating to automated solutions § Ease of Use is important! Employee engagement is likely to be much higher if it is easy to use the system § A large amount of paper can be eliminated with receipt imaging § Audit a percentage – focus on the high risks § Leverage your access to reporting to negotiate discounts 51
Questions?
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