presented to: industry best practices for t&e expense management and automation april 23, 2013...
TRANSCRIPT
Presented to:Industry Best Practices for T&E Expense Management and Automation
April 23, 2013
Pittsburgh AFP
David Enick, CTPAssistant Vice PresidentTreasury Consulting Group
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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.
Standard Disclosure
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I. T&E Expense Management Trends
II. T&E Expense Management Automation Trends
III. Bank Offered Expense Management Solutions
Agenda
T&E Expense Management Trends Survey Demographics
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2012 Institute of Financial Operations Trends in Expense Management Survey Results
T&E Expense Management Trends2012 IOFO and Aberdeen Group Survey Demographics
11.6%0.8%2.5%
0.8%
8.3%
5.8%
28.1%
11.6%
5.0%
3.3%
1.7%7.4%
1.7%
3.3%5.0% 3.3%
Company IndustryBanking/Financial ServicesConstructionEducationFood and BeverageGovernmentInsuranceManufacturingMedical/Dental/HealthcareNot-for-ProfitPharmaceuticalsReal EstateRetailServiceSoftwareTelecomTransportationUtilities/Communication
12.3%
23.8%
8.5%13.1%
26.9%
6.2%
9.2%
Company Annual Revenue
Less than $50 million
$50 million to $250 million
$250 million to $500 million
$500 million to $1 billion
$1 billion to $5 billion
$5 billion to $10 billion
Greater than $10 billion
21.0%
11.0%
10.0%
8.0%5.0%5.0%
40.0%
Industry
Manufacturing Software
Financial Services Public Sector
Transportation/Logistics Retail
25 Other Industries
47.0%
27.0%
26.0%
Company Size
Annual revenue greater than $1 billion
Annual revenue $50 million to $1 billion
Annual revenue of $50 million or less
2012 Aberdeen Group T&E Expense Management Survey Results
Source: IOFO 2012 Trends in Expense Management
Source: Aberdeen Group 2012 T&E Expense Management
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Please select your company’s total number of employees.
13.5%
26.2%
29.1%
19.9%
5.0%
2.1% 4.3%
Company's Total Number of Employees
Less than 250
251 to 1,000
1,001 to 5,000
5,001 to 25,000
25,001 to 50,000
50,001 to 100,000
More than 100,000
T&E Expense Management Trends 2012 IOFO Survey Demographics
Source: IOFO 2012 Trends in Expense Management
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Select the number of employees who submit expense reports.
24.5%
33.6%
15.5%
12.7%
10.9%
2.7%
Employees who Submit Expense Reports
Under 100
101 to 500
501 to 1,000
1,001 to 2,500
2,501 to 10,000
More than 10,000
T&E Expense Management Trends 2012 IOFO Survey Demographics
Source: IOFO 2012 Trends in Expense Management
T&E Expense Management Trends Organization
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Which department has primary responsibility for expense management processing?
T&E Expense Management Trends Organization
93.9%
2.0%4.1%
Department
Accounts Payable
Human Resources
Purchasing/Travel Management
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
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What percent of total expense reports do you audit?
Nearly half (48.6%) of respondents report auditing between 76 – 100% of Expense Reports
T&E Expense Management Trends Organization
6.5%
20.6%
10.3%
9.3%
4.7%
14.0%
34.6%
Percent of Audited Expense Reports
0%
1% to 15%
16% to 25%
26% to 50%
51% to 75%
76% to 99%
100%
Source: IOFO 2012 Trends in Expense Management
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Does your company provide cash advances for travel?
T&E Expense Management Trends Organization
46.3%
25.9%
6.5%
21.3%
Cash Advances
No
Yes, if requested
Yes, if employee does not have a corporate card
Yes, with management approval
Source: IOFO 2012 Trends in Expense Management
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How do you reimburse employees for out-of-pocket expenses?
T&E Expense Management Trends Organization
25.3%
39.4%
21.2%
14.1%
Reimbursement Method
AP Check
AP via ACH
Attach to payroll
Outside provider pays
Source: IOFO 2012 Trends in Expense Management
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20.8%
13.2%
38.7%
10.4%
4.7% 12.3%
Reimbursement Frequency
Daily
Twice a week
Weekly
Every two weeks
Semi-monthly
Monthly
What is the frequency of employee reimbursements?
T&E Expense Management Trends Organization
Source: IOFO 2012 Trends in Expense Management
T&E Expense Management Trends Policies
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What is your company’s minimum threshold for receipt requirement?
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
T&E Expense Management Trends Policies
11.1%
4.0%
32.3%
52.5%
Receipt Requirement
Greater than $75
Greater than $50 (but less than $75)
Greater than $25 (but less than $50)
Receipts are (generally) re-quired for all non per diem re-imbursements
Source: IOFO 2012 Trends in Expense Management
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41.2%
8.2%
19.6%
25.8%
5.2% Receipt Documentation
Paper
Fax/email
Scanned by users
Combination fax/email and scan by users
Submitted to central scanning facility
How are supporting receipts and related documentation submitted?
T&E Expense Management Trends Policies
Source: IOFO 2012 Trends in Expense Management
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Are approvers expected to review receipts as part of the approval process?
T&E Expense Management Trends Policies
88.5%
11.5%
Receipt Reviewed
Yes No
Source: IOFO 2012 Trends in Expense Management
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Is there a separate policy or exceptions to the standard policy for executives?
75.2% “they must follow the rules just like everyone else — without exception”
T&E Expense Management Trends Policies
75.2%
22.0%
2.8%Separate Policy or Exceptions for Executives
No
Yes - Exceptions
Yes - Separate policy
Source: IOFO 2012 Trends in Expense Management
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Are there restrictions related to booking air travel?
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
T&E Expense Management Trends Policies
61.3%15.1%
5.7%
13.2%
4.7% Air Travel Restriction
Lowest price coach class on any airline
Lowest price coach class on preferred airline only
Lowest price coach (domestic)/business or first class (interna-tional)Business or first class if travel time exceeds set number of hours
No restrictions
Source: IOFO 2012 Trends in Expense Management
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At what rate does your company reimburse for use of personal car?
IRS allowable rate (2012 - 55.5 cents per mile)
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
T&E Expense Management Trends Policies
75.0%
11.1%
8.3%
1.9%2.8%0.9%
Personal Car
Reimburse at IRS allowable rate (currently 55.5 cents per mile)
Reimburse at 45 -54.5 cents per mile
Reimburse at 35 - 44.5 cents per mile
Reimburse at less than 35 cents per mile
Rate varies for different groups of employees
Do not reimburse for use of personal car
Source: IOFO 2012 Trends in Expense Management
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What is the approved class of rental car for non-executive travelers?
What is the approved class of rental car for executive travelers?
T&E Expense Management Trends Policies
43.8%49.4%
3.4% 3.4%
Approved Class of Rental Car
Sub-compactCompactIntermediate/midsizeFull sizeLuxury
4.5%
27.3%
48.9%
15.9%3.4%
Approved Class of Rental Car
Sub-compactCompactIntermediate/midsizeFull sizeLuxury
Source: IOFO 2012 Trends in Expense Management
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What is your travel meal reimbursement policy?
Over 80% of companies pay for all meals while traveling, 29.5% with no limits “go ahead and eat”
T&E Expense Management Trends Policies
17.1%
29.5%
51.4%
1.9%
Travel Meal Reimbursement
Pay per diem
Pay actual (no limit) for all meals
Pay actual (with limit) for all meals
Pay actual for breakfast and dinner (exclude lunch) 0%
Pay actual (with limit) for break-fast and dinner
Do not reimburse for meals 0%
Source: IOFO 2012 Trends in Expense Management
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59.0%22.9%
18.1%
Lodging Reimbursement
Pay a per diem for lodging 0%
Pay actual (no daily limit)
Approved/preferred hotels only pay actual (with daily limit)
Approved/preferred hotels only (no daily limit)
What is your lodging reimbursement policy?
T&E Expense Management Trends Policies
Source: IOFO 2012 Trends in Expense Management
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91.6%
4.2% 4.2%
Frequent Traveler/Affinity Benefits
Employee may keep points/miles for personal useEmployee must assign points/miles to company
Employee must use points/miles for company travel
What is your policy on frequent traveler or affinity benefits?
T&E Expense Management Trends Policies
Source: IOFO 2012 Trends in Expense Management
T&E Expense Management Trends Travel Management
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49.5%
13.7%
36.8%
Travel Management Organization
Corporate travel agency
In-house travel department
None - we allow employees to book any way they wish
What is the primary type of travel management organization you use?
T&E Expense Management Trends Travel Management
Does the company mandate use of the company’s travel management process to make travel reservations and purchase?
63.9%22.7%
13.4%
Mandate Company's Travel Management Process
Yes No Not applicable
Source: IOFO 2012 Trends in Expense Management
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51.5%35.1%
13.4%
Online Booking Tool
Yes No Not applicable
Does your process offer an online booking tool for employee use?
T&E Expense Management Trends Travel Management
If yes, which tool provider?
21.6%
51.4%
5.4%
8.1%
5.4%8.1%
Tool ProviderGet There
Cliqbook
Res-X
Reardon
NuTravel 0%
Egencia/Expedia
Orbitz for Business
Travelocity Business 0%
Source: IOFO 2012 Trends in Expense Management
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Do you pre-populate data into the expense reporting system?
T&E Expense Management Trends Travel Management
Do you plan to increase integration between the travel management function and the expense management process in the future?
11.6%
88.4%
Pre-populate Data
Yes No
30.5%
69.5%
Plan to Increase Integration
Yes No
Source: IOFO 2012 Trends in Expense Management
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What role does the company travel manager play in expense reporting?
T&E Expense Management Trends Travel Management
10.9%
8.7%
6.5%
18.5%
55.4%
Role of Travel Manager In Expense Reporting
Manages the expensereporting process
Receives data fromthe expense reportingprocess
Audits expensereports
Has a limited role
Has no involvementwhatsoever
Source: IOFO 2012 Trends in Expense Management
T&E Expense Management Automation Trends
31
29.8%
18.1%17.0
%
9.6%
6.4%
4.3%
3.2%
3.2%
2.1%
2.1%2.1% 1.1% 1.1%
T&E Reporting System
Paper-based Concur
InterplX Oracle/PeopleSoft
In-house developed software sys-tem
Corporate card provider system
SAP Electronic spreadsheets
Infor/Lawson Ariba
IBM SumTotal
Databasics Reardon/Expensewire 0%
Expenseable 0% ExpenseWatch 0%
Certify 0%
Please select your primary T&E reporting system
T&E Expense Management Automation Trends What are companies doing today?
Source: IOFO 2012 Trends in Expense Management
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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
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Measured Performance
T&E Expense Management Automation Trends What Does “Paper Based” Cost to Process?
Best In Class
90% compliance to corporate policies concerning T&E 85% business travel spend under management* $7.91 cost to process a single expense report
Average 77% compliance to corporate policies concerning T&E 64% business travel spend under management * $ 17.87 cost to process a single expense report
Laggards 40% compliance to corporate policies concerning T&E 19% business travel spend under management* $25.72 cost to process a single expense report
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
Cost Savings Example
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)
– Cost per automated report $7.91– Annual Cost 200*12*$7.91=– $18,984 Annual Cost
Estimated Annual Savings?
– Annual savings of $42,744– 69% Savings
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Expense Management Priorities and Challenges / Pressures
Theme?– Reporting and visibility into expenditures
T&E Expense Management Automation Trends Selecting an Expense Management Solution
Source: Aberdeen Group, February 2012
Improve intelligence through analytics/reporting
Enhance visibility into overall travel/expense spending
Drive more value out of business travel
Improve expense management processes
42%
55%
57%
58%
Expense Management Priorities for 2012
n = 140
Inadequate global visibility into supplier base
Mandate to reduce expense-processing costs
Must enhance expense management analytics
Lack of compliance to travel/expense policies
25%
38%
47%
59%
Expense Management Challenges / Pressures
n = 140
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T&E Expense Management Automation Trends Selecting an Expense Management Solution
Source: IOFO 2012 Trends in Expense Management
What is the MOST important factor in choosing an expense management solution?
Ease
of u
se
ERP
inte
grat
ion
Lowes
t cos
t
Corpo
rate
car
d inte
grat
ion
Robus
t fea
ture
set
Man
agem
ent r
epor
ting
Online
book
ing
inte
grat
ion
Mob
ile d
evice
cap
abilit
ies
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%34.0%
18.1% 17.0% 17.0%
6.4% 6.4%
1.1% 0.0%
What is the MOST important factor in choosing an expense man-agement solution?
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Which of the following do you utilize in your expense management system?
Ad-hoc management reporting is the most commonly utilized tool in an expense management system – who is using this functionality?
T&E Expense Management Automation Trends Selecting an Expense Management Solution
Automated integration with CRM/SFA system
OCR receipt reading/matching
Map integration for mileage calculation
Personal card charges pre-populated
Offline entry capability
Level-3 data for hotel folio, etc.
Automated integration with HR system
Flexible policy changes (limits, etc.)
Ad-hoc management reporting
0 10 20 30 40 50 60 70 80 90 100
Utilized Expense Management Features
YesNoNo, but I like itNot available
Source: IOFO 2012 Trends in Expense Management
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Which areas use the management information reporting capabilities of your expense management system/process?
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
Others
End-users/travelers
Approvers
Senior management
Travel management
Accounts payable
0 10 20 30 40 50 60 70 80 90
Reporting Users
Heavy usersMedium usersLight usersDon't use
T&E Expense Management Automation Trends Selecting an Expense Management Solution
Source: IOFO 2012 Trends in Expense Management
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2012 Aberdeen Survey
Expense Management Technology Roadmap
52% Cloud based SaaS(Software-as-a-Service)
24% Installed Software
21% Mix
T&E Expense Management Automation Trends So what are companies planning on doing?
2012 IOFO Survey
Planning on making changes to expense management program?
34.4% - Yes
Manual and paper-based
Mix of cloud and on-premise
On-premise/installed
Cloud-based/Software-as-a-Service
27%
12%
31%
29%
4%
21%
24%
52%
Expense Management Technology Roadmap
Expected Fu-ture De-ployment
Current Deploy-ment
8.3%
10.4%
10.4%
5.2%
65.6%
Planning on making changes?
Yes
In the next 6 months
Yes in the next 18 months
Yes after the next 18 months
No changes planned
Source: IOFO 2012 Trends in Expense Management
Source: Aberdeen Group 2012 T&E Expense Management
Bank Offered Expense Management Solutions
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Bank Offered Solutions*
Ease of Use ERP Integration Lowest Cost Corporate Card Integration Robust Feature Set Management Reporting Online Booking Integration Mobile Device Capabilities
All of top factors supported
Bank Offered Expense Management SolutionsSelecting an Expense Management Solution
Source: IOFO 2012 Trends in Expense Management
*Not all Bank offered solutions may address each factor
Industry needs vs. bank offered capabilities
Ease
of u
se
ERP
inte
grat
ion
Lowes
t cos
t
Corpo
rate
car
d inte
grat
ion
Robus
t fea
ture
set
Man
agem
ent r
epor
ting
Online
book
ing
inte
grat
ion
Mob
ile d
evice
cap
abilit
ies
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
34.0%
18.1%17.0% 17.0%
6.4% 6.4%
1.1%0.0%
What is the MOST important factor in choos-ing an expense management solution?
41
Industry needs vs. bank offered capabilities
Bank Offered Expense Management Solutions Selecting an Expense Management Solution
Automated integration with CRM/SFA system
OCR receipt reading/matching
Map integration for mileage calculation
Personal card charges pre-populated
Offline entry capability
Level-3 data for hotel folio, etc.
Automated integration with HR system
Flexible policy changes (limits, etc.)
Ad-hoc management reporting
0 10 20 30 40 50 60 70 80 90100
Utilized Expense Management Features
Yes
No
No, but I like it
Not available
Source: IOFO 2012 Trends in Expense Management
*Not all Bank offered solutions may address each factor
Bank Offered Solutions*
Ad-hoc management reporting Flexible policy changes Automated integration with HR
system Level-3 data for hotel folio, etc.
Offline entry capability
Personal card charges pre-populated
5 of top 6 features supported
42
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, PeopleSoft 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
Bank Offered Expense Management Solutions
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Complex Policy Rule Integration for Card and Cash Expenses Multiple Policy Triggers can be applied simultaneously to create unique Policy Rules
Bank Offered Expense Management Solutions Policy Integration – Policy Rules
Transaction Types
Card Transactions
Cash Expenses
Violation Level
Policy Levels 1 - 4
Amount Triggers
Less Than
Subject Triggers
Supplier
Currency
Charge Code Segment
Charge Code
Source Country
Home Country
Merchant Category
Merchant Group
Transaction Type
Day of Week
Policy Example:
– Card Transactions greater than $100 at Office Depot on a Saturday and Coded to Project 2 is a Policy level 1 Violation
Card Transactions Greater Than $100
Supplier - Office Depot
Day of Week - Saturday
Policy Level 1Charge Code – Project 2
Greater Than
Between
44
Policy flags highlight suspected policy violations Cardholders can enter comments to justify policy violations Managers will have visibility into policy violations and cardholder comments
Bank Offered Expense Management Solutions Policy Integration – Violation Monitoring
45
Basic or Complex Approval Routing
Bank Offered Expense Management Solutions Approval Routing Rules
Transaction Types
Card Transactions
Cash Expenses
Subject Triggers
Rule Behavior
Amount Triggers Rule Drivers
Supplier
Currency
Charge Code Segment
Charge Code
Source Country
Home Country
Merchant Category
Merchant Group
Transaction Type
Day of Week
Approval Rule Example:
– Card Transactions greater than $100 and Coded to Project 2 requires an additional approval
Card Transactions Greater Than $100 Charge Code – Project 2Transaction Status –
Strictly Coded
Basic Approval Routing– Approval can be simply based in hierarchy
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
Process Order
Dependency Order
Approver Grouping
Transaction Status
Less Than
Greater Than
Between
Rule Grouping
46
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
Bank Offered Expense Management Solutions Policy and Approval Rules – Compliance Audits
Perform company wide searches based on custom approval and policy rules
Click on violations to drill into details
47
4.) Coding automatically
assigned /locked
Customizable Spend Wizards can simplify and automate assignment of charge codes by focusing on question based expense report allocation
Bank Offered Expense Management Solutions Spend Wizards – Simplified Charge Code Allocation
3.)Enter Information
2.) Allocate Amounts
1.) Select Spend Wizard
5.) Receipt Images can be attached to transaction
48
Streamline month end reconciliation management with automated email reminder alerts and the ability send communications directly to certain groups of users
Bank Offered Expense Management Solutions Program Management - Email Communications
Multiple email alerts can be set for distribution with multiple trigger and distribution frequency
options
Emails can be generated to predefined groups of employees i.e. “Employees with items not
submitted”, etc
49
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
Bank Offered Expense Management Solutions Interactive Program Reporting
50
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 InterplX
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
51
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
Summary - Observations
Questions?