BTN's 4th Annual Expense Manager Survey: Automated Expense Systems Make Further Inroads

Michael B. Baker, Business Travel News, 10/22/2007

Paper and spreadsheets still dominate as the expense reporting methods of choice for buyers in Business Travel News' fourth annual Expense Manager Survey, but BTN's research also indicates that more options from expense vendors along with the need for more oversight to comply with Sarbanes-Oxley reporting requirements have eroded that dominance and made automated expense reporting more common in small and midmarket companies. While integrating expense systems with other aspects of the supply chain remains largely the exception rather than the rule, expense managers are showing a desire to do so.

Based on BTN's survey of 168 expense managers, 30 percent use systems purchased from outside vendors, and the remaining 70 percent use in-house systems. In terms of the ratio, however, nearly twice as many respondents use outside vendors for their expense reporting tool compared with BTN's first Expense Manager Survey in 2004, when only 17 percent were doing so.

Survey respondents largely were from small and midmarket companies with less than $12 million in annual U.S. booked air spending, and consultants said outside expense vendor penetration among large-market buyers is much higher. David Hillman, principal of Deerfield, Ill.-based Consulting Strategies, said smaller-market expense managers are seeing the success of larger companies with expense automation, and that success now is trickling down to them. Vendors also are more aggressively targeting small and midmarket expense managers, and implementation has become more affordable.

"The price for third-party expense management software has come down significantly over the years, particularly for smaller users," Hillman said. "It used to be that companies with fewer than 1,000 users couldn't justify the cost. Now, that's not the case."

As senior financial managers change jobs, they are spreading best practices to their new employers, another reason for the growth of automation, said Bob Langsfeld, a consultant with the Incline Village, Nev.-based Corporate Solutions Group. "The primary benefit is for the corporation to make the travel experience the best possible and least imposing," he said. "We are seeing the end of the hard-copy, fax-it-in and Excel spreadsheet solutions."

That end might be in sight, but paper and spreadsheets still dominate among in-house systems, according to BTN's survey. Of those users, 30 percent use paper and 46 percent use spreadsheets for expense reporting, slightly higher than in the 2004 survey.

Such methods make policy enforcement difficult, said Henry Ijams, managing director and founder of Charlotte, N.C.-based financial technology consulting firm PayStream Advisors. "Paper means we can't control it properly, because we can't see it," he said. "Unless we bring it online, expenses can spiral out of control."

Expense managers are bracing for more travel and entertainment expenses in 2008. More than two-thirds of respondents said they expected expenses to be higher next year, indicating a mean increase of 15 percent.

"Travel is a very manageable expense, and it's definitely one we can control better," Ijams said. "Unfortunately, the research shows we're not doing that."

PuriCore, a Malvern, Pa.-based life science company specializing in antimicrobial technology, saw firsthand the benefits of automating its expense reporting process when it moved from a paper-based process to an automated tool supplied by Conshohocken, Pa.-based Expensewatch.com, which specializes in small and midmarket clients. Under the old process, employees mailed in reports, and staff accountants had to manually match receipts with those reports, said Marko Vukosavovic, PuriCore's senior financial analyst. Reimbursement took between four and six weeks, and the delay often would lead employees to wait until several months of receipts were accumulated before filing. Accountants had to manually enter T&E categories, 30 percent of which were labeled "miscellaneous," he said.

Not only did expense reporting automation drastically shorten reimbursement time, but the improved data availability gave PuriCore a window on some areas that were unnecessarily adding to the company's T&E spending, Vukosavovic said. The company discovered employees were returning rental cars without filling up the tank, resulting in charges, and PuriCore adjusted its travel policy accordingly.

"There are so many things you can go in and understand," Vukosavovic said. "The system really did improve our processes, not only by saving us from hiring more employees, but bringing us much better efficiencies."

Bill Davidson, corporate travel and meeting services manager of Austin, Texas-based International Sematech, also helped oversee a conversion of a paper-based process, creating a homegrown solution using Oracle's PeopleSoft technology a few years ago. Like Vukosavovic, Davidson said his company was able to pursue savings based on what he was seeing in the expense reporting system. Prior to automation, the company was not able to see data outside of air, car, hotel and perhaps meals.

"When doing manual expense reporting, people didn't chase down details of what they were spending on parking, fuel, shipping and hosted dinners," Davidson said. "Now you have the ability to look that stuff up with some real numbers behind it."

Despite these savings opportunities, expense managers attempting automation often face resistance or apathy from upper management, consultants said. The cost of installation, though decreasing, still is off-putting for some senior financial managers, and T&E expense reporting is not always the highest priority within a company, Corporate Solutions Group's Langsfeld said.

Sematech's Davidson said his group gained support by presenting management with hard numbers, a study of the current system's cost in time and effort and the anticipated savings. Once the new system was up and running, he checked to verify the numbers. "We weren't far off, and it turned out to be significant savings," he said. "You want to do some things because they're more efficient, but everybody looks at the cost."

PuriCore's Vukosavovic said he saw some resistance from company executives who worried the system would be too time-consuming to learn, but he overcame those concerns by training employees in groups and allowing them to help define the new T&E categories. The growth of the company, which has tripled in size since 2005, also was an impetus for implementation, he said.

Consultants said expense reporting tools are becoming more global in scope and facing a set of challenges, particularly as reimbursement rules vary by country, often by law. Consulting Strategies' Hillman said the number of Fortune 1,000 companies using the same system globally is relatively small, but many are moving in that direction.

"There's no question that there's more and more focus on global expense management, just as there is with global travel management," Hillman said.

BTN's survey results support that assertion. About half of respondents indicated that they have employees outside of the United States, and more than half of that subset indicated those employees use the same expense reporting tool as do U.S. employees.

Vendors, too, are noticing the trend toward globalization. Redmond, Wash.-based Concur Technologies this month opened an international office in Prague, and has opened offices in Belgium, Germany and Norway in the past 24 months.

"We have offices all over continental Europe," said Raj Singh, Concur president and COO. "In our estimation, the company has a choice to consolidate, and it's a wise leveraging decision."

Concur also has been at the forefront of another key trend in expense management: the integration of online booking tools and expense reporting tools. This is the first full year that the integrated suite of Concur's expense tool and the Cliqbook booking tool, which Concur acquired in 2006, has been on the market. Meanwhile, European booking tool provider KDS has introduced a similar tool, and other expense reporting tool suppliers—including CyberShift's Necho and Databasics—have forged alliances with booking tools to achieve integration that they claim allows clients to choose the best-of-breed products from all supplier fronts.

Michael Ciaccio, travel and expense administrator for New York-based global financial services provider RiskMetrics, said his company has used Concur's expense tool since 2004 and Cliqbook for about a year and a half, and Ciaccio said it has gone well so far.

"We're getting close to the point of realizing the one-click solution," Ciaccio said. "I've been one of the few who have used it, and the functionality seems to work pretty well. We'll be putting in some upgrades, like electronic receipts, which have been a big bugaboo with employees."

Integrating expense and online booking is far from prevalent among expense managers surveyed by BTN. Only 12 percent of respondents reported integration between online booking and expense tools. To compare, 40 percent reported integration with a corporate payment system, and 81 percent reported integration with accounts payable and payroll.

Still, respondents also gave a vote of confidence to Concur's strategy. About two-thirds said they'd prefer a single supplier for both booking and expense, with the remaining 34 percent saying they would prefer multiple providers. Consulting Strategies' Hillman credited Concur's marketing muscle.

"Concur is, to a great extent, responsible for that mindset," Hillman said. "Because Concur is the market leader, the other market participants need to meet that functionality and be able to integrate with booking systems."

Concur also shook up the expense reporting tool landscape this year with the purchase of Gelco Expense Management, one of its largest competitors dedicated solely to expense management, in a transaction completed earlier this month. Although some consultants said this takes yet another choice off the marketplace for buyers, Corporate Solutions Group's Langsfeld said it's possible buyers will see an even more efficient tool with the integration of Gelco's and Concur's capabilities. The rising price of Concur's stock is a good indicator of future growth opportunities in the expense reporting field, he said.

"It's not just sales hype," Langsfeld said. "The market is one of the strongest critics. The expense reporting marketplace might have been oversaturated with players, and we are seeing an economic adjustment."

Hillman said the loss of a competitor also could bring more attention to enterprise resource planning systems that also provide expense reporting functionality. Travel management companies also have been getting on board. HRG, for example, earlier this year launched HRG Online, a tool that integrates booking and expense reporting, and more recently launched a tool targeted to companies moving off paper solutions. Hillman said TMC penetration into the expense market will be limited.

"They're not players in this marketplace, and I don't think they will be," Hillman said. "They've demonstrated in the past that this is not an area in which they have a core competency."