Industry Best Practices for T&E 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 Company Annual Revenue Banking/Financial Services Construction Education 0.80% 1.70% 11.58% 0.80% Food and Beverage Government 4.99% 3.29% Insurance 7.39% Manufacturing 2.50% 3.29% 1.70% 8.28% Medical/Dental/Healthcare
Not-for-Profit 3.29% 5.79% Pharmaceuticals 4.99% Real Estate Retail 11.58% Service Software 28.04% Telecom Transportation Utilities/Communication 9.20% Less than $50 million 12.30% $50 million to $250 million 6.20% $250 million to $500 million 23.80% 26.90% 8.50% 13.10% $500 million to $1 billion $1 billion to $5 billion
$5 billion to $10 billion Greater than $10 billion 2012 Aberdeen Group T&E Expense Management Survey Results Industry 21.00% 40.00% 11.00% 10.00% 5.00% 5.00% 8.00% Company Size Manufacturing Software Financial Services Public Sector Transportation/Logistics Retail 26.00% 47.00% Annual revenue greater than $1 billion Annual revenue $50 million to $1 billion 27.00% 25 Other Industries
Source: IOFO 2012 Trends in Expense Management Source: Aberdeen Group 2012 T&E Expense Management 5 Annual revenue of $50 million or less T&E Expense Management Trends 2012 IOFO Survey Demographics Please select your companys total number of employees. Company's Total Number of Employees 13.49% Less than 250 2.10% 4.30% 251 to 1,000 5.00% 1,001 to 5,000 19.88% 26.17% 5,001 to 25,000 25,001 to 50,000 50,001 to 100,000 29.07% 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 Under 100 10.91% 2.70% 24.52% 12.71% 101 to 500 501 to 1,000 1,001 to 2,500 15.52% 33.63% 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 2.00% 4.10% Accounts Payable Human Resources Purchasing/Travel Management 93.90% 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 0% 6.50% 20.60%
34.60% 1% to 15% 16% to 25% 26% to 50% 51% to 75% 10.30% 100% 4.70% 14.00% 76% to 99% 9.30% 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 21.30% Yes, if requested
6.50% 46.30% Yes, if employee does not have a corporate card Yes, with management approval 25.90% 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 14.10% 25.30% AP Check AP via ACH 21.20% Attach to payroll Outside provider pays 39.40% Source: IOFO 2012 Trends in Expense Management 12
T&E Expense Management Trends Organization What is the frequency of employee reimbursements? Reimbursement Frequency 12.29% 20.78% 4.70% Daily Twice a week 10.39% Weekly 13.19% Every two weeks Semi-monthly Monthly 38.66% Source: IOFO 2012 Trends in Expense Management 13 T&E Expense Management Trends Policies T&E Expense Management Trends Policies What is your companys minimum threshold for receipt requirement?
Receipt Requirement 11.11% Greater than $75 Greater than $50 (but less than $75) 4.00% Greater than $25 (but less than $50) 52.55% Receipts 32.33% are (generally) required for all non per diem reimbursements 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 Paper 5.20% 25.80% Fax/email 41.20%
Scanned by users Combination fax/email and scan by users 19.60% 8.20% Submitted to central scanning facility 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 11.50% Yes No 88.50% 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 22.00% 2.80% No Yes - Exceptions 75.20% 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? Air Travel Restriction 13.20% 4.70% 5.70% 15.10% 61.30% Lowest price coach class on any airline Lowest price coach class on preferred airline only Lowest price coach
(domestic)/business or first class (international) Business or first class if travel time exceeds set number of hours No restrictions 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 1.90%0.90% 8.30% 2.80% 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 11.10%
Reimburse at less than 35 cents per mile Rate varies for different groups of employees 75.00% 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 Sub-compact Compact Intermediate/midsize 43.80% Full size Luxury 3.40% 3.40% 49.40% What is the approved class of rental car for executive travelers? Approved Class of Rental Car
3.40% 4.50% 15.90% 27.30% 48.90% 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 1.90% Pay per diem Pay actual (no limit) for all meals 17.12% Pay actual (with limit) for all meals Pay actual for breakfast and dinner (exclude lunch) 0% 51.45% 29.53% 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% 18.10% 22.90% Pay actual (no daily limit) Approved/preferred hotels only pay actual (with daily limit) 59.00% 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 Employee may keep points/ 4.20% 4.20% miles for personal use Employee must assign points/miles to company Employee must use points/ miles for company travel 91.60% 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 36.80% 49.50% In-house travel department None - we allow employees to book any way they wish 13.70%
Does the company mandate use of the companys travel management process to make travel reservations and purchase? Mandate Company's Travel Management Process 13.40% 22.70% 63.90% 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 13.40% 51.50% 35.10% Yes No Not applicable
If yes, which tool provider? Tool Provider Get There Cliqbook 5.40% 8.10% 5.40% Res-X 8.10% 21.60% Reardon NuTravel 0% Egencia/Expedia Orbitz for Business 51.40% 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? Pre-populate Data 11.60% Yes No 88.40%
Do you plan to increase integration between the travel management function and the expense management process in the future? Plan to Increase Integration 30.50% Yes 69.50% 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 10.90% 8.70% 6.50% 55.40% 18.50% 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 1.10% 3.20% 3.20% 4.30% 6.39% 9.59% 1.10% 2.10% 2.10% 2.10% 29.77% 18.08%
Paper-based Concur InterplX Oracle/PeopleSoft In-house developed software system Corporate card provider system SAP Electronic spreadsheets Infor/Lawson Ariba IBM SumTotal Databasics Reardon/Expensewire 0% Expenseable 0% ExpenseWatch 0% Certify 0%
16.98% 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 Best In In Class Class Average Average 90% compliance to corporate policies concerning T&E 85% business travel spend under management* $7.91 cost to process a single expense report Based on 200 Expense Reports per month Laggards (Paper Based)
77% compliance to corporate policies concerning T&E 64% business travel spend under management * $ 17.87 cost to process a single expense report Laggards Laggards Best in Class (Automated) 40% compliance to corporate policies concerning T&E 19% business travel spend under management* $25.72 cost to process a single expense report *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
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 Cost per manual report $25.72 Annual Cost 200*12*$25.72= $61,728 Annual Cost 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 55% Mandate to reduce expense-processing costs Improve intelligence through analytics/reporting 42% Inadequate global visibility into supplier base n = 140 59% 47% 38% 25% n = 140 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? 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% 17.0% 15.0% 10.0% 6.4% 6.4% 5.0% 1.1% 0.0% se a E
o se u f P ER a gr e t in n tio w Lo Co tc s e t os ra o rp te ca
rd n io t a gr e t in tf s bu o R e e ur t a M Source: IOFO 2012 Trends in Expense Management 35 t se em
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M 0.0% n tio ile ob e ic v de ca p es i t ili ab 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 Level-3 data for hotel folio, etc. Not available
No, but I like it No Yes Offline entry capability Personal card charges pre-populated Map integration for mileage calculation OCR receipt reading/matching Automated integration with CRM/SFA system 0 10 20 30 40 50 60 70 80 90 100 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 Don't use Light users Medium users Heavy users Senior management Approvers End-users/travelers Others 0 10 20 30 40 50 60 70 80 90 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 Planning on making changes to expense
management program? 34.4% - Yes Yes In the next 6 months 8.31% 10.41% Yes in the next 18 months 10.41% 65.67% 5.21% Yes after the next 18 months No changes planned 2012 Aberdeen Survey Expense Management Technology Roadmap 52% Cloud based SaaS(Software-as-aService) 24% Installed Software Expense Management Technology Roadmap 52% Cloud-based/Software-as-a-Ser... 29% 24% On-premise/insta...
31% 21% Mix 21% Mix of cloud and on-pre... Manual and paper-b... Source: IOFO 2012 Trends in Expense Management Source: Aberdeen Group 2012 T&E Expense Management 38 12% 4% 27% Current Deployment Expected Future Deployment Bank Offered Expense Management Solutions Bank Offered Expense Management Solutions Selecting an Expense Management Solution Industry needs vs. bank offered capabilities What is the MOST important factor in choosing an expense management solution? 40.0% 35.0%
34.0% Ease of Use ERP Integration 30.0% Lowest Cost 25.0% 20.0% Bank Offered Solutions* 18.1% 17.0% Corporate Card Integration 17.0% 15.0% 10.0% Robust Feature Set 6.4%
1.1% 0.0% Management Reporting 6.4% 5.0% 0.0% Online Booking Integration Mobile Device Capabilities All of top factors supported Source: IOFO 2012 Trends in Expense Management *Not all Bank offered solutions may address each factor 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 Ad-hoc management reporting Automated integration with HR system Flexible policy changes (limits, etc.) Automated integration with HR system Level-3 data for hotel folio, etc. Not available Offline entry capability No, but I like it Personal card charges pre-populated No Level-3 data for hotel folio, etc.
Offline entry capability Personal card charges prepopulated Yes Map integration for mileage calculation 5 of top 6 features supported OCR receipt reading/matching Automated integration with CRM/SFA system 0 10 20 30 40 50 60 70 80 90100 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, 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 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 Transaction Types Types Amount Amount Triggers Triggers Subject Subject Triggers Triggers Violation Violation Level 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: Card Transactions greater than $100 at Office Depot on a Saturday and Coded to Project 2 is a Policy level 1 Violation Card Transactions Supplier - Office Depot 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 Transaction Types Types Amount Amount Triggers Triggers Rule Rule Drivers Drivers Subject Subject Triggers 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 Home Country Approver Grouping 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 crosscharged by the cardholder 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 companys travel and entertainment (T&E) policy, its crucial to conduct audits on a regular basis Robust reporting options can simplify policy and approval rule audits by focusing on exceptions Perform
Perform company company wide wide searches searches based based on on custom custom approval approval and and policy policy rules rules Click Click on on violations violations to to drill drill into into details 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.) 2.) Allocate Allocate Amounts Amounts
3.)Enter 3.)Enter Information Information 1.) 1.) Select Select Spend Spend Wizard Wizard 4.) 4.) Coding Coding automatically automatically assigned assigned /locked /locked 5.) 5.) Receipt Receipt Images Images can can be be attached to transaction 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 Emails can can be be generated generated to to predefined predefined groups groups of of employees employees i.e. i.e. Employees Employees with with items items not not submitted, submitted, etc etc Multiple Multiple email email alerts alerts can can be be set set for for distribution distribution with
with multiple multiple trigger trigger and and distribution distribution frequency frequency options 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 cant 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 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 LAMBORGHINIS - 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
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