Improving Control of Travel Spend

Finance Executives on Optimizing Travel-Expense Management

A report prepared by CFO Research in collaboration with SAP

Improving Control of Travel Spend

Finance Executives on Optimizing Travel-Expense Management

A report prepared by CFO Research in collaboration with SAP

 IMPROVING CONTROL OF TRAVEL SPEND

Contents

About this Report Finance Teams Top Priority for Travel-Expense Management: Greater Control Especially as Revenues Grow, Control over Travel Spending Can Shrink Technology Can Be a Tool for Constructing a Solutionif Not the Solution in Itself On the Road to Better Control Travel-Expense Management is a Two-Way Street Sponsors Perspective

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About this Report

In January 2013, CFO Research conducted a survey among senior nance executives at large and midsize companies in North America and Europe to examine their views on managing business-travel spending. We investigated the tools and practices that nance teams use to set and enforce travel-spending policies, identify patterns in their employees spending behavior, and improve their ability to manage travel expenses. We gathered a total of 173 complete survey responses. Respondents represent a broad range of company segments, as follows:
Industry

Title

Director of nance 24% Chief nancial officer 20% VP of nance 15% Controller 13% EVP or SVP of nance 9% Treasurer 5% Other senior nance executive 8% Other 7% Revenue US$500 million US$1 billion 29% US$1 billion US$5 billion 31% US$5 billion US$10 billion 13% US$10 billion US$20 billion 15% US$20 billion or more 13% Region United States/Canada 79% Europe 21%
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Financial services/Real estate/Insurance 21% Auto/Industrial/Manufacturing 11% Chemicals/Energy/Utilities 10% Food/Beverages/Consumer packaged goods 9% Public sector/Nonprot 8% Wholesale/Retail trade 7% Business/Professional services 5% Pharmaceuticals/Biotechnology/ Life sciences 5% Media/Entertainment/Travel/Leisure 4% Health care 4% Software/Internet/Networking 4% Construction 4% Aerospace/Defense 3% Telecommunications 2% Transportation/Warehousing 2% Hardware/Electronics 1% Note: Percentages may not total 100%, due to rounding.

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Finance Teams Top Priority for TravelExpense Management: Greater Control

IN A BUSINESS ENVIRONMENT WHERE every competitive advantage counts, companies would do well to keep a sharp eye on employee travel. In a CFO Research recent survey of 173 senior nance executives based in North America and Europe, respondents emphasize that they are, indeed, seeking greater visibility into and control over travel spending. But survey results suggest that companies often settle for merely middling performance in their travel-expense management. These days, middle-of-the-road may no longer be good enough. For this reason, nance executives are looking to increase the control they have over travel spending at their companies. In our survey, a plurality of respondents (42%) say that their companies will focus on optimizing the level of control over travel-expense spending over the next two years: gathering more information on employee spending behavior, ne-tuning policies for travel spending, and related activities. (See Figure 1.) Control over the total travel spend is likely to have a greater impact on a companys nancial performance than simply getting the best pricethat is, maximizing the value of travel-related spendingor reducing transactions costs by minimizing the administrative burden of travel-expense management. A key aspect of control is improving compliance with travel spending policies and reducing the number of exceptions that have to be processed. Although few nance executives
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view employee compliance with travel-related spending policies as disastrous, only about one in ten (12%) go so far as to say it is excellent. More than 85% of survey respondents admit that employee compliance with travel spending policies has some room for improvement, and a third of those say that theres a great deal of room for improvement.

Survey results suggest that companies often settle for merely middling performance in their travel-expense management.

FIGURE 1 To improve travel-expense management over the next two years, my company will focus on ___________________.

42% Optimizing the level of control over travel-related spending

the value of travelrelated spending 30% Maximizing

of travel-expense 22% burden management

Minimizing the administrative

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Especially as Revenues Grow, Control over Travel Spending Can Shrink

ALTHOUGH SOME COMPANIES HAVE MADE strides toward a culture of compliance, others continue to struggle. In some cases, the need for better control runs up against the need to aggressively pursue renewed opportunities for growth. So, for example, one CFO at a nancial services rm explains, In order to better control costs, we have signicantly increased the restrictions we place on employee travel including mandating the use of certain carriers, lowest fares, specic hotels, etc. The volume of restrictions makes it more difficult for us to police exceptions as there are so many. Yet a director of nance at a large business/ professional services rm notes that employees who seek a policy exception, after all, arent always in the wrong. As the economy and our business become increasingly stable, offers this executive, the restrictive [travel-spending] policies are becoming challenged more frequently in context. At another nancial services rm, an EVP of nance says that restrictions on airlines and hotels have caused signicant issues in attending conferences as the hotel may be several miles away. Timing can be another source of necessary exceptions, because employees are often hard-pressed to plan as far enough in advance as required by travel-expense policies. One senior director of business operations/transformation at a large telecommunications company expresses the problem succinctly: Pressure to make arrangements more in advance of travel, but meetings are set up on short notice. Result = numerous violations to track. The need for speed and maneuverability outpaces the degree of control that companies seek.
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To add to these challenges, travel-expense requirements present a moving target: whenever policies are adapted to new circumstances, employees must be guided through the change. At one midsize manufacturing company, for instance, New ownership implemented new rules, which were more consistent with industry standards, but more restrictive, says a controller at the company. We now have the cultural change management requirements to get broad acceptance. Similarly, one director of nance at a midsize software/networking company says, We have streamlined our processes worldwide. We contract with a single travel agent with three centralized points of contacts (one per [geographic region]). [So there are] lots of behavior changes to manage. Another director of nanceone at a midsize nonprot companyechoes this point by saying, The difficult piece is getting people to adhere to certain policies. [There is] a lot of do as I say, not as I do. Cultivating widespread acceptance of travel policies, ultimately, requires better communication. At a large transportation/warehousing company, for example, travel-expense policies are difficult to enforce because everyone thinks their travel is the one exception that should be made, according to a director of nance at the company. But the CFO at a large manufacturing company offers a solution. We have been more specic and communicated the policies very widely to be sure everyone is aware, says this executive. A prerequisite to follow a policy is that it is known.

The difcult piece is getting people to adhere to certain policies. There is a lot of do as I say, not as I do.
DIRECTOR OF FINANCE, NONPROFIT COMPANY

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Technology Can Be a Tool for Constructing a Solutionif Not the Solution in Itself
IMPROVING EMPLOYEES ADHERENCE TO policies is at least partially a factor of making it easier for them to do so. In fact, three-quarters of survey respondents (76%) agree that making travelexpense submission and reimbursement less timeconsuming and error-prone would yield a meaningful nancial benet for their companies. But herein lies a dilemma: reducing the administrative burden on travelers and managers may come at the expense of the more detailed reporting that nance executives need to better control spending. As nance teams work to improve their control over travel spending, they remain mindful of the challenges that asking employees for more information can createespecially when their processes for collecting such data are mostly manual. At one large health-care company, for example, Enforcement of policies has resulted in a multi-page questionnaire with each travel expense submission using Excel, according to a VP of nance at the rm. It is cumbersome and has less value on small dollar items (i.e., reimbursement of $8 parking fee probably costs $8 in time and effort to complete the process). Survey results also show that simply automating processes, on its face, is not enough; automation has to be done right. Most companies represented in the survey rely on some degree of automation in their travel processes, with only 16% saying that processes are primarily manual. However, a majority of respondents (56%) report that their companies employees must navigate among a variety of dedicated point solutions for booking, reimbursement, and reporting. Only 28% of respondents say that the travel systems at their companies are tightly
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integrated with each other, and even fewer (22%) can claim that their travel systems are tightly integrated with their ERP and general ledger systems. If travel systems arent well integrated, then automation by itself cant deliver on the value it promises. The conundrum for companies, as described by one director of nance at a midsize wholesale/retail company, is this: Requiring people to enter too much info on their expense reports is counter-productive and creates a lot of negative noise. [But] without this data we cant report.

Three-quarters of survey respondents agree that making travel-expense submission and reimbursement less time-consuming and error-prone would yield a meaningful nancial benet for their companies.

FIGURE 2 At my company, _____ is among the greatest barriers to accessing robust, timely, and comprehensive information on travel expenses.
of company-wide integration among 39% Lack travel systems and processes

21% Lack of mandate for change

on manual 21% Over-reliance travel processes and systems compliance with 19% Uneven travel-spending policies non-standard 15% or travel processes Under-controlled
Note: Respondents were asked to select up to two responses.

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FIGURE 3 My companys travel booking and expense systems make a substantial contribution to our ability to meet our travel-expense management goals.

at companies with highly automated travel systems

35 % AGREE

at companies with somewhat automated travel systems

15 % AGREE

at companies with primarily manual travel systems

4 % AGREE

In fact, survey respondents say that the single largest barrier to accessing robust, timely, and comprehensive information on travel expenses is a lack of integration among different systems and processes. A plurality of respondents (39%) point to lack of integration as one of their top challenges; no other problem is selected by more than 20% of respondents. (See Figure 2, previous page.) In addition, two-thirds of respondents (66%) report relying on many sources of data in many formats (e.g., corporate card reports, employee expense reports, travel vendor reports, etc.). With this level of complexity, collecting, aggregating, and analyzing travel-related information can easily be as much of a time-sink with siloed systems as it is in companies that do it all by hand. These days, a company cant afford to use multiple travel systems to do the same thing, or even to do different things, if those systems cant communicate with each other. One CFO at a midsize nancial services rm warns of cumbersome software tools that merely shift the administrative burden from [the] accounting [department] to the traveler, and a director of nance at a large manufacturing company says that automation can actually create more bureaucracy when automated
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systems are not easy to use and demand a lot of time to digitalize receipts. Another nance executivean EVP of nance at a large media/entertainment companysays, We have a combination of additional travel requirements and budget cuts. Were sending people all over the world, and also have less ability to pay for it. We have a new system for charging travel expenses to clients and projects, and a self-managed travel planning site. The result is, its a mess of paperwork and data that doesnt really help anyone. If its done right, however, automation can help, our survey shows. One treasurer at a midsize nonprot company expresses concern with the more options, less control tradeoff in travel-expense management, adding that a new system can help us understand spend better. Among respondents at companies that employ a high degree of automation for travel, 35% say that their systems make a substantial contribution to their ability to meet their travel-expense management goals, whereas only 15% of respondents at companies that use some automation say the same. (See Figure 3.) At companies that have primarily manual systems, almost no respondents (4%) describe their travel systems as contributing substantially to their expense-management goals.

One treasurer at a midsize nonprot company expresses concern with the more options, less control tradeoff in travel-expense management, adding that a new system can help us understand spend better.

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On the Road to Better Control

OUR SURVEY RESULTS SUGGEST THREE main pathways for successful automation of travel-expense submission and reimbursement. They are: their ability to meet their travel-expense management goals, whereas far fewer respondents at companies with only somewhat integrated travel systems (11%) say the same. (See Figure 4.) The gure is even lower7%at companies with no integration between their travel systems and their other enterprise systems. Companies have quite a bit of ground to cover on travel-systems integration, our research indicatesand nance executives are keen on doing so soon. According to survey results, only 22% of companies have travel systems that are tightly integrated with their ERP and general-ledger

1 Tight integration between travel systems and other enterprise systems

Our research stresses, rst, that nance executives are particularly interested in ensuring that their travel systems are well-integrated with their other enterprise systems. At companies that tightly integrate their travel systems with their ERP and general-ledger systems, 49% of respondents say that their travel systems contribute substantially to

FIGURE 4 My companys travel booking and expense systems make a substantial contribution to our ability to meet our travel-expense management goals.

at companies with tight integration between enterprise systems and travel systems

49 % AGREE

at companies with some integration between enterprise systems and travel systems

11 % AGREE

at companies with no integration between enterprise systems and travel systems

7 % AGREE

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systems. About half of companies (52%) have some integration between their travel systems and their other enterprise systems, and a full quarter of companies (25%) have no integration.

executivea director of nance at a midsize software/networking companysays that corporate card reports are useful but not consolidated across countries, so aggregated data is difficult to obtain.

2 Consolidation of travel-expense data

Research results also suggest that travel systems tend to offer the greatest value if they manage to consolidate travel-expense data into a single source. At companies that rely on a unied source of travel-expense data, 84% of respondents say that their management decision makers have access to robust, timely, and comprehensive information on travel expenses, whereas this gure is only 57% at companies that rely on many sources of travel-expense data in many formats. (See Figure 5.) Decision makers with incomplete access to travel-expense data have to work harder to get the information they needor go without. At one midsize aerospace/defense company, for instance, a nance manager complains of aws in the companys data management systems: Because that is not the only source [of travel data], the picture from which the decision is being made is incorrect. Consolidating travel-expense data may be an important step for many nance teams. In our survey, 66% of companies rely on many sources of travel-expense data and only 25% rely on a unied source of travel-expense data. Regional divisions are cited by several executives as a major cause of scattered travel-expense data. One senior analyst at a large manufacturing company says, North American data is unied, but international data is not. Another nance
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3 Better use of preferred-vendor relationships for travel

Finance executives interest in furthering preferred-vendor relationships for travelprimarily by funneling their travel dollars to a small number of travel providerssuggests a nal important strategy for managing travel spend. According to our survey, three-quarters

FIGURE 5 Decision makers at my company have access to robust, timely, and comprehensive information on travel expenses.

at companies that rely on a unied source of travel data

84 % AGREE

at companies that rely on many sources of travel data in many formats

57 % AGREE

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of companies (75%) make extensive use of preferred-vendor relationships through which they receive special products, services, prices, or business terms for travel-related purchases. Respondents most frequently identify better prices as one of the top benets that their companies have realized through preferred-vendor relationships. (See Figure 6.) The overwhelming majority of nance executives see value in working to make better use of preferred-vendor relationships for travel: three-quarters of respondents (77%) agree that doing so would yield a meaningful nancial benet for their companies. Fully leveraging such relationships is most often a question of consolidating purchasing volume and better enforcing employee compliance, according to nance executives we surveyed. (See Figure 7.) We have the spending but through too many channels, says one EVP of nance at a midsize nonprot company. At another companya large chemicals/ energy rmstandardizing around a limited set of travel providers (e.g., airlines and hotels) has made it easier to negotiate preferred rates and evaluate spending trends, according to the rms treasurer. Our implementation of better travel technology solutions (online booking, manager reporting, etc.) has also helped.

FIGURE 6

_________is among the top benets my company has realized through preferred-vendor relationships for travel.

68% Better prices

over employees 39% control travel behavior Better visibility into/

25%

Better customer service

11% Better selection of products 7% Faster delivery

FIGURE 7

_________is among the greatest barriers to my companys ability to make better use of preferred vendor relationships for travel-related purchases.

30% 30% 20% 16% 16% 15%

Difculty consolidating enough purchasing volume with a given vendor to gain negotiating leverage

Difculty enforcing employee compliance with travel-spending policies

Lack of overall travel-purchasing volume

Difculty establishing relationships with vendors that employees are comfortable using

The cost of documenting spending volume and negotiating concessions outweighs the benets

Lack of timely access to comprehensive information on travel-related spending

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Travel-Expense Management is a Two-Way Street

ALTHOUGH FINANCE EXECUTIVES ARE naturally suited to take the lead on improving their companies ability to understand and control their travel spending, they are careful to note that travel-expense management works best as a companywide effort. Reaching for better information on travel spending, respondents suggest, is a two-way effort. If companies provide their employees with the policies and tools that pull travel-expense management out of the darkthat help illuminate, rather than obscure, the logic behind certain policies, and make it easier rather than harder to complythey are more likely to receive the travel-expense information they need to make informed management decisions. Respondents to our survey recognize the value of employees who can look at their options through the lens of a nance manager, objectively balancing their own needs against a high-level, companywide imperative to tame spending. Respondents also recognize, however, the origins of such behavior: employees are much more likely to exhibit it in a company culture that reinforces those values through example, through clear and consistent communication, and through applying the effort needed to cast a net around the multifarious ows of travel-related information that naturally accompany a business on a growth path.

If companies help illuminate, rather than obscure, the logic behind travel policies, and make it easier rather than harder to comply, they are more likely to receive the travel-expense information they need to make informed management decisions.

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Sponsors Perspective
WHEN IT COMES TO TRAVEL AND expenses, top of mind for nancial executives are enforcing global compliance with travel policies, gaining better visibility into travel-spending trends, and reducing travel costs and complexity. The ideal solution is one designed for how employees work and travel today. Its one that automates travel planning, travel booking, expense and receipt capture, and expense reimbursement. And one that helps companies simplify reporting and analyze expenses across multiple dimensions to control costs while improving compliance with corporate travel policies. With SAP Travel OnDemand, a cloud-based endto-end, one-stop solution designed for seamless travel and expense management, global nancial leaders are transforming their travel and expense management: Making travel easy via mobile access and realtime booking and receipt capture n Integrating expense management with SAP nancial solutions to manage the entire trip lifecycle n Streamlining processes with automation n Staying compliant with corporate booking policies, preferred suppliers, and expense limits n Accelerating reconciliation and reimbursement for improved cash management n Gaining greater visibility for better insight and control of travel costs
n

SAP Travel OnDemand helps reduce our travel expenses and makes booking and expense reporting and reimbursement so much easier. Weve seen a tangible business ROI since our implementation of SAP Travel OnDemand, and the integration with our other business software has created a seamless end-user experience.
CORBY BRENDLE, PRACTICE DIRECTOR, UST GLOBAL

To learn more about SAP Travel OnDemand, visit us at www.sap.com/travelondemand You can also visit our resource center or call us at 1-877-727-1127 x40002

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Improving Control of Travel Spend: Finance Executives on Optimizing Travel-Expense Management is published by CFO Publishing LLC, 51 Sleeper Street, Boston, MA 02210. Please direct inquiries to Matt Surka at (617) 790 3211 or mattsurka@cfo.com. CFO Research and SAP developed the hypotheses for this research jointly. SAP funded the research and publication of our ndings. At CFO Research, Matt Surka and David Owens directed the research and wrote the report. March 2013 Copyright 2013 CFO Publishing LLC, which is solely responsible for its content. All rights reserved. No part of this report may be reproduced, stored in a retrieval system, or transmitted in any form, by any means, without written permission.