For many companies, travel and entertainment (T&E) is the largest controllable expense after the payroll – and it’s growing in importance as more people travel, at all levels of the company. But it’s also one of the hardest to track, mixing big expenses like air-fares with an easily accessible data trail with smaller costs, incurred off-line and often difficult to verify.

The average expenses claim costs £30-40 to process, frequently exceeding the amount being claimed. It can also take up to seven weeks for some employees to get their expense claims met – often taking longer in larger companies, with more authorisation and approval stages to go through, and any manual processes sometimes adding days at a time. There's also the hidden cost of management time tied up in the travel management process, efficiency lost through uncoordinated travel planning, and motivation lost when employees are kept waiting for approval and reimbursement or are forced to travel by what they know is an inefficient route.

The savings on offer
So there’s growing pressure to implement new travel expense management (TEM) systems – either installing one in-house, or handing over travel to one run by an outsource. TEM suppliers cite at least four routes to a quick return on investment:

• stricter monitoring of T&E choices before expense is incurred, allowing avoidable financial (and environmental) expense of unnecessary travel to be eliminated
• better planning and block-booking of employees’ travel, hotel and car-hire bookings, so bulk discounts and loyalty schemes are fully exploited
• more efficient processing of T&E expense claims after they’re incurred, so employees get reimbursed faster and processing costs are reduced
• statistical analysis of T&E choices, so that patterns of inefficiency and incomplete honesty are detected and eliminated

While savings vary widely with companies' travel needs and the efficiency of their present arrangements, providers in this area are explicit – and ambitious – on the scale of savings they expect to be able to generate, for a comparatively small outlay on software installation and support. Etap-on-Line, the Paris-based TEM specialist which launched UK operations in February, says its Ulysse system can reduce travel management costs by up to 75%, and management time by over 60%.

Ariba, which extended the travel component of its expense management systems with the acquisition of online TEM provider KDS in September, says clients can reduce the cost per invoice from an average £35 to less than £5, and the typical travel expense cycle from 2-3 weeks to 5 days or less.

Software Europe, which offers web-based expense management, says its clients start out with a cost per invoice of around £30 on average, which its system can reduce by at least 50%. And Basware, which offers TEM as part of its enterprise purchase-to-pay systems, says that on average "organisations can cut the processing time and reduce the time and cost of expense reimbursement processing by one third, creating bottom-line savings and optimising the entire travel-related purchase-to-pay process." More dramatic savings can be made at larger international organisations, where Basware calculates that business travel typically accounts for 20% of all indirect purchasing cost.

User reactions
Whereas some expense management initiatives delight those who monitor the spending while frustrating those who make it, TEM installers claim a high rate of end-user satisfaction. The main reason: travellers can file their claims more easily, are less likely to have them contested, and can get their money back much faster – often during a trip when they need it, rather than several weeks later after having to dip into their own pockets.

TEMs can also help create a policy that lets most employees take command of their own travel arrangements, while staying within rules that preserve the benefits of central monitoring and aggregation. Staff feel empowered by not having to ask permission for routine T&E from their supervisors, who in turn are relieved of micro-managing duties. At Software Europe, operations manager Adele Briggs says users especially appreciate a dropdown menu system that greatly reduces the amount of information claimants have to type in.

However, accounts departments’ desire for maximum transparency and control of T&E – by bringing all booking and expense claims online, and all expenditure onto corporate cards – needs to be balanced against the needs of travelling employees, who can’t always change their plans to keep things simple. "Most journeys are point-to-point, so the travel and hotel bookings are easy to bring online, but if it’s more complicated you need to conduct the policy offline," says Paul Hargreaves, vice-president and UK general manager at American Express. "Online use is growing but is still not 100%."

Owning vs outsourcing
As in other areas of expense management and data analysis, the old binary choice between in- and out-of-house has been split by a halfway house: software as a service (SaaS), in which clients use software hosted and maintained by an outsource. Hosted solutions are catching on, even among larger companies, and they have also made outsourced travel management cost-effective for much smaller ones. Software Europe says its system has proved cost-effective for businesses with as few as five regular claimants, while Etap-on-Line says Ulysse clients' user bases range from over 100,000 to as few as 40.

Etap-on-Line has seen most clients move from in-house TEM 5-7 years ago to a web-based solution, after recognising its speed and efficiency advantages and overcoming concerns about data security. Many larger clients have invested heavily in SAP or Oracle enterprise resource planning (ERP) systems. But precisely for that reason, says general manager Pierre-Emmanuel Tetaz, "they don’t want to out a lot of resources into other software." More than hosting, the company now sees itself as an Application Service Provider (ASP), undertaking to collect, check and input the data that clients want to report into the Ulysse system.

The ASP option has become widely cost-effective within the past two years, agrees Ariba T&E solution line manager Charles Brossman, and even large multinationals that used to buy the system outright have switched to a hosted system. "They may have to sacrifice some specialist calculations to get it configurable, but they obtain a reduction in internal IT support cost."

Full outsourcing of T&E is also growing, and AmEx’s Paul Hargreaves sees this as part of the general trend to free up employees and their managers to concentrate on their core business, with the added advantage that a specialist out-of-house travel manager can work on better purchasing arrangements, and neutrally assign different service levels to staff at different levels of seniority.

But web-based providers believe they can provide similar levels of service, especially for smaller clients with no in-house travel or software specialists. "We offer dedicated helpdesk support, and don’t abandon the customer after they’ve bought the system," says Briggs at Software Europe. "They can also get assistance if they want to add new functionality."

In Part Two…
It takes place away from home, involves cash as well as card transactions, and involves unpredictable assignments whose nature can’t always be disclosed – making travel one of business’s hardest-to-track costs, as well as one of the biggest, and one where out-of-policy detours can be particularly expensive.

The next instalment will look at use of travel expense management to dig deeper into the data to optimise travel patterns; optimise the planning and purchasing of travel; and integrate travel policy with wider business strategies for employee security and environmental improvement.