Why Automation Drives the ROI of T&E Spend
Many companies are getting less return from employee travel and expenses than they should. The problem isn’t a lack of policy or organization, but a lack of consistent implementation. Employee expenses are too often administered with an emphasis on flexibility instead of policy enforcement, and it’s costing companies real money.
This revelation was the most prominent finding to come out of a report by London School of Economics lecturer Dr. Alexander Grous released last month. In the paper, commissioned by travel technology company Amadeus, Grous studied the ROI of corporate T&E spending by interviewing 26 C-level executives across a range of corporate sectors. He found that organizations consistently forego savings in the name of leniency—and that if policy is consistently applied with the use of automation, the ROI of T&E increases.
According to the paper, the benefits of an automated expense system manifest in three ways.
Expense automation means policy compliance
One of the most consistent themes to emerge was the reluctance of businesses to decisively enforce their expense policies. Of companies that had defined T&E policies, 95% permitted out-of-policy purchases. Not surprisingly, policy-noncompliant spend was fairly high: between 15–20% of expenses.
That leniency forfeits savings. Companies with more than 80% compliant travel expenses enjoy 23% lower total indirect costs per traveler than companies with lower policy adherence. Internal compliance also ensures that purchases remain within a managed buying channel, which drives savings through volume discounts and spend consolidation.
So why are companies letting employees ignore fiscally beneficial expense policies? According to the CEOs, CFOs, and other executives interviewed for the paper, the problem stems from the late stage of the expense lifecycle at which expense policies are applied. If the finance team doesn’t discover a policy violation until the review phase, the window to correct that purchase is closed.
Expense automation solves this challenge by preventing or flagging exceptions at the point of submission. This in-line enforcement not only imposes the expense policy consistently and in real time, but it also communicates the policy clearly, minimizing the likelihood of future violations.
Corporate cards are efficient purchase mechanisms
Another powerful cost control mechanism is the use of corporate cards. Over two-thirds of firms offer corporate cards, but uptake is reportedly scarce—only 15% of employees, according to the study.
Part of the problem is employee preference. “People don’t want to give up collecting points on their personal cards,” said one COO. A more structural hindrance, specifically with travel, is that employees don’t tend to put unexpected purchases in emergency situations on a corporate card. The study participants estimated that employees put over 90% of on-trip purchases on their personal cards.
This allowance of ad hoc reimbursable expenses precludes an important savings opportunity. Combined with automated expense management systems, corporate cards reduce the cost of expense processing by 78%. They also reduce processing times by 24% and minimize the risk of fraud or duplicate submissions.
And while automated solutions won’t convince employees to take a company card with them, automation can reduce the complexity that plagues accounts payable processes in general. Grous suggests “matching spending with purchase requests in an automated manner. This automated accounts payable process significantly lowers transaction costs and fraud by eliminating the need to review every invoice manually.” Automation can similarly streamline corporate card reconciliation.
Expense automation empowers critical analysis
Perhaps most worryingly of the report’s findings, 80% of executives do not believe they have the information necessary to meaningfully analyze their employee expenses. This challenge of “spend identification” makes it hard for companies to see where their money goes, which in turn minimizes the savings available through volume discounts other efficiencies. It also makes ROI hard to calculate.
It’s no coincidence that, concurrently with this reported lack of visibility, those same executives are generally dissatisfied with their expense solutions. Sixty percent of the study’s executives say they are considering making changes to their IT systems in the next 3 years to facilitate better T&E management.
What they want, in a word, is detail. Seventy percent of these people identify the need for better analysis as their primary expense challenge. “This includes the ability to segment and search expenses at a granular level via defined criteria such as compliant and noncompliant categories, employee names, routes selected for travel, and other major categories.”
Expense automation generates this level of data and makes it accessible. Given that over half of CFOs lament having to produce “multiple reports manually” in a “labor-intensive process,” the utility of data-heavy expense automation is clear. The ability to slice and dice data into meaningful views is a cornerstone of real time expense reporting, and it hasn’t arrived a moment too soon.
Expense automation eliminates half of direct processing costs
Expense automation doesn’t just enforce policy consistently. It also pushes employee transactions into a monitored purchasing channel, helps companies manage corporate cards easier, and enables a level of reporting that is simply unavailable otherwise. For these reasons, expense automation cuts the direct cost of expense claims from 4.6% of total spend to 2.1%—a reduction of over half.
Keep in mind, too, that over 90% of the interviewed executives currently have an expense solution in place. Clearly, not every tool is getting the job done. What these teams need is modern expense automation: the kind specifically designed to manage complexity out of an inherently complex process. With more automated support, human reviewers can operate more efficiently and intelligently—focusing on what matters, not on catching up to unpredictable employees.