Rick Rodick, senior vice president of field finance at Miami-based Ryder Systems, remembers what a pain it was to keep up with his travel and entertainment (T&E) reports back when he spent 50% to 60% of his time on the road. "Keeping track of receipts and filling out manual T&Es was very difficult and time-consuming," he says.
So when Ryder was considering adopting expense management automation software, which constantly updates expense reports as employees use their corporate credit cards, Rodick realized that the benefit of this investment would not be simply its ability to lower administrative costs, but in its capacity to raise employee morale. "The biggest plus is employee satisfaction," he says. "This is just one less hassle that a traveler has now."
Not surprisingly, Rodick turned out to be right about Ryder's implementation of IBM's Expense Reporting Solutions (ERS) last December. Rather than laboring to put together an expense report based on a collection of rumpled paper receipts, employees can simply go online and call up a report that already lists all of their corporate card transactions. The employees need only fill in a few details–such as the business purpose of an expenditure or any cash outlays–and hit a button to send the report on to be approved by a supervisor.
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Employees must also break out how much of a hotel bill was for lodging and how much for food, phone calls or other expenses. But in many cases, they don't even have to worry about providing receipts; companies can get IRS approval to use the digital receipts provided by the card company for tax purposes.
Rodick points out an ERS feature that allows employees to log on for their expense reports, work on them offline and then send them in later. That's handy for travelers, who can log on at the airport, fill in the details on the report while in flight and send it once they land, he says. Other vendors have similar features.
While the advantages for employees are obvious, analysts and companies that provide such systems say they can also provide big savings for businesses. For starters, they pare the cost of processing T&E reports: In 1997 an American Express study put the average cost at $36.41 per report and estimated that an EMA solution could cut that by more than 75%, to $7.91. Vendors also tout the savings possible if companies use the data the systems provide on T&E spending to bargain with frequent providers.
With all these apparent benefits, why aren't EMA systems more popular? Industry participants say that Web-based EMA systems were overshadowed by corporations' Y2K worries, their focus on installing ERP and CRM systems and the e-commerce stampede. In the late '90s, "all the IT mind share was going to e-business and how companies were going to be dot-com enabled," says Christa Degnan, a senior research analyst at Aberdeen Group Inc., a Boston-based information technology research firm. "IT and finance departments had other priorities."
T&E reporting wasn't one of them "because there were rudimentary processes in place that worked. They didn't work very well, but they worked," Degnan says. In addition, "expense management hasn't been an area where companies felt there was a significant return on investment."
As a result, penetration isn't everything that software providers would like. Concur Technologies Inc., the biggest of the companies specializing in EMA software, did a telephone poll of the Fortune 3,000 over the last two years that showed only 20% to 23% of companies have an automated T&E solution, says Elena Donio, Concur's vice president of worldwide sales. Donio sums up the market as "a lot of early adopters, but still a lot of open room to grow."
But most feel the cost-conscious times will create an environment for faster growth from now on. Philip Philliou, vice president for e-business and emerging technologies at MasterCard International, expects increased interest in EMA solutions given the "renewed focus on return on investment, on the bottom line, on technologies which produce a clear and quantifiable benefit to the corporation."
Companies that specialize in EMA solutions include Concur, Captura Inc., Extensity Inc. and Gelco Information Network Inc. The software is also available from big players like Ariba Inc., IBM Corp., Oracle Corp., PeopleSoft Inc. and SAP Aktiengesellschaft.
Ryder–where employees file about 120,000 T&E reports annually and charge about $35 billion on American Express corporate cards–calculated that it would save enough in the first year of use to offset the cost of the software. Rodick says the company's analysis of EMA software focused on hard numbers rather than trying to put a dollar value on factors like the time employees would save. Right off the bat, Ryder could count on saving the $300,000 to $350,000 that employees were spending each year to send their expense reports via overnight mail and the $30,000 that it spent annually on printing and preparing expense checks.
Ryder also expects to garner discounts from American Express for prompt payment. Under the old set-up, Amex wasn't paid until the expense report was filed and processed and the employee was paid. Ryder never earned any prompt-payment discounts, Rodick says. With ERS, the filing of expense reports has been speeded up and Ryder pays American Express directly. The ERS system "will pay for itself, given the discounts," he says.
Scoring Better Rates
Bob Tobias, Textron Inc.'s director of corporate office accounting, has similar hopes for savings at the $12.3 billion diversified manufacturer based in Providence, R.I. Textron, in the process of rolling out Captura Expense's hosted version for 11,000 of its employees, spends $60 million on U.S. travel and entertainment and processes 75,000 expense reports a year.
Tobias says Textron should save once the system is in place because accounting personnel will no longer have to re-key each report. Textron will also use business rules embedded in Captura's system to authorize a lot of expense reports automatically, freeing up supervisors. Tobias also expects savings because of the same kind of company card discounts that Rodick is hoping for and because the system will help Textron direct its spending toward preferred suppliers.
Analysts and EMA providers say corporations can realize another whole layer of savings once the EMA systems accumulate enough data to allow them to bargain for better rates with their biggest providers. That's partly a function of the quality of the data, which is more detailed than what corporations can pull from their accounting systems.
Just ask Charles Stahl, global manager of employee reimbursements and travel technology at E. I. duPont de Nemours and Co. The $24.7 billion chemical manufacturer has realized substantial savings in the two years in which it has used Concur Expense. DuPont has 40,000 to 45,000 employees who are reimbursed for expenses and it processes about 400,000 expense reports a year. Stahl says DuPont's experience confirms American Express's estimate that companies can save about 75% of the cost of processing T&E reports. In the first year DuPont used Concur Expense, "we saw savings of about 4% on our [T&E] spend," Stahl says. "The payback on the project was about three months."
The big first-year savings represented "some of the low-hanging fruit," he says, but notes that DuPont saved 1.5% in the second year. Stahl expects savings to stabilize at about 1% a year.
Stahl says the information provided brings to DuPont's attention possible savings it might not have noted otherwise. For example, the data showed that it was spending about $1 million a year on parking at Philadelphia International Airport, the nearest airport to its Wilmington, Del., headquarters. DuPont bargained for, and got, a better rate for employees that saved it 25% of what it had been spending on airport parking.
Aberdeen's Degnan says many corporations could similarly benefit from more data, noting that 21% of the companies participating in a 2000 Aberdeen e-procurement survey had no idea how much money they spent on T&E. "The information benefit eventually lets the CFO sit down and say, 'Now I know I'm spending $100,000 a year with Marriott. Now we're going to negotiate to pay less,'" she says. Degnan estimates such negotiations can save companies 5% to 10% of their overall T&E budgets.
Who's Who in Expense Management Automation
Captura Inc.Captura targets large multinational corporations withwww.captura.comits EMA software, Captura Expense, which handles procurement and fleet spending as well as T&E.
Concur Technologies Inc.Concur, the biggest of the EMA vendors, targets big and
www.concur.commid-sized companies with Concur Expense. The company
also has timesheet and procurement products
Extensity Inc.Extensity 6, which automates T&E, procurement and
www.extensity.comtimesheet reporting, is aimed at large global companies.
Gelco Information Gelco's EMA software, Gelco Expense Management,
Network, Inc.targets mid-sized companies and government agencies.
www.gelcoexpense.com
IBMIBM'S Expense Reporting Solution (ERS) was originally
www-1.ibm.com/developed for inhouse use and is aimed at corporations
services/e-business/ers/that process 10,000 or more expense reports a year.
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