Leveraging Treasury Skills: Generating Savings in T&E

Globally, travel and entertainment (T&E) expenditure is worth more than US$400bn a year and, in some companies, represents over 10 per cent of total expenditure. T&E expenditure is widely considered to be the third largest controllable indirect spend in many organisations and represents one of the biggest opportunities to cut costs and improve returns.

Background research by gtnews shows that corporate treasurers are becoming increasingly important in the development of company T&E policy and strategy, and the recent gtnews poll in November 2005 indicated that some 84 per cent of corporate treasurers acknowledge that their organization’s T&E programmes need improvement or were unsatisfactory.

The potential savings from improvements in T&E expenditure management are huge. Companies moving to effective combinations of payment cards, best practices and expenditure management can save as much as 30-40 per cent of their total T&E expenditure and administration costs, and at the same time save their employees and managers considerable time and hassle in filling in and managing expense claims. To achieve these savings the corporate treasury department needs to get actively involved, as they have a great deal to contribute.

T&E Expenditure Management Programme Set Up and Objectives

Successful T&E expenditure management programmes are run by a multi-disciplinary project team made up of members from procurement, travel, personnel, operations/computing and treasury departments. The role of the treasury department varies but treasurers have vital contributions to make with their understanding of the cost-effectiveness of financial processes and also in negotiations with banks and card issuers where they have unparalleled experience and knowledge. Treasury is uniquely positioned to leverage relationships when negotiating with banks. Companies who do not involve treasury in this process are ignoring a key skill set and bargaining position.

The project team’s first task is to define the company or organisation’s overall policies and objectives on T&E expenditure. Key objectives include:

• Employee and manager time:
  • maximising the ease of use of T&E procedures and systems
  • minimising the time taken by employees on T&E expenditure and expenses
• Compliance with T&E policy:
  • maximising the number of company T&E cardholders
  • maximising compliant T&E expenditure
• Internal efficiency and administration costs:
  • minimising the cost of T&E expenditure and expense processing
  • minimising the cost of T&E procurement
• Company T&E cards:
  • minimising administration costs
  • maximising the rebate for global or regional cards and services
• T&E service costs:
  • minimising the prices paid for effective and appropriate T&E services
• Others:
  • maximising savings, for example on VAT reclaim.

Successful T&E Expenditure Programmes

The main elements of a successful T&E expenditure management programme are:

• Integration of T&E payment card reporting with expense reporting technologies to collect comprehensive data on T&E expenditure worldwide
• Using T&E data in negotiations with suppliers to lower prices
• Elimination of petty cash accounts
• Pre-population of electronic expense reports with T&E card data to save employees time and decrease the time cycle for paying out-of-pocket expenses
• Issuing T&E cards to all employees making two or more business trips a year
• Insistence on the use of T&E cards wherever possible to minimise cash payments
• Mandatory initial training for cardholders to increase approved and cut non-compliant T&E card usage
• Use of automated expense reporting systems
• Development of clearly defined cardholder liability and repayment procedures
• Operation of efficient control procedures for minimising T&E card fraud and expenditure misrepresentation
• Use of Internet based systems and procedures, and other automation, to minimise manual administration.

Another major feature of successful T&E expenditure management programmes is the drive to simplify, reducing the number of suppliers, systems and administrative procedures wherever possible. The best example of this are major global companies aiming for a single T&E card issuer, a single travel agent and a single expense management system worldwide.