Tightly Integrated Card Programs and Expense Processing Solutions
More than half of a typical company’s annual travel and entertainment (T&E) expenses are currently paid with corporate cards. Yet, there is still tremendous opportunity to run significantly more of a company’s T&E expenses through its commercial card program – the volume of commercial card transactions is forecast to pass the trillion dollar mark in the next year.
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While a well-managed card program can help ensure compliance with spending policies and control out-of-pocket expenses, many organizations fail to capture the true value of their corporate card program. Fully integrating a company’s corporate card program with its automated expense management solutions motivates employees to put all their expenses on a company sponsored card, and ultimately provides the comprehensive, actionable data organizations need to optimize their card programs, support strategic decision-making, and contribute to healthy growth. This article will answer the following questions:
Anywhere from 10-75% of employees in a company may have corporate cards, nevertheless, card utilization is not always at optimal levels, and manual expense management processes make it difficult to track card use, ensure timely payments, and monitor compliance.2 Employees are often delinquent on their payments, incurring late fees. Companies lack the detailed data about hotels, airfare, and car rental necessary for compliance and financial planning, as well as for savvy negotiations with vendors and suppliers. Lack of control and limited data create the potential for fraud – more than 20% of a company’s fraudulent activity is related to expense reimbursement.3 As businesses optimize the integration of their card programs with an automated expense management solution, they will:
Tight integration of a corporate card program and an automated expense management solution has proven to deliver measurable value to help organizations fuel healthy financial growth, both in cost savings and more effective use of its revenue producing personnel.
Integrating the corporate card program and an expense solution is a collaboration between the card issuer, the expense management provider, and an organization seeking to turn business processes into growth assets – recent studies indicate that companies have realized annual savings from US$900,000 to US$4.5m as a result of integrating their corporate card and an automated expense management solution.4 The integrated process consists of a series of steps:
Step One – Transaction Data: The card issuer provides transactional and enhanced data to the expense management provider who uploads files daily from the issuer.
Step Two – Expense Report Creation: The card data is automatically fed into the system and auto-creates an expense report with all transactions applied to the accurate spend categories. All employees have to do is verify accuracy of the charges; indicate any personal charges; add out-of pocket expenses and comments. A flagging system alerts filers when an expense is out-of-policy. The automatic creation of an expense report with all card transaction data makes it difficult to hide credits, refund transactions, or engage in other potentially fraudulent behavior.
Step Three – Receipt Submission: Employees either fax or mail the original receipts, based on company policy, for imaging and storage. The expense management provider manages the receipt imaging process and can manage the receipt process to enable VAT reclamation if applicable.
Step Four – Approval Process: Expense reports are automatically routed for approval based on the organization’s approval hierarchy. Managers validate expense submission amounts and reason codes against budgets and policies. The expense management provider incorporates a validation engine based on an organization’s unique approval process.
Step Five – Payment: The expense management provider makes card payments on behalf of the organization, based on an organization’s scheduling needs (to maximize rewards programs, reduce late fees, and maximize cash flow requirements), and directly reimburses the employee’s out-of-pocket expenses, eliminating the need for employees to be kept as vendors in the accounts payable (A/P) system. Both card issuers and employees are paid directly by the expense management provider, which also results in savings from cash float. Data can be sent to the client, for upload into their general ledger accounts.
Step Six – Unified Insights: Once the card data is in the expense management solution, it can be aggregated with additional expense data to provide reporting that ensures financial managers achieve true global insight and optimize the management of employee-initiated spend. An integrated, automated expense management solution creates a virtually ‘touchless’ expense reporting process, which results in a high level of employee satisfaction.5 Automatic card downloads and categorization saves time and speeds up reimbursement, which drives card spend. With on demand web-based expense management solutions, employees can file expense reports anywhere they have Internet connectivity and a fax machine for submission of receipts. Timely, automatic payment both to card issuers and employees can virtually eliminate late-payment fees, another factor that drives card spend and enhances satisfaction.
Driving card spend is significant on a number of levels. The enhanced data associated with card spend provides organizations with the rich information they need to make strategic sourcing and budget decisions. Integrated data (data that combines the results of diverse reports, tracking a broad array of variables) is essential to achieve ‘unified insights’, the global understanding made possible by a thorough consideration of this comprehensive and cohesive data. Higher card spend allows organizations to take advantage of card issuers’ rewards programs and opportunities for volume discounts. With an automated, integrated process, card spend is tied to policies that mandate booking air, hotels, and cars with preferred vendors and related cost containment measures. Although this type of compliance is an obvious goal, it is worth noting that nearly 60% of companies report that policy enforcement is the most problematic area of expense control.6 The effect of an efficient, streamlined process, direct payment to both card issuers and employees, and error free, ‘touchless’ system is powerful, driving card spend up and administrative costs down.7
A tightly integrated card program and expense process solution should be optimized for maximum control. Organizations seeking to prevent fraud and improve compliance will want a solution with the most advanced control capabilities, which can include:
These capabilities help both payment administrators and expense report filers by eliminating confusion and the potential for error, reducing opportunities for fraud, and ensuring the integrity of spend data.
A best-in-class provider will offer integration options for nearly any card program, as well as for organizations with multiple programs. Automation and integration reduce processing time, ensure greater data integrity, and can result in significant cost savings. These are clearly substantial benefits, nevertheless, one of the expense management provider’s most valuable benefits is the ability to help organizations achieve visibility in order to turn spend data into business intelligence.
Access to standard reports, as well as to raw data for ad hoc reporting or populating a company’s own business intelligence tool, is critical for analysis and action. A best-in-class solution offers easy-to-use reporting capabilities that can track overall spend, card use, card spend volume, compliance with policies, personal charges, refund transactions, integration process performance, analysis of spend by category, supplier, business unit or cost center, and other customized needs to suit an organization’s business processes and policies. Real-time access to data is crucial from both a strategic and tactical perspective.
The value of aggregated data cannot be understated.8 Structural complexity and fragmented data are key obstacles to improving enterprise performance. As organizations become increasingly multi-national and multi-divisional, they must bring together disparate processes and accurate data from a wide variety of sources to eliminate structural complexity and improve performance. Supported by insights derived from comparative data across the organization – associating planned spend with actual expenses – businesses can rely on these ‘unified data’ insights to:
A worldwide leader in innovative plumbing products with offices across the globe had their finance department managing more than 1,000 expense reports per month. While many employees used the company’s corporate card, finance executives realized that optimizing the card program meant driving card spend higher. Finance staff spent a significant amount of time processing and reconciling expense report reimbursements for card program in order to drive card spend, reduce late fees, achieve superior spend cash payments and personal card usage. The company wanted to maximize the corporate control and visibility, and satisfy travelers with a quick and easy reimbursement process. The company decided to integrate their card program with their expense management solution which allowed them to achieve complete visibility into transactions and to take advantage of card float and volume incentives. Most importantly, integrating the corporate card program and expense management solution has driven card utilization to an industry-leading 94%. Time to reconcile past due charges has been reduced by two days per month, late fees have been reduced almost to zero, and employees have been eliminated as vendors in the AP system. Travelers appreciate the virtually touchless process and ease of use and speedy reimbursement to them and their corporate card. With the detailed, reliable data that integration of the card program and expense reporting provides, the company is able to easily access spend data by vendor, spend category, and division in order to identify questionable charges and audit for compliance.
An enormous level of detail about T&E spend currently exists, and the technologies and systems for data capture continue to evolve. Turning data into business intelligence requires control and analysis. As travel costs rise and ever greater volumes of data become available, organizations that track, aggregate, and analyze this data, while controlling the environment in which expenses are processed, will have an advantage when it comes not only to managing costs, but planning for healthy financial growth.
A tightly integrated card program and expense management solution should be part of every competitive organization’s strategy to achieve unified insights. Financial managers who provide their organization’s leadership with rich information to support savvy decision-making will have turned a routine business process into a business growth asset. Today, that achievement is realistic and within reach.
1The US Market for Corporate Credit Cards and Purchasing Cards, Packaged Facts, 2005.
2Practical Guide to Commercial Card Integration with Expense Reporting Applications, Visa Commercial Solutions, 2006.
3Fraud Examiner’s Manual, ACFE, 2006.
4Business Indicator, Carlson Wagonlit, July 2006.
5Practical Guide to Commercial Card Integration with Expense Reporting Applications, Visa Commercial Solutions, 2006.
6“Expense Management Tools: The Search for Better Controls”, Business Finance Magazine, August 2006.
7Moen Incorporated has achieved 94 percent card utilization by integrating their corporate card program with Gelco Expense Management’s solution. Gelco SmartTalks, February 2007.
8A recent study indicates that companies could save an average of 9% of their overall T&E budget through better leveraging of travel data in vendor negotiations and improved policy enforcement. MasterCard Worldwide Group News Release, July 2006.