All companies have travel and entertainment (T&E) expenses and the challenges and issues in managing them are the same regardless of size. However, the question remains as to whether size matters when it comes to managing these expenses. Are smaller companies more efficient, or do size and scale help when it comes to integration of the T&E solution with other systems? Where does the balance lie between aiding the traveler and supporting the business? Are they compatible or conflicting goals when it comes to prioritizing technology solutions?
This report will examine these questions for small and medium businesses (SMBs) in terms of their capabilities and technology adoption compared to Best-in-Class companies, in order to determine where the differences lie and improvements that are needed. SMBs for this report are defined as companies with 1000employees or less.
Business Pressures Facing All Companies
In order to understand the approach that companies are taking when it comes to managing their T&E, it is important to consider the business pressures that they are under. Figure 1 provides a view of the business pressures that All Companies are facing.
The first and largest issue by far is having control of T&E expenses. Management does not like surprises when it comes to reporting, and having visibility into expenses at all levels at the earliest possible point is a key to avoiding those surprises. Ideally, capturing the commitment or transaction at the source and making it visible would be ideal. However, control also means compliance and adherence to policies in order to drive better decisions, which will help minimize the expenses prior to the transaction itself. The result is that the greater the amount of spend under management by a T&E solution, the greater the control.
The more spend being managed, the greater the visibility. However, that assumes that there is good integration from the source to the back-end systems in order to enable that visibility across the board. Spreadsheets and application silos are the biggest culprits when it comes to poor visibility. The goal is that once a transaction is made, it becomes visible immediately, with the data being captured at the source.
In addition to the company perspective, the needs of the traveler are also a concern. Lengthy reimbursement times can be a sore spot for employees when it comes to expenses for which they used their own money or credit, particularly if the process takes too long. The process time is often a function of how manual the T&E management function is. Eliminating the manual handoffs and capturing the information electronically is the key to enabling standardization, streamlining, and strong integration.
We first look at the performance of the SMBs’ group in Table 1, compared to Best-in-Class companies, to see where the differences may be.
The performance criteria for determining the Best-in-Class (see sidebar for Best-in-Class definition) are the percentage of travel spend under management, the compliance rate to policies, th enumber of days to process an expense report, and the average cost for processing a report.
There is quite a gap for the SMBs’ group, compared to the Best-in-Class as far as spend under management, with the Best-in-Class having twice the percentage of T&E spend under management for their T&E solution. Unmanaged spend creates an issue because of manual handoffs and entering of expenses. It also creates an issue for approval and compliance to travel policies when the actions taken are outside of a system. It also creates an issue for approval and compliance to travel policies when the actions taken are outside the system.
At over a week, the number of days to approve an expense report for SMBs is more than twice that of the Best-in-Class. The extra time is most likely because SMBs have less integration than the Best-in-Class. Having less than half the spend under management adds time to the process, and drives up costs for the SMB.
Figure 2 shows the basic framework and infrastructure behind a T&E solution for Best-in-Class companies compared to SMBs. Having a documented process for T&E expense management is the first step. Although SMBs companies have a fairly strong adoption of a documented process, they still lag behind the Best-in-Class, who are 40% more likely to have this in place.
As Aberdeen research indicates, size and scale, as well as organizational maturity, do play a role when it comes to T&E expense management. The pressures and performance metrics suggest that there is certainly significant room for improvement in all areas of T&E for SMB companies, given the degree that SMB lag behind the Best-in-Class. The SMBs have many fundamentals in place in terms of policies, or adoption of some integration with source capture, but lack the overall breadth and scope of an integrated end-to-end T&E expense management approach.