the best-in-class pillars of next-generation expense management

The next-generation T&E expense management program is built on the Best-in-Class pillars of modern expense management, including analytical, mobile, cloud and integrated capabilities and

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T&E Expense Management

The Best-in-Class Pillars of Next-Generation Expense Management

March 2012 Christopher J Dwyer

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Executive Summary

Modern management of expenses related to Travel and Entertainment

(T&E) has undergone an evolution from traditional back-office function to

strategic internal set of processes The next-generation T&E expense

management program is built on the Best-in-Class pillars of modern expense

management, including analytical, mobile, cloud and integrated capabilities

and processes, and has proven to drive tremendous value from a complex

spend category that is necessary for driving corporate business value The

T&E Expense Management research study, conducted in January and

February 2012 of 140 enterprises, unearths the Best-in-Class framework for

effective expense management and seeks to educate organizations on the

strategic value of next-generation approaches

Best-in-Class Performance

Aberdeen used three key performance criteria to distinguish Best-in-Class

companies: the cost to process a single expense report, rate of compliance

to corporate travel policies, and the percentage of business travel spend

under management Top-performing organizations are known for their

superior performance, including:

• 60% lower expense-processing costs than all other organizations

• A 43% higher rate of business travel spend under management

• A 31% higher rate of corporate policy compliance

Competitive Maturity Assessment

Survey results show that the firms enjoying Best-in-Class performance

shared several common characteristics, including:

• 57% higher likelihood than all other companies to leverage

end-to-end travel and expense management solutions

• 54% higher likelihood to regularly-report on policy compliance

• 50% higher likelihood to have real-time visibility into T&E spending

against budget

Required Actions

In addition to the specific recommendations in Chapter Three of this

report, to achieve Best-in-Class performance, companies must:

• Leverage next-generation expense management attributes, such as

analytical, mobile, and integrated capabilities, to enhance programs

• Develop visibility into T&E spending against corporate budgets

• Formalize and standardize key processes related to T&E expense

management

Research Benchmark Aberdeen’s Research Benchmarks provide an in-depth and comprehensive look into process, procedure, methodologies, and

technologies with best practice identification and actionable recommendations

This document is the result of primary research performed by Aberdeen Group Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc

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Table of Contents

Executive Summary 2

Best-in-Class Performance 2

Competitive Maturity Assessment 2

Required Actions 2

Chapter One: Benchmarking the Best-in-Class 4

T&E Expense Management in 2012 4

The Maturity Class Framework 5

The Best-in-Class PACE Model 6

The Pillars of Best-in-Class Expense Management 7

Chapter Two: Benchmarking Requirements for Success 9

Competitive Assessment 9

Expense Management Capabilities 11

Best-in-Class Technology Utilization 12

Chapter Three: Required Actions 15

Laggard Steps to Success 15

Industry Average Steps to Success 15

Best-in-Class Steps to Success 16

Appendix A: Research Methodology 17

Appendix B: Related Aberdeen Research 19

Figures Figure 1: Expense Management Priorities for 2012 4

Figure 2: Top Expense Management Challenges / Pressures 5

Figure 3: The Pillars of Best-in-Class Expense Management 7

Figure 4: Best-in-Class Technology Utilization 12

Figure 5: Expense Management Technology Roadmap 14

Tables Table 1: Top Performers Earn Best-in-Class Status 6

Table 2: The Best-in-Class PACE Framework 6

Table 3: The Competitive Framework 10

Table 4: The PACE Framework Key 18

Table 5: The Competitive Framework Key 18

Table 6: The Relationship Between PACE and the Competitive Framework 18

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Chapter One:

Benchmarking the Best-in-Class

Corporate travel has long been considered an accepted cost of conducting

business; in fact, expenses related to Travel and Entertainment (T&E)

encompass 8% to 12% of the average organization's total budget With this

significant level of corporate resources attributed to this complex spend

arena, it has become critical for organizations in 2012 to approach expense

management with next-generation strategies and solutions and ensure that

they are driving value from the T&E category

T&E Expense Management in 2012

Nearly 70% of organizations across the globe view T&E expense

management as a strategic internal function Aligned with this notion is the

fact that companies are prioritizing the improvement of key expense

management processes (58%, Figure 1) as their major catalyst for expense

management in 2012 Modern expense management includes processes such

as expense creation, submission, approval workflow, reimbursement and

data analytics, factors that when enhanced via next-generation strategies and

technologies can drive tremendous corporate value

Figure 1: Expense Management Priorities for 2012

Source: Aberdeen Group, February 2012

The T&E Expense Management study also finds that organizations are honed

into driving more value out of their business travel (57%), a factor which is

linked directly to the level of enterprise financial resources associated with

the T&E category Visibility (55%) and intelligence (42%) are also high on the

priority list, as companies are looking more and more to improve analytical

capabilities and improve their understanding of the spending and suppliers

associated with corporate business travel

Fast Facts

√ T&E expenses account for 8% to 12% of the average organization's total budget

√ Best-in-Class organizations have driven 60% lower expense-processing costs than all other companies

n=140

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The challenges and pressures highlighted in Figure 2 reflect a level of

corporate travel that has not been seen since the economic downturn; with

more and more organizations reinstating travel budgets (and increasing

those budgets), a major challenge that arises is employee behavior and

implications regarding a lack of compliance to corporate travel policies and

guidelines (59%)

Figure 2: Top Expense Management Challenges / Pressures

In addition to the overarching pressure of enforcing proper business

traveler behavior, organizations are also focused on two other core areas:

cost and visibility Analytics (47%), an arena we see Best-in-Class

organizations heavily relying upon, play a major role in the modern

organization's expense management program Coupled with inadequate

global supplier visibility (25%), the typical enterprise seeks to not only

improve the processes relevant to the management of T&E expenses, but

also to enhance analytical capabilities and visibility to effectively forecast,

plan and budget for a category that comprises a significant chunk of

corporate finances

The Maturity Class Framework

Aberdeen used the following three key performance metrics to distinguish

the Best-in-Class from Industry Average and Laggard organizations:

compliance to corporate policies concerning T&E, business travel spend

under management, and the cost to process a single expense report

(including costs for processes regarding accounting, auditing, report / review

/ approval time, etc.)

n=140

“T&E expense management is a high priority function,

particularly since when we manage it efficiently it allows us

to bill expenses out to our clients There is a very high focus on audit and compliance.”

~ Corporate Manager, Large North American Enterprise

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Table 1: Top Performers Earn Best-in-Class Status

Definition of

Maturity Class Mean Class Performance

Best-in-Class:

Top 20%

of aggregate

performance scorers

 90% compliance to corporate policies concerning T&E

 85% business travel spend under management

 $7.91 cost to process a single expense report

Industry Average:

Middle 50%

of aggregate

performance scorers

Laggard:

Bottom 30%

of aggregate

performance scorers

Best-in-Class organizations in the T&E Expense Management research study

are noted for their superior performance across three major metrics and

their advantages over all other companies These top-performing

organizations have driven 60% lower expense-processing costs, experienced

a 43% higher rate of business travel spend under management, and achieved

a 31% higher rate of corporate policy compliance

The Best-in-Class PACE Model

Effective management of expenses related to T&E requires a combination of

strategic actions, organizational capabilities, and enabling technologies that

can be summarized as shown in Table 2

Table 2: The Best-in-Class PACE Framework

 Improve processes

related to the

management of

T&E expense

 Automate key components of T&E expense

management

 Leverage analytics and reporting to improve expense spend intelligence

 Real-time visibility into expense spending against corporate budgets

 Alignment between expense management and overall corporate goals / objectives

 Regular reporting on travel policy compliance

 End-to-end expense management solution

 Corporate card / expense management integration

 Automated analytics / reporting / BI

 Mobile travel and expense management application / portal

 Automated expense reimbursement

 Expense management module as part of a larger financial suite

Definition: Business Travel Spend Under Management

√ Business travel spend under management is defined as the percentage of planned travel spend that is actively managed and accounted for

in corporate budgeting / planning / forecasting

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The Pillars of Best-in-Class Expense Management

Modern expense management has evolved from its back-office roots into a

multi-faceted program that involves a strategic blend of next-generation

solutions and approaches Best-in-Class enterprises have driven a top-tier

level of performance across a series of key metrics related to T&E expense

management; it is within this maturity class of organizations that we look to

the "pillars" of expense management in 2012 (Figure 3)

Figure 3: The Pillars of Best-in-Class Expense Management

Source: Aberdeen Group, February 2012 When looking at the advantages achieved by Best-in-Class organizations, it is

clear that their achievements are driven by three major attributes within

their T&E expense management program: integration (78%), analytics (57%)

and mobile (42%) Top-performing organizations have relied upon these

pillars to support, enhance and streamline major expense management

processes and drive tremendous value:

• Through integration between corporate card programs and expense

management systems, Best-in-Class organizations have created a

holistic process for the cycle of an expense report, from expense

creation to reimbursement

• Analytics present top-performing organizations with the necessary

intelligence for linkage to corporate forecasting and planning, a

factor which contributes to enhanced visibility into all travel

spending and the utilization of that intelligence in corporate-wide

budgeting

• Mobile travel and expense management applications (and

mobile-optimized web portals) offer business travelers the power of

n=140

“[T&E expense management] is

a significant activity It is very difficult to plan so prompt visibility of actual spending is crucial.”

~ Director, Small Asia / Pacific

Organization

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expense management technology while on the road or away from

the office, allowing both employees and executives to submit /

approve expenses on business trips

The three pillars addressed above will be discussed at-length in the next

chapter We will also learn the specific components of the Best-in-Class

expense management program and highlight the necessary capabilities for

driving value out of business travel and improving overall performance of

T&E expense management

Aberdeen Insights — Strategy: Travel and Procurement

Collaboration

Although the focus of a next-generation T&E expense management

program centers on 21st-century technology functionalities and

capabilities, one area that can be overlooked is internal collaboration

Within a complex spend category such as business travel, it becomes

critical for organizations, considering the sizable chunk of corporate

revenue associated with the area, that the procurement and sourcing

teams have a hand in managing major suppliers

Best-in-Class organizations are over 30% more likely than all other

enterprises to utilize a formal travel sourcing component as part of their

larger T&E expense management program This factor can help drive

visibility into spending on business travel, as well as assist in negotiations

with major travel suppliers (airlines, hotels / resorts, etc.) Best-in-Class

companies have relied on this collaborative capability to drive their

superior rate of business travel spend under management (43% higher

rate than all other organizations)

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Chapter Two:

Benchmarking Requirements for Success

The next-generation T&E expense management program is comprised of a

multi-faceted framework of nuanced approaches, strategies and solutions, all

designed to streamline major processes, improve key visibility, increase T&E

spend intelligence, and assist executives with achieving overall corporate and

organizational goals and objectives In this chapter, we will detail the

advancements blazed by Best-in-Class corporations and highlight their

reliance on core capabilities and technology solutions

Case Study — Leveraging Next-Generation Solutions

As detailed in the T&E Expense Management research study, Best-in-Class

organizations are leveraging a slew of next-generation strategies,

approaches and solutions to streamline major processes and drive

tremendous value For the director of finance for a small, North

American hospitality organization, these next-generation attributes have

helped improve performance and enhanced their management of

expenses related to T&E

“We have a two-tier approval process for audit purposes and attempt to

audit approximate 80% of all submission,” said the director of finance,

providing light on the processes behind their 75% rate of corporate

policy compliance The organization has also looked to mobility as a

prime differentiator “The mobile application is an excellent feature for

real-time record-keeping of expenses for future review and final

submission,” he said, adding that over 23% of the company’s total

expenses are managed by mobile in some fashion

The organization has also relied on other next-generation enablers, such

as end-to-end travel and expense management automation (cloud-based)

and automated data analytics / business intelligence, to develop real-time

visibility into all of their T&E-related spending against their corporate

budgets

Competitive Assessment

Aberdeen Group analyzed the aggregated metrics of surveyed companies to

determine whether their performance ranked as Best-in-Class, Industry

Average, or Laggard In addition to having common performance levels, each

class also shared characteristics in five key categories: (1) process (the

approaches they take to execute daily expense management operations); (2)

organization (corporate focus and collaboration among stakeholders); (3)

knowledge management (contextualizing expense data and exposing it

to key stakeholders); (4) technology (the selection of the appropriate

tools and the effective deployment of those tools); and (5) performance

management (the ability of the organization to measure its expense

management results to improve its business) These characteristics

Fast Facts

√ Best-in-Class companies are 64% more likely than all others to align expense management processes and programs and the

achievement of greater corporate objectives

√ The average business traveler saves three hours per month of productivity by leveraging a mobile travel and expense management application / portal

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(identified in Table 3) serve as a guideline for best practices, and correlate

directly with Best-in-Class performance across the key metrics

Table 3: The Competitive Framework

Best-in-Class Average Laggards

Process

Formal business travel group (standardized processes for management of business travel)

Documented processes for submission of expense reports

Organization

Alignment between expense management and overall corporate goals / objectives

Knowledge

Real-time visibility into travel spending against budget

Real-time reviews of pre-trip travel against budget

Technology

Expense management technology solutions / tools in place:

 82% end-to-end expense management solution

 80% automated data analytics / reporting / BI

 78% commercial card / expense management integration

 67% automated billable time-and-travel management

 41% mobile travel / expense management application

Performance

Expense management performance-tracking capabilities:

 81% regular reporting on policy compliance

 75% regular audits of expense reports

 66% regular audits of expense reports

 41% regular audits of expense reports Source: Aberdeen Group, February 2012

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