Expense Reports Go High-Tech

To make sure that employees traveling for Bell Helicopter Textron have the cash they need for their jaunts, general accounting supervisor Alvie Ealy assigns one member of his staff to the sole task of handing out cash, eight hours a day, five days a week. Bell Helicopter, located in Ft. Worth, is a division of $10 billion Textron Inc., Providence. However, Ealy is grounding Bell's cash-and-carry operation in favor of an automated travel-and-entertainment (T&E) reporting system from Value Integrated Network Inc. (VIN.net), Barrington, Ill. The new system, currently being rolled out, incorporates a company charge card that employees can use to cover almost all expenses on the road. If they still need greenbacks for cab fare or parking, the card will let them download the real thing from the nearest automated teller machine. To prepare their expense reports, Bell employees electronically access the system and drag-and-drop the information from the charge card system into their expense reports. Then, rather than moving via interoffice mail, the reports are filed electronically to the accounting department. "It's having a dramatic effect on our area," Ealy says. "We're able to shift priorities and better utilize staff." By redeploying some accounting folks, streamlining processing, and taking advantage of the information contained in the system to better manage travel purchases, the system should save Bell several hundred thousand dollars a year, believes Ken Spicer, manager of payroll systems and records. Bell's 2,000 traveling employees, who generate some 20,000 expense reports annually, also appreciate their new-found freedom from paper expense reports. Bell Helicopter's experience is typical of many companies that have begun using new software applications to automate one of the last paper-based, manual processes left in the corporate world: accounting for T&E purchases and expenses. One reason for the shift is that companies are paying more attention to T&E expenses, as well as the processes they use to account for those expenses. Key concerns are making the system more efficient and less expensive for the company and easier on employees. At most companies T&E is the third-largest controllable expense, after payroll and the cost of goods or services sold, analysts say. The new software applications aim at reducing travel costs in several ways. They give management a better picture of where a company's travel dollars are being spent. Until now, not many accounting systems have been able to gather information showing, for example, how much a company was spending with a specific airline. Management thus had little to go on when negotiating for a preferred rate. Eli Lilly & Co. has been able to shave an estimated 10% off its costs for travel services simply by having such information, says Terry Thompson, director of financial operations with the Indianapolis pharmaceutical giant. Lilly launched its system, which is from IBM Global Services, at the end of 1998. In addition to the dollars spent on actual travel, the price of maintaining what is often a jerry-rigged, pen-and-paper system of accounting for travel costs can mount up. American businesses spend up to $35 to process a single expense report, while companies that employ best practices, including an automated T&E expense reporting system, cut that cost to about $5, says a 1998 survey by Visa International. With large multinational companies processing more than 1 million expense reports annually, the potential savings are compelling. What's more, these systems generally can be rolled out in a matter of months, instead of the years it can take to install some enterprise-wide software products. Automation has other benefits as well. Companies have large numbers of travelers and remote workers who have little desire to spend time filling out expense reports. Most electronic systems do much of the work for them. As a result, this is one software change that appears to be getting a strong thumbs-up from employees. "As far as feedback, all I've been hearing is 'oohs and ahs,'" says Charles Stahl, manager of reimbursements with Du Pont & Co., Wilmington, Del. "It's been a joy to lead an effort where people are so anxious to get the new software." In November, Du Pont turned on Concur Technologies' Expense Management Software (XMS). Stahl expects to roll out the system to the 50,000 Du Pont employees around the globe within the next 18 months. XMS replaces a home-grown system that wasn't Y2K compliant and had limited reporting capabilities. Although it's too early to calculate dollars saved with the new system, Stahl says the time required to complete and process an expense report has been reduced by as much as a week. Despite all the process and cost benefits of expense reporting systems, experts caution that business rules and issues should take precedence. They advise companies to make sure that the procedures in place are necessary and logical before automating. And although some of the software is fairly intuitive, it makes sense to allow for training. Also, if employees traditionally have been able to stay at the hotel of their choice, suddenly forcing them to scrimp on travel services (as part of implementing a new system) can cause a near-mutiny. One way to gently promote compliance with new rules accompanying new software is to schedule a transition period during which employees are simply informed of the new policies, and aren't penalized for not adhering to them (other than for outright theft, of course). However, they also should be told that after the grace period, expenses falling outside corporate policies will be disallowed. Despite the growing interest, though, the new software doesn't offer true end-to-end travel, which would allow travelers to book flights and reserve hotel rooms online. Other concerns are the short histories of some vendors and the absence of large numbers of installed systems. Software vendors specializing in the area include Concur Technologies of Redmond, Wash., Captura Software of Bothell, Wash., Extensity Inc. of Emeryville, Calif., and Necho Systems Corp. of Mississauga, Ont. Oracle Corp., the database and applications software firm in Redwood Shores, Calif., has its own T&E module. The big travel agencies, including American Express, Carlson Wagonlit, and Rosenbluth International, also offer T&E applications. An increasing number of potential buyers find the offerings today credible and viable. "In the last year and a half, the third-party vendors have really proved themselves," says Jennifer Loftin, manager of T&E automation with Cisco Systems Inc., San Jose. Loftin also chairs the National Business Travel Assn. In fact, Cisco Systems, which had developed an internal system, now plans to switch to an outside provider, says Loftin. Cisco created its system in 1997, after finding that none of the applications on the market at the time was Web-enabled. Although the home-grown system saved money -- the cost to process each of the 150,000 expense reports generated annually dropped from $25 to $2.80, reports Loftin -- and earned positive reviews from employees, management decided that it didn't make sense to continue to invest in it. In part, that's because the options available from outside vendors have grown since Cisco last was in the market. Companies that don't want to maintain a T&E application themselves can turn to a service bureau to handle the function. One analyst says T&E reporting is a natural candidate for outsourcing. "It's tedious and repetitious, so an outsourcer can handle it less expensively," says Judith Hodges, research manager with International Data Corp., Framingham, Mass. That's the route taken by McNeil Consumer Products Co., the division of Johnson & Johnson that makes Tylenol. "We didn't want to develop or manage the system internally," says Kathy McLearnon, financial-services supervisor with the Fort Washington, Pa., company. McNeil began rolling out ExpenseLink from Gelco Information Network Inc., Eden Prairie, Minn., last June and uses it to process approximately 17,000 expense reports per year. Although it's too early to pinpoint cost savings, McLearnon says that the time to process expense reports and reimburse employees has dropped from a month to several days. Because the information processed by a T&E application eventually shows up on a company's financial statements, maintaining control over data and ensuring adherence to corporate travel policies is uppermost in managers' minds. On the other hand, they also acknowledge that the levels of manual approvals often required in the past did little to boost security. "We have more control with the system, because we're not relying on people to make the call [about allowing an expense]," says Cisco's Loftin. Like Cisco, a number of companies that have automated their T&E reporting follow an "audit by exception" policy. That is, the trip report flows through the system without requiring human attention unless the software, which has been configured with the company's travel and accounting guidelines, notices a violation or payment that doesn't make sense. In that case, the report usually is returned to the approving manager, who is responsible for working with the employee to determine how to handle the exception. However, it's important to recognize that even as automation promises to cut the cost of traveling, technology can't eliminate all problems. "The only way to control travel expense is to have the boss care about it," points out Rolfe Shellenberger, a Palm Desert, Calif., consultant for Runzheimer International, a Rochester, Wis., travel-management firm. "You can't bypass that portion of the chain."