T&E Flying Under The Radar? Why CFOs Should Simplify Compliance

Richard McLean

For companies today, improving business performance means running more efficiently and squeezing more output from existing resources. For CFOs, that means increasing transparency across your expense base and gaining tighter control of internal processes.

At a macro level, greater transparency and control translates into a reduction in wasted expenditure, which frees funds for reinvestment in the business. At a micro level, it yields incremental benefits to the individuals connected to those processes in terms of time saved. As CFO, you can impact each level to deliver benefits to your people – and the bottom line.

Let’s use travel and expense (T&E) management as an example to illustrate how.

Measuring the impact of T&E expenses

Studies by analysts indicate that approximately 10% of a company’s operating expenses are related to T&E. Of that percentage, 20% or more of those expenses are for travel arrangements that are made outside of policy – such as staying with a non-preferred vendor or booking a flight at the last minute. Non-compliance typically means higher costs. On average, if airline travel is booked within 7 days of departure, it’s 44% more expensive than if booked more than 14 days in advance. Hotels can be 50% more expensive when booked late.

For a large organization, 20% of travel expenditure can equate to millions of dollars that could be spent more strategically elsewhere. What’s more, it’s also millions of dollars lacking visibility that you can’t easily factor in when negotiating volume discounts with suppliers. I still remember my first meeting with the procurement officer of a company I worked at many years ago, who took time to impress upon me how “information is power” in any negotiation.

Clearly, T&E policies and processes that help reduce expenses are a win for the business, but how do we make sure adherence to these policies is good for employees as well so as to maximize compliance? We do that by partnering with the business to make T&E processes as efficient and user-friendly as possible.

Driving compliance with low-touch technology

Automating each phase of travel – such as preapprovals, booking, travel, reimbursement, analysis, and expense reporting – allows the whole process to become low touch, which saves time for your people and money for your business. For example, travel and expense management software can be used to automate and streamline the end-to-end travel process. This approach facilitates compliance by linking to the company’s preferred hotels and airlines, including online travel booking sites. The software populates expense claims using electronic receipts from those suppliers without requiring employees to capture an image of a receipt or enter expenses manually.

By having rigorous T&E processes that are easy to use, your employees are more likely to plan ahead and comply with policy – and in so doing enable the macro- and micro-level benefits that can have a positive impact on business performance.

Meeting duty-of-care obligations

But the benefits of compliance transcend time and money. Compliance actually helps the business uphold its duty-of-care obligation as an employer. Quite simply, by encouraging people to adhere to company policies, you’ll know where they are in case of an emergency. If they use an online booking company that is not in your supplier network , for example, how do you know where they are if there’s a natural disaster or some terrorist activity?

Compliance with T&E policies not only boosts the bottom line, but it can help employees to be more productive. In addition, there’s value in being able to track your employees better with access to that information through your travel-booking process. Seems like a win-win scenario to me.

To continue the discussion on the pivotal role finance will play in digital transformation and how CFOs can help their organizations reimagine efficiency, read Digital Finance: Transforming Finance for the Digital Economy. Learn more about how CFOs can drive the use of comprehensive automation to improve, simplify, and completely rethink back-office operations, leverage business networks, and speed up decision making. There will be more of this to come in my next blog.

Richard McLean

About Richard McLean

Richard McLean, regional CFO for SAP Asia Pacific Japan, oversees all key finance and administrative functions for field and regional headquarters, supporting more than 18,000 employees. He has more than 20 years of experience in senior finance roles with leading global companies across a range of industries, including financial services, investment banking, automotive, and IT. He joined SAP in 2008.