In Most organizations, travel and entertainment (T&E) expenses are often overlooked as insignificant or inevitable. Because of that, they do not immediately come to mind in the context of traditional supply chains. According to the Aberdeen Group, “Employee-initiated travel and entertainment (T&E) can account for one in five operational dollars a company spends (with even higher percentages at service firms).” Following is a discussion of expense management automation (EMA) as a part of total cost management (TCM).
Expense reimbursement mixed in manual paper-based procedures, lack policy enforcement resulting in lengthy and costly process cycles with no reporting or analysis capability. However, times have changed, and the tough economic conditions of the past few years have forced organizations to curb expenses and scrutinize travel policies. As a result, business T&E expenses are virtually untapped areas for process automation and cost savings in all companies.
Organizations all over the world are cutting direct costs, which make up 30-60% of most companies overall expenditures. Employee-initiated expenses, such as T&E contribute up to 20% to these costs. However, traditional expense management systems are time consuming, labor intensive, and lack a policy enforcement mechanism. They also require significant staff resources, including managers and accounting personnel.
Over the last decade companies have invested in electronic enterprise resource planning (ERP), building a sophisticated TCM infrastructure or better manage direct and indirect costs. However, little attention paid to automating and optimizing employee-initiated expenses. According to the Aberdeen Group, “EMA offers as much opportunity, if not more, as e-procurement in reining in costs.”
Understanding Expenses
Many leading global companies with the most sophisticated ERP systems can provide detail such as the exact quantity, location and price of the smallest component of a commodity in their products supply chain. However, these systems fail to track how much employees spend on hotels, where they stay, and/or how much they pay per night.
According to the Aberdeen Group survey, despite million-dollar travel budgets and 100% manual auditing of all expense reports for policy compliance, in most companies support of the T&E functions for employees is non-existent or neglected. For example, top sales executives could spend hours each week preparing expense forms, finding receipts, and sending the paper packet (via overnight mail) to a manager for approval. Any problem with the report means several rounds of phone calls, which wastes employee and administration time. Additionally, if any out-of-policy expenses identified, managers usually view them with indifference. According to Aberdeen Group, many companies use employee reimbursement as a loophole to circumvent the accounting department, policies, and/or systems.
Overall, manual expense reporting has proven to be an inefficient, frustrating, and expensive process for all involved – an area ripe for automation.
The Power of EMA
As is true with any automated process, EMA is about enhancing collaboration, streamlining processes, controlling costs, and enhancing the information exchange within and across organizational boundaries. EMA helps companies focus on the bottom line and reduce costs by quickly and consistently collecting expense information, enforcing company policies, and gaining efficiency. The automation of expense management is no different than automating any internal process, and considered as a strategic tool in TCM.
Besides the manual method, there are other EMA methods, available in the marketplace, including outsourcing and licensed software. However, the most cost-effective method is a 100% Web-Based application service provider. Web-Based EMA solution providers target companies that push the envelope in business process automation and supply chain efficiencies using the Internet. “The companies that have embraced Web Based EMA solutions are reaping significant rewards … and are also prepared themselves for when the market begins to grow again, as they can do more with fewer A/P employees.
Many companies promised that expense management process could simply be addressed using financial or sophisticated ERP system modules. However, according to the analysts, many best-practice companies have found themselves turning to Web-Based providers for ease-of-use and ease-of-implementation. Solution provider like iEmployee are addressing and solving real business issues, and the companies deploying Web-Based solutions are gaining significant and rapid business value -value that translates into business advantages that were unattainable before the advent of Internet technology. Key advantage of Web-based EMA:
In Most organizations, travel and entertainment (T&E) expenses are often overlooked as insignificant or inevitable. Because of that, they do not immediately come to mind in the context of traditional supply chains. According to the Aberdeen Group, “Employee-initiated travel and entertainment (T&E) can account for one in five operational dollars a company spends (with even higher percentages at service firms).” Following is a discussion of expense management automation (EMA) as a part of total cost management (TCM).
Expense reimbursement mixed in manual paper-based procedures, lack policy enforcement resulting in lengthy and costly process cycles with no reporting or analysis capability. However, times have changed, and the tough economic conditions of the past few years have forced organizations to curb expenses and scrutinize travel policies. As a result, business T&E expenses are virtually untapped areas for process automation and cost savings in all companies.
Organizations all over the world are cutting direct costs, which make up 30-60% of most companies overall expenditures. Employee-initiated expenses, such as T&E contribute up to 20% to these costs. However, traditional expense management systems are time consuming, labor intensive, and lack a policy enforcement mechanism. They also require significant staff resources, including managers and accounting personnel.
Over the last decade companies have invested in electronic enterprise resource planning (ERP), building a sophisticated TCM infrastructure or better manage direct and indirect costs. However, little attention paid to automating and optimizing employee-initiated expenses. According to the Aberdeen Group, “EMA offers as much opportunity, if not more, as e-procurement in reining in costs.”