[PERSPECTIVES] Beneath the surface of direct costs in business travelEmmanuel Ebray, February 9, 2017
Most travel buyers are intently focused on direct travel costs but fail to recognise the astonishingly high administrative expenditure that lies beneath. They may have processes in place to save on direct travel expenses, but there still remains an immense potential to cut back on indirect costs, especially in Singapore – where an increasing number of firms are tightening their belts when it comes to travel costs.
With companies spending over €20 million (US$21.3 million) processing 64,000 expense reports annually, the expense reporting process is a key area where costs can be scaled back. Often perceived as one of the most troublesome aspects of business travel experiences, each expense report costs companies €58 on average – from preparing the report, compiling the accounts, attaching receipts, getting approval, right up to reimbursements and archiving data – according to a study by the Global Business Travel Association (GBTA) Foundation and HRS.
This raises several questions. How much time and effort does it take for an expense report to be prepared, vetted and processed? How many reports contain inaccuracies, and how much do these mistakes cost? Can these processes be streamlined to help optimise savings?
While the expense reporting process differs across companies – from the software used to collect data, methods of submitting receipts, number of approvals required and report submission deadlines – most expense reporting systems share similar pain points, according to the same study by GBTA and HRS.
Preparing expense reports for submission
Although three-quarters of business travellers around the world are satisfied with their travel experiences, a sizeable 45 per cent of them are not satisfied with their expense reporting processes, according to a 2015 report on business traveller sentiment conducted by GBTA in partnership with American Express. This sentiment is echoed by many travel managers, who consider preparing expense reports for submission the biggest challenge.
Unsurprisingly, around half of travel managers at companies that process expense reports internally without third-party software find the initial steps of expense reporting the most troublesome – setting up expense reports, entering data and attaching receipts.
One way to tackle this is through using third-party software or outsourcing the expense reporting process entirely, seeing that most travel managers who do so do not consider preparing expense reports a pain point. Yet, only four per cent of travel managers outsource their expense reporting process.
Missing and incorrect information
Missing and incorrect information on expense reports is one of the greatest barriers to achieving efficiency in expense reporting. It takes an employee 20 minutes on average to complete an expense report, and another 18 minutes to correct any errors.
This is troubling, because on average, one in five expense reports are submitted with errors each year. This has resulted in thousands of hours spent correcting information and an average cost of €52 to fix errors in each report. For companies with large annual spends or a large number of employees, this figure jumps.
To reduce processing time and errors in expense reports, companies can consider migrating from paper forms to software designed with automated error detection functions. Improving the data input process and allowing receipts to be submitted electronically would also allow companies to better channel resources into other areas.
Invoice processing and errors
Apart from expense report processing, invoice processing also accounts for a huge proportion of indirect costs. When companies receive invoices for travel-related expenditure such as hotel fees, the company embarks on a costly verification process; determining whether the traveller observed company policies and whether the invoice complies with legal regulations.
Invoicing errors often occur too – company names are spelt incorrectly and addresses are wrong. It takes time and money to contact the hotel, request for a correction and start the whole process again. Above all, this places unnecessary stress on travel managers.
To eliminate these indirect costs, companies can outsource invoice processing on process costs centrally, similar to the way flights costs are managed. Additionally, if payments were made using virtual accounts instead of company or personal credit cards, this would likely reduce the need for expense reports to be processed.
Companies in Singapore should adopt a more holistic approach to closing gaps in their expense reporting process by looking beyond direct costs. Compared to bringing down direct costs of flights or hotel bookings by a few dollars, working to reduce the cost of expense report and invoice processing would likely have a larger impact on overall travel-related expenditure.
At the end of the day, travellers want to have a simple, fuss-free process for the payment of flights and hotel stays, and companies that evaluate and streamline their processes will create a more satisfying travel experience for their employees.
Emmanuel Ebray is the managing director of HRS Global Hotel Solutions, taking charge of South-east Asia, South Korea and India. HRS is a global hotel solutions provider with more than 40,000 corporate customers worldwide, including Fortune 500 companies. His core responsibilities include setting the business direction, driving organic growth with new and existing customers across the markets, establishing strategic partnerships, and talent development.