EMPLOYEE expenses: no one loves them, but many of us have to do them ourselves or process them for others. Travel and expense (T&E) spend is a fact of life for most businesses and, regardless of their size and complexity, it remains the second-most controllable cost for organisations.
How cloud and mobile are facilitating a process that’s efficient for your business, great for your employees and enables you to drive productivity, efficiency and business growth was the subject of a Financial Director web seminar held in conjunction with Concur, the expense management solutions provider.
According to research undertaken by Vanson Bourne, the three key things companies are thinking about now that the economy has started to improve are growth, client acquisition and controlling spend. And more than 90% of companies that are automating expenses reported positive benefits from doing so.
Nevertheless, most companies still have one or more business processes that rely on spreadsheets to be completed. Dafydd Llewellyn, senior director of UK SMB sales at Concur, says he often hears in particular from smaller companies that want to leverage technology to fuel their growth and drive employee satisfaction, but many of these think they are just too small to see the benefits of automation.
“A lot of CFOs say, ‘We don’t want to go through complex ERP-type implementation to fix what is a straightforward problem’. They want something that is simple, quick to deploy and best practice-based. Cloud enables that,” Llewellyn says. “It doesn’t require big set-up fees and internal IT support and is easy to roll out.”
This was the case for Sunil Purohit, CFO at VC-backed fashion e-commerce company Fits.me. The provider of virtual fitting room solutions expects rapid growth over a short time frame and needed to think about its T&E system “in terms of how scalable and appropriate the process we implement today will be in the business we expect to see in three years’ time”, Purohit explains. “It is unrealistic to get a ‘yes’ to implement an all-singing, all-dancing ERP system. The reality is we may one day get to that place but today we wouldn’t be justified in making a big investment. Cloud-based point solutions are easy way for a business such as ours to get around the ‘yes’ issue.
“In businesses I have worked at in the past, the chief executive officer typically nods when you talk about how you expect to grow, but when you say that you need to transition to an ERP solution, an alarm bell goes off and you get to a tomorrow-never-comes scenario. If you say that you have easy to implement a point solution for this particular problem, it is easier to get a yes.”
With 60 staff spread across two continents, three countries and four office locations, Fits.me is quite dispersed in terms of where its people are based, while the majority of its clients are international. And at €500m (£367m) a year, T&E represents a significant part of the business’s expense base, but is one of the discretionary line items over which it has some control.
According to Llewellyn, companies that automate their expenses typically see between a 9% and 12% reduction in T&E spend because of the ability to build the expense policy into the system. Claims outside of company policy will be red-flagged. This has failed to lead to a reduction in overall spend at Fits.me as a consequence of its rapid growth, but it has led to “smarter spend”, Purohit says.
“It’s easier to have a policy that can be applied easily and consistently. When people join, you can go through your expense policy and employment manual, but the reality is they tend to gather dust after that. Having a cloud-based system that inherently supports processes makes for smarter spend,” he explains.
At the same time, it improves visibility over spend, which supports an agile budgeting and planning process. “In an ideal world, you set a long-term plan and budget and everything goes as predicted, but in reality it never goes quite that way. As soon as you finish your budget and planning, the real word kicks in. You have to reset expectations and it is at that point that you have to say, ‘What are the things we can change in the short term?’ And, critically, you don’t want to cut things like the marketing budget as it doesn’t help in the long run,” he says.
This, too, can help foster investment in a growing owner-managed business looking to attract venture capital. As an FD of a VC-backed business, Purohit stresses the importance of having a robust, flexible and transparent reporting system that meets need of investors.
“We have group of VC investors in our business that all require slightly different reporting. Each fund has its own requirement about frequency and detail. It’s a confidence booster to have this as part of your overall reporting overall solution. There is nothing worse than being the laggard as the last company in their portfolio to deliver your numbers and when you do, it is something they didn’t ask for,” he adds.
Llewellyn adds that if costs can be controlled or reduced, automation means savings can be spent in smart way. “It goes straight onto your bottom line and the business can spend that money on growth, innovation and client acquisition,” he says.
It also frees up time for finance teams – which increasingly are moving away from transaction-based services to providing more strategic insight. Analysis by Aberdeen Group found that automation can lead to a 70% reduction in the time spent processing T&E spend, with less time spent checking claims against company policy, auditing claims for VAT purposes and answering employee queries. It also provides greater visibility over cashflow.
“Individuals tend to store expenses up for a long time. I hear horror stories of £20,000 expense claims that come through, often from senior management. That’s not great from a cashflow perspective,” Llewellyn says.
Purohit agrees that it has “made life easier in the sense that we automated the link between our expense system and core cloud-based accounting system. We spend less time getting data from one system to other and more time analysing where that money is spent.”
It can also lead to productivity gains in the wider workforce. “We have a mobile workforce that needs to travel extensively to do their job and expense processing is typically a headache,” Purohit adds.
The inclusion of a smartphone app means that colleagues can populate their expense reports on the move. Research by mobile network Three predicts that 80% of internet transaction will be made by smartphones and 97% of individuals will own a smartphone by 2017.
“After using smartphones in our daily lives, individuals from the millennial generation expect to be able to use technology like that. When it comes to doing employee expenses, it is no different,” says Llewellyn. “In an automated world, there is very little for me to do. It is done for me.”
But does that lead to a more productive workforce? Llewellyn thinks so and suggests that it takes 50% less time to submit a claim using a cloud-based system. But whereas time savings in finance, reduction in spend and increases in VAT reclaims can be monitored, overall employee productivity is harder to KPI.
Nevertheless, it keeps the admin to a minimum and saves colleagues from filling out swathes of expense forms at work – at the cost of doing their main job – or in their personal time. ?
For more information on how cloud can support your travel and expense processes visit www.concur.co.uk