U.S. Bank Corporate Payment Systems highlights conflicting issues facing travel and expense (T&E) management and how to bring them into balance.

Finding the balance:

4 expense management conflicts to conquer in 2017

2017 is the year to get serious about automating expense management. With employee satisfaction and retention being a driving force, the more an organization can streamline systems to simplify processes, increase efficiencies and gain visibility into spending, the easier it will be on employees at every turn.

If process simplification, increased efficiency and visibility are the keys to progress, then employee support, empowerment and recognition are the keys to success. But in a world where these things don’t always peacefully coexist, the challenge is to combine progress with policies and systems that provide the right level of harmony for your unique business needs.

Let’s take a look at 4 key issues causing potential conflicts when it comes to expense management and how leading organizations are bringing them into balance.

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1Employee connectivity

data securityToday’s employees demand the ability to move seamlessly between their professional and personal lives. They’re always connected, managing multiple aspects of their lives online; they expect this same level of connectivity and convenience from professional tools and systems. This level of convenience—particularly when it comes to travel and expense (T&E) management—can expose organizations to multiple types of risk. The challenge is finding the right tools and systems that provide connectivity and convenience employees want without sacrificing security in the process.

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Data security

75%75% of business travelers use their smartphone for both business and personal during their trip.3

More than 50% of workers in North America are mobile: they travel, drive for work, and work virtually.2

>50%

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88% of millennial workers want work/life integration.¹

88%

Connectivity is the new normal

For a large part of today’s workforce, connectivity is a base-level expectation for everyday productivity.

When it comes to business travel, the expectations get even higher. Employees don’t just want to be able to conduct business from their smartphones, tablets or laptops while they’re on the road.

They want to use mobile devices to manage their entire trip, from booking plane tickets and ordering cabs to setting up reservations, paying for client meals and taking care of other discretionary purchases.

They expect expense tracking and reporting to be just as simple, with automatic expense capture and automated T&E claims processing. On their return, they want to be able to complete their expense reports with minimal hassle and additional paperwork.

Employee connectivity

Connectivity opens the door to risk

The ever-increasing use of smartphones and mobile devices for business equals a growing risk to organizations, both in the office and on the go.

According to a new study by the Ponemon Institute, employee mobile devices are the root cause of many data breaches, whether those devices are used in the office or during business travel.4

In a world where mobility and connectivity are the norm, it won’t be enough to install IT security at the corporate or server-system level. Even endpoint management software that provides security for all devices attached to a network—including mobile devices—is not foolproof.

Organizations need security that provides point of sale encryption and cloud-based protections to ensure top-notch security of data in real time.

64%

64% of organizations are not vigilant in protecting sensitive or confidential data stored on or accessed by mobile devices.6

Data security

Employee connectivity

40%

40% of organizations are challenged by security and compliance risks from byod (bring your own device).5

5

Connectivity and security: a look forward

Leading organizations are seeking systems that give employees the convenience and connectivity they expect while allowing for the level of security needed to protect the business. Overly restricted employees (who are not able to experience the connectivity they take for granted in everyday life) may not be able to comply easily with policies around prompt and accurate expense reporting. What companies don’t want is to trade complete connectivity for the risk of a costly data breach. And with the solutions available today, they don’t have to.

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2Empowerment

controlEmployees who have the ability to make decisions on their own, such as booking travel and covering expenses, are more likely to be highly engaged and invest in their positions. Yet the growing lack of visibility into daily expense management makes it difficult for finance teams to maintain cost controls and (in the worst-case scenarios) take quick action with individual over-spenders. The trick is to find a solution that allows for empowering employees without sacrificing expense visibility and control.

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“ When you can give your employees “ownership” in the process of defining how accountability is enforced – you inspire trust and a desire to go above and beyond the call of duty.”9

TRUST

When trust goes up, cost goes down, and speed goes up.8

SPEEDCOST

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Empowerment inspires responsibility

Trust has a profound impact on employee performance. When employees are trusted with financial responsibility and empowered to make decisions, they’ll actually seek out bargains on their own.7

They take pride in finding less expensive hotel rooms, setting up smarter rides to the airport, checking for cheaper flights and rebooking delayed flights.

When workers understand the budgets, limitations and the reasons they are in place, they are even more likely to make responsible decisions.

Spending limits and guidelines don’t translate to restriction—they simply enable workers to make smart decisions within parameters they can respect.

The key is to set parameters and intuitive guidelines, supported by transparency and communication, so employees become part of the expense management process—not part of the problem.

Empowerment

Control

Nearly 87% of surveyed organizations reported they do not “aggressively manage” travel costs.11

51%

87%

51% of surveyed organizations cite poor T&E visibility as the top challenge.10

Visibility is the key to control

When data is siloed across different departments or allocated to spreadsheets and other forms of paper-based tracking, finance teams can’t get a full picture of the spending patterns, trends or irregularities of a company’s workforce.

Couple that with a decentralized approach to booking travel and managing expenses, and the opportunity for expense account fraud and other abuses escalates.

Automated systems that increase visibility can help finance teams understand who’s spending what and where, allowing them to recognize patterns and problems more easily, implement cost controls where needed and react to fraud/abuse quickly and decisively.

Visibility also enables finance to forecast with a stronger level of confidence and optimize budgets with an eye on long-term cost savings and efficiencies.

Control

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Empowerment and control: where things are headed

Implementing processes and systems for increased visibility are imperative for gaining insights on daily spend, T&E policy adherence and trends to improve cost control. But if done at the expense of employee empowerment, it can backfire. Transparency and communication are the keys to gaining employee buy-in and adherence. The more companies can consolidate different types of spending and different accounts under a few main vehicles (ex. corporate card programs), the easier it is for finance teams to keep their fingers on the pulse without unduly restricting employees.

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3Status quo

evolutionThe average organization allocates 7-10% of its annual budget to T&E12, making expense management more significant than ever. With steadily increasing pressure to manage this complex category efficiently and strategically, organizations must figure out the best way to gain efficiencies and improve their bottom line. For many organizations, it comes down to the numbers—and the perceived risk vs. reward.

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Top 5 reasons why some organizations still don’t embrace automation:13

Cost

Complexity

Learning Curve

Integration with Legacy Systems

Fear

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The costs of change

While adoption for payment automation is on the rise, some key decision makers may believe the costs outweigh the value.

Top of mind are assumptions about the immediate costs. The perception is that payment automation can be extremely cost-prohibitive. It’s not easily quantifiable that spending a large amount on system integration and automation will pay off— or even be justifiable.

In addition, the new technology may not integrate well, in which case unforeseen issues just add to the expense. Plus, there are data risks—there’s no guarantee that the new system will be as secure as it promises to be.

Last but not least, there’s an underlying belief that payment automation could eliminate jobs. In organizations that put employees at the top of their list, the last thing they want to do is gain efficiencies at the expense of the employees they value so highly.

Status quo

Evolution

90-95%reduction in paperwork14

25%increase in labor productivity14

Automation results:

The advantage of automation

Automation allows employees to do more with less, providing increased data accuracy, reduced (or fully eliminated) paperwork, streamlined workflows and a reduction in time spent on tedious tasks such as manual reconciliation of receipts and invoice processing.

Automating the payment management process—from online travel-booking to expense report creation, submission, approval and reimbursement—can help companies reduce expense processing costs by over 46% and contribute to a 15% higher rate of policy adherence.15

Corporate card programs help even further. With feeds that pre-populate card payments into expense reports, processing times can be reduced by 54% and processing costs can be reduced by more than 50%.16

Evolution

Status quo

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Evolution is the new status quo: a reality check

There’s never been a better time to get serious about streamlining and automating expense management. In most cases, the costs of automation are based on system usage rather than the price of setup. Implementation is typically simple enough to require only minimal assistance from IT, and take days rather than weeks. When organizations find the right system, the ROI quickly outweighs implementation costs. Organizations that do not get on board will find themselves left behind.

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4Employee rewards

company benefitsWith employee engagement and retention at a premium, recognition plays a key role. For employees who travel, allowing them to keep card program reward points can be a perfect way to recognize their extra efforts—particularly when it comes to the time they may spend away from their family. On the other hand, it is the company’s money being spent on the travel. Some organizations believe the company should retain reward points to use for future travel, savings and discounts. The debate rages on…

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Employees who work in a culture of recognition are 5x more likely to feel valued than those who do not.”18

Nearly half [of those surveyed] find that earning points in airline and hotel programs is the most enjoyable part of business travel.”17

5X morelikely to feel valued

Rewardsare the best part

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Employee rewards pay off

When their accomplishments are acknowledged and appreciated, employees feel valued, motivated and invested in their organization.

Reward points from corporate card programs play a key role in appreciation and can have a lasting impact on retention—especially for employees who travel on a regular basis.

Business trips mean time away from family and friends. Flight delays, poor sleep and off-kilter fitness routines can add additional stress.

Allowing employees to accrue airline miles for the travel, sleep vouchers for the hotel stays and points for their purchases is a simple and cost-effective way to reward employees and keep them motivated throughout every trip.

Employee rewards

Company benefits

Annual fees as high as

$450+

“ You could end up that someone goes for a more expensive carrier simply to get the air miles to suit them.” 20

Certain premium cards charge annual fees as high as $450 or more.19

Companies want options

For some organizations, it makes more sense to keep the rewards from their card programs, particularly when the program offers few rewards or limited options to earn points until specific dollar amounts have been spent.

Other organizations may choose to pool reward points and use them to offset annual fees or supplement additional T&E expenses, an approach that mitigates the risk of employees abusing the point system.

Organizations may also choose to trade reward points for merchandise or gift cards, electing to use these more tangible items in their overall incentive program.

There are cases in which companies opt out of corporate rewards altogether, choosing card programs that offer other benefits such as supplier discounts on airfare, hotels and other purchases.21

Company benefits

Employee rewards

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Employee rewards and company benefits: the foundation of success

Reward points from card programs can play a valuable role in an organization’s retention strategy. When it comes to reward points from various card programs, the organization must decide which benefits are right for the business—and the employees. It’s important to note that one size (or reward type) does not fit all. Some card programs offer individual card holders rewards while simultaneously offering benefits to the company. It comes down to evaluating which types of rewards are most motivating for employees and finding a system that fits an organization’s unique needs.

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Find your balanceAs a payments expert, U.S. Bank is uniquely positioned to help organizations manage their travel and expense costs, one of the largest variable expense categories.

Its leading-edge solutions provide control over and visibility into transactions, reducing costs and improving oversight while mitigating fraud risk and increasing automation across the entire tiered travel payments and expense process.

U.S. Bank analyzes clients’ corporate-accounts data and supplier profiles to create a payment model that optimizes cash flow and drives down costs. The evaluation is based on the clients’ unique business needs, so recommendations address what specific changes organizations can make to achieve better bottom-line results. With the ongoing development of innovative and emerging technologies, U.S. Bank meets clients’ needs today while anticipating what they might need tomorrow.

Contact U.S. Bank for more information

1.866.274.5898 intouchwithus@usbank.com

usbpayment.com

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Sources1 Forbes, What Millennials Want in the Workplace (And Why You Should Start Giving It To Them), 2014

2 Runzheimer, Visibility: Better Insight Leads to Better Cost Control, 2015

3 Concur, Travel and Expenses Management - How modern How modern finance leaders balance control with employee satisfaction, 2016

4 Ponemon Institute, The Economic Risk of Confidential Data on Mobile Devices in the Workplace, 2016

5 Aberdeen Group, Knowledge Tied to Action: How Leaders Combine Deep Network Analytics with Automated Control and Management, 2016

6 Lookout, Mobile risk is a real number, 2016

7 Concur, ibid.

8 Harvard Business Review, The Connection Between Employee Trust and Financial Performance, 2016

9 Forbes, 10 Ways To Inspire Your Team, 2013

10 Aberdeen Group, Travel and Entertainment Expense Visibility—To Be or Not To Be, 2013

11 Runzheimer, ibid.

12 Runzheimer, ibid.

13 Ayehu, Overcoming Objections to IT Process Automation, 2015

14 Iron Mountain, 5 Myths About Accounts Payable Automation Debunked, 2012

15 Aberdeen Group, Expense Management for a New Decade, 2011

16 RPMG Research Group, 2011 Corporate Travel Card Benchmark Survey Results, 2011

17 Small Market Meetings Magazine, Survey reports business travel is worth the hardships, 2012

18 Incentive Magazine, The Power of Perks, 2013

19 The Simple Dollar, Does It Make Sense to Pay an Annual Fee?, 2016

20 BBC News, The Ethics of Air Miles, 2008

21 CreditCards.com, Corporate credit cards: How they work, benefits, drawbacks, 2008

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