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How and when you should automate expense processes

Gartner looks at the benefits of expense management tools and the circumstances that make software as a service preferable

Travel and expense management (TEM) tools automate the expense reporting and reimbursement process.

They provide visibility in corporate expenses and policy compliance in one of the largest cost bases to a business after salaries.

Many organisations seek to replace manual paper-based or spreadsheet-based processes with a modern system specifically designed for TEM because they create user-friendly systems and satisfy reporting and compliance requirements for finance leaders.

Many organisations ask: “Should we take a system from a domain specialist provider?”

If you are looking for travel booking and/or pre-trip approval functionality, then a system from a specialist is very likely the most appropriate source. But if you are looking for an expense management system only, then the answer is: It depends.

Today’s tools from all providers generally have common attributes, such as mobile user interface capabilities, and they can handle the basic process flow – from expense submission to approval and reimbursement.

Differentiation between the different systems lies in the sophistication of their expense management capabilities, user experience, reporting and suitability to a client’s back-office situation.

Most TEM applications designed in the past two years are more than capable of enabling the basic process – that is, expense submission, approval and processing. Mobile applications accompanying the desktop version of the application has been a differentiator in years past – but these are now available from most providers as standard.

The main differentiators today have shifted to the level of functional sophistication provided in the mobile and desktop experience, the roadmap for further innovation, additional value-add services, and the supplier’s ability to deeply integrate with the core back-office system in an out-of-the-box manner. If you are seeking richer functionality for your users (expense submitters and approvers), the best systems today tend to be delivered only via software as a service (SaaS). There are several reasons why SaaS should be seriously considered.

The first is when you see TEM as a commodity process and see no value in implementing and maintaining a custom-made on‑premise system in-house.

Second, SaaS is a good option if you have a multi-tiered enterprise resource planning (ERP) environment (that is, multiple ERP systems – such as SAP, Oracle, Infor and Microsoft – are used across the company) but you want a consistent global process and system in place for TEM. This is often seen in companies that have grown through mergers and acquisitions, and where a cloud-based TEM application can be used to bridge different ERP and finance applications.

The third case for SaaS is if you have a single ERP application with multiple instances and/or versions across the company, but don’t have plans to move to a common platform (that is, the same release version) in the near future. This is important because, to use the ERP TEM module effectively, it’s normally a prerequisite to have every user on the same instance/version of the software.

Integrating into and across different release versions is sometimes possible, but the complexity of implementing and managing this on an ongoing basis is not a trivial exercise.

Then there is the case of when you use legacy applications — such as Lotus Notes-based, client/server and Excel-based systems — that need to be replaced quickly because of user dissatisfaction or lack of actionable insight or when they are not sustainable if volume dramatically increases.

SaaS TEM is also good if you:

  • Want to stay current with industry best practice and operate globally on one version of the software;
  • Want a single platform for travel booking and expense reimbursement – but with allowances built in for local exceptions and differences;
  • Want a fast implementation of an expense management platform and want continuous product innovation and critical updates with minimum disruption.

Integrating TEM

Methods of integration and data exchange between systems vary by provider. But the general principle is that you need a “feed in” (user profiles and cost centre information) and a “feed out” (to your accounting platform and your chosen reimbursement mechanism).

Read more about expense management software

Travel and expense software improved record keeping, speeded reporting and approvals and tightened compliance.

We look at the benefits that every organisation – whether it is incurring expenses, dealing with the claims process, or processing, reporting or analysing the financial impact on an organisation – should be looking to get from a travel and expenses management system.

The actual mechanism for data integration also varies from basic (flat files), to moderate (application programming interface, or API), to sophisticated (real-time via web services). Choice of integration is needed because it gives maximum flexibility to accommodate back-end systems. For example, in many large global organisations, a standardised ERP system does not exist because of  the evolution of the organisation though mergers and acquisitions. So, in these instances, it may require a combination of all three integration mechanisms. Meanwhile, for a smaller organisation using a single platform for accounting and with one repository for HR data, leveraging the full web services route could be the obvious choice.

The case for corporate credit cards

It’s not a prerequisite to have corporate credit cards to use TEM, as users can still manually create expense line items for cash and credit card expenses. The procurement/supply chain and/or finance organisation will need to decide whether it is necessary and, if so, what corporate card provider is used. Specific benefits of having a corporate card feeding into the TEM application include the following:

  • It reduces the ruisk of fraud, because corporate credit card transactions cannot be overwritten by the user;
  • The information needed for most expenses – such as date, amount, currency and supplier – is automatically populated and ready to be assigned to an expense report, reducing the time needed to create and submit an expense report
  • It provides an individual bill-central pay model, where the credit card supplier gets reimbursed in bulk at frequent times during the month. The company gains better terms, and potentially more rebates, from the credit card supplier.

But recognise that, while automated credit card feeds have a positive efficiency impact overall, credit card acceptance is not ubiquitous across the globe, and credit cards are not always accepted by merchants due to the transaction charges levied by credit card companies, which makes it uneconomical to accept card payments for low-value transactions.

This is an extract of the Gartner Research Note: Ten Things to Consider When Planning a Travel Expense Management Project. Chris Pang is a research director at Gartner.

Read more on Software-as-a-Service (SaaS)