Automating time and expense reporting: company slashes processing costs and cleans up a messy practice - HR Technology

HR Magazine, May, 2003 by Bill Roberts

Expense reporting used to be a messy affair at The Thomson Corp., a Stamford, Conn.-based company that provides financial, legal and regulatory information.

Although the process varied among Thomson's five business units, about half of the 40,000 global workers who are regular business travelers had to fill out by hand a laborious paper report on travel and entertainment (T&E) expenses. In one division, many travelers would procrastinate because there was little motivation to do reports: Whether they filed or not, Thomson automatically paid the corporate credit card to which most expenses were charged.

But travelers who did not have company-paid cards would complain that they didn't get their checks promptly. They also didn't like making separate trips to the bank to cash those checks. After all, pay checks were deposited directly into their bank accounts--why not expense checks? To circumvent the problem, many employees took huge cash advances, which didn't help cash management.

"It took 90 days to rationalize all expenses," recalls Maggie Lagana, corporate director for U.S. cash management at Thomson. "The whole situation was a mess."

Not any more, thanks to the web-based expense management software that Thomson began to roll out in January 2002. With the system, Thomson reduced the cost of processing a single T&E report from $30.75 to $1410 and achieved a payback on its $3 million investment in a year, Lagana says. Also, Thomson now has data that it can use to negotiate better deals with preferred travel providers and to enforce compliance among workers.

Expense management software has been around in some form for about a decade, and there are several mature web-based packages available. They can be installed and maintained by the adopter or run on an application service provider (ASP) model. Either way, they cut the time, energy and cost of filing, approving and processing expenses, and they can help companies manage costs.

"The opportunity is not just to streamline and automate the process, which is certainly important, but a way to manage and control what is a very big chunk of spending every year;' says Monica Barron, an analyst at AMR Research Inc. in Boston. Any company that uses at least one full-time equivalent to process and audit expense reports can benefit from automation, she says.

Curbing a Controllable Cost

Thomson's return on investment (ROI) in one year is not uncommon, says Christa Deguan, senior analyst at Aberdeen Group Inc. of Boston. In a 2002 survey of 50 Fortune 500 companies that use expense management products, Degnan found that, on average, they cut the cycle time for processing reports by 79 percent and reduced the cost of processing one report by 63 percent. In the survey, 79 percent reported administrative savings, 33 percent redeployed workers, and 53 percent cut full-time employees.

Despite savings like these, less than 30 percent of North American companies have adopted expense management software, Barron estimates. One reason: IT spending has been down due to the recession, and expense management projects compete for IT funds. Another reason might be that potential adopters underestimate what the software can do.

Adopting software to cut processing costs is a good start, Degnan and others say. But these products can also help lower actual T&E costs by giving companies data they need to negotiate better prices with hotel chains, rental car agencies and airlines.

Degnan says a company can expect to pay an average of $500,000 for the first year to automate T&E reporting, assuming it buys a license that covers any 500 concurrent users. A smaller company with only 100 concurrent users can set up for as little as $45,000. No vendor appears dominant yet, but big names include Concur Technologies of Redmond, Wash., and Extensity Inc. of Emeryville, Calif., which is a division of Geac Computer Corp. Ltd. of Markham, Ontario, Canada.

Thomson chose Extensity.

Hosting Their Own

Lagana began to look into expense management software after she took over accounts payable and T&E expense reporting for the corporate office in 1999. "I soon realized what was going on and said it has to stop immediately," she recalls. She not only wanted to make the process more efficient, but she also wanted to pay employees electronically.

She had no previous experience with expense management software; however, as president of the Treasury Management Association of New York, she did have a network of people who did. Lagana says she knew from the start that she wanted an Internet-based system.

She also wanted the software installed and managed in house, not at an ASP. With an online, real-time system such as expense management, Lagana wanted to know immediately how long it would take to fix the system if it went down. "I want to be able to call my own people and remind them this is a critical business system. I don't want to be calling an [ASP's] help desk," she explains.

It helped that Thomson had already invested heavily on infrastructure for hosting other self-service applications. Keith Berg, a sales engineer manager for Extensity who worked on the Thomson project, says companies more commonly opt for the ASP model. But it makes sense for a company to host its own when it's invested heavily in information technology (IT) staff and infrastructure. At Thomson, IT hosts the applications and covers the costs.