Are you a traveler who’s fed up with completing expense reports when you travel? Or perhaps a highly skilled finance professional that spends time accounting and auditing employee expense reports or witnessing how your teams do so, when there’s so much more you could all be doing with this time? If so, please read on, this blog could be one for you.
The last post in this series examined three pain points businesses and travelers face when paying for and managing expenses associated with business travel. We also touched on arecent study conducted by the Centre for Economics and Business Research (CEBR), which seeks to quantify the business case for transforming this area of the industry. This time we’re going to dive deeper to examine how things could look in a future where companies have end-to-end digital spend management in place.
End-to-end digital spend management is a new concept in business travel. The principle being that new virtual payments technology can be used throughout the booking and travel process so that payments are made directly by the company itself, not the traveler. This sounds like a modest change but it’s transformational.
Removing the traditional traveler pay and reclaim process has the potential to boost employee experience while saving time for employees, their managers and the finance teams involved in the process.CEBR’s analysis has shown this is a future worth pursuing because the efficiencies gained would free the equivalent of 188,000 full time employees for more productive tasks*. With the tools in place to better apply their travel policies, companies could also save approximately 8.2% of their annual direct travel spend. But how might end-to-end digital spend management work in practice?
Step one:
The traveler makes an airline and hotel booking through the corporate self-booking tool (Cytric by Amadeus we hope). The airline is paid using a lodge card within the booking tool as usual, a process that already works well. But the hotel is paid using a virtual card within Cytric, which is automatically reconciled to that trip.
Step two:
Before the traveler sets off on their trip, machine learning will assign a specific budget for on-trip expenses like taxis and meals based on the company’s policy, the seniority of the traveler and the specifics of the trip. Another virtual card is created for this amount and sent to the traveler’s mobile device where it can be accessed using an app.
Step three:
The trip takes place, and the traveler uses contactless payments from their mobile to pay for expenses like meals, taxis, and trains. The virtual card the traveler uses is programmed with the company’s travel policy so it can only be used at specific merchants, for specific amounts.
The traveler has an unexpected client lunch while traveling, meaning she needs to pay for a meal that exceeds her €50 limit. She uses the app on her phone to request an increased limit for the lunch and her manager grants the request(even if the request wasn’t approved in time the card would have allowed the above-budget purchase but flagged it for discussion after the trip).
The traveler doesn’t need to complete an expense report, instead the spend comes from a centralized company account (via the virtual card) and is automatically logged in the company’s accounting system.
Step four:
The air and hotel payments made pre-trip are automatically reconciled with the on-trip expenses, all of which have made by the company’s centralized payment account providing a clear view of the end-to-end trip cost.
This data is conveyed directly to the company’s back-office accounting system, triggering an outsourced provider to obtain additional invoicing information from supplier like hotels that are involved with the trip.
Finance doesn’t need to perform its typical accounting and auditing role to check a traveler’s expense claim against what was spent on a trip.
What are the advantages of this approach?
1. Productivity improvements for business travelers, managers, and finance teams:
CEBR’s analysis found this approach saves 147 minutes per expense claim, equating to 188,000 Full Time Equivalents across the four economies covered in the study. CEBR’s research also found that paying the hotel with a virtual card meant travelers were likely to save a further 27 minutes on average by avoiding the need to settle their bill in-person at hotel checkout.
2. Direct travel spend efficiencies
Attributed to reductions in fraud and error common to expense reports, as well as more consistent application of company travel policies due to the programmability of virtual cards, savings of $31.4B or 8.2% of direct travel spend could be achieved on average.
3. Rebates paid by virtual card issuers
Using virtual cards for more spend leads to higher rebates. Rebates range from 1-3% of spend and expanding the use of virtual cards across hotel and on-trip expenses could result in significant additional incentives.
4. Expanding travel procurement programs beyond air and hotels to cover on-trip suppliers.
Because payments are made from the company’s centralized payment account for on-trip expenses the company has far greater visibility over this spend than ever before. While thoroughly calculating this economic impact was beyond the scope of CEBR’s report, it’s likely the expansion of negotiated rates to suppliers like taxi firms and restaurant chains represents a significant opportunity for savings.
5. Simplifying international VAT reclaim.
The first step to simplifying international VAT reclaim is providing a clear and timely digital record of traveler spend. The OECD found global companies could save $10B annually by more effectively reclaiming international VAT on employee travel.
6. Simplifying expenses for affiliates.
Companies often need to cover expenses for temporary workers, job interview candidates and contractors, who don’t have a company issued plastic card. Virtual cards provide an easy to control way to extend company funds to this group.
7. The end of ‘cash advance’
The process of extending company cash to employees is time consuming and complex. But approving a virtual card and providing it digitally is quick, simple, and easy to control.
8. Digital archiving
Traditionally companies pay to physically archive documents like invoices, expenses forms and receipts. In a growing number of countries, like France and the UK, digital archiving is permitted by the local Tax Authority, saving on back-office costs. With a 100% digital process through the entire trip, companies can reduce archiving costs, not to mention the positive news for the environment of the whole paperless process.
At Amadeus we believe the application of end-to-end digital spend management represents a significant opportunity for cost reduction, improved control, and an improved business travel experience. Delivering this future for the industry is a top priority for me and my team.
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