Last Summer, TPN Register, a ____ Catalog Management Service, Decided to Automate Its Travel

[Human Resources/Finance]

Smart Business: Travel and Expense Online

Hed: The New Holy Grail

Deck: Once beyond the reach of small businesses, new technology makes online T&E management accessible and affordable

Pull quote: "We have been able to cut the time our accounts payable staff spends processing expense reports in half, and will save $30,000 a year from that." -- Jeffrey Yentis, controller, TPN Register

When was the last time you took a close look at your company's travel and expense records? Probably not recently especially if you're still using the good old paper-based model. But an increasing number of small businesses are automating their travel and expense (T&E) systems and taking them online, with an eye to cutting costs and improving efficiency. It turns out that online T&E processing is easy for both employee and company.

TPN Register, a Rockville, Md., catalog management service, has 140 employees, 90 of whom submit expense reports. Last summer, the company put its paper-based T&E model under the microscope and found it slow, often inaccurate, and limited in terms of tracking expenditures.

The company decided to automate, and within three weeks had implemented a new Web-based T&E system. "We have been able to cut the time our accounts payable staff spends processing expense reports in half," says controller Jeffrey Yentis, "and will save $30,000 a year from that."

Growing Web-ward

That kind of saving would not have been possible for smaller businesses three or four years ago. "The travel and expense application market is maturing," says Timothy Tow, a senior analyst with Gartner Group, an IT research firm in Stamford, Conn. "The shift from client/server to Web-based systems has forced vendors to re-architect their products for Web deployment."

That's one reason behind the emergence of affordable, highly functional T&E automation for small and mid-sized businesses. What's more, most T&E software vendors are now offering an application service provider (ASP) model alongside their traditional licensing models. ASPs are firms that host and deploy software applications on the Web, and can be either the software vendor or a third party.

Approximately 24 T&E software vendors do business worldwide, according to Tow. Ranked by revenues, the five industry leaders are: Concur, InterPro, Captura, Extensity and Necho Systems. Some 200 companies host T&E systems online.

What this means to small businesses is that software no longer has to be purchased, installed or maintained in-house; the entire process is managed online by the ASP. It also means dramatic savings, as steep licensing fees are replaced by small set-up and transaction charges.

"Our licensing model is more sophisticated, but can run in the hundreds of thousands of dollars," says Rex Bull, executive VP of product marketing for Redmond, Wash.'s Concur Technologies, the revenue leader in T&E software. "For companies of 50 to 1,000 employees, the ASP model is the best bet."

Best Bang for the Buck

The math bears this out. "A company with 500 employees will pay an average of $100 per user to buy a licensing system," says Tow, "and the same again to implement it." That's $100,000 right there. "Add a maintenance cost of about 18 to 20 percent of the purchase price and you're paying another $10,000 a year."

ASPs on the other hand, cost only about $10 per user for the initial setup, and $5-$10 per user per month in transaction fees.

The difference lies in the levels of customization and control. "Because the licensing model can be highly customized and updated in-house, it is appropriate for companies with frequently changing T&E policies," says Tow. "Or it may be considered by consulting and services firms -- companies for which travel expenses are a mission-critical part of doing business."

ASPs can't offer the same degree of customization because they are hosted and maintained offsite. "This is the downside to ASPs," says Tow. "Companies don't have as much control over changing the applications, and are subject to the service providers' upgrade schedules and capabilities." Still, he says, they offer the best bang for the small business buck. "ASPs are fast and effective for getting expenses in, approved and paid."

The Holy Grail

Beyond these three core functions (getting expenses in, approved, and paid) lies the system's ability to track and record T&E expenses efficiently something many see as its greatest asset. Todd Blaschka is the director of marketing communications at InterPro Business Solutions, a T&E management systems vendor in Pleasanton, Calif. "The key advantage to small businesses is that it helps them understand where their T&E money is being spent," he says. "They can then negotiate better rates with airlines, hotels, etc."

Rex Bull of Concur agrees. "This could be the Holy Grail for businesses," he says. "With paper-based models, many companies are not aware of how much they're spending on certain vendors. The discounts that can be leveraged with this kind of information can represent significant savings."

Bull cites the example of Dupont, a Concur client that was able to leverage $20 million worth of vendor discounts in one year alone.

Savings are a little more modest at TPN Register, which uses Concur Expense, but Jeffrey Yantis sees the potential. Since automating, he says, "the level of detail on our T&E spending has gone from nothing to almost any piece of information you could want. We are starting to aggregate data which we hope to be able to leverage for better travel supplier rates."

Time in the Bank

Not only do online T&E systems put money in employers' pockets, often they do the same for employees as well – and quickly. "Previously, from the time the bill and receipt would come in there would be about a four-week turnaround (in reimbursement)," says Yentis. "Now, almost without exception, it is eight days or less."

Managers tell a similar story at Automotive Resources International (ARI), an automotive leasing company in Mount Laurel, N.J., which has 95 employees submitting expense reports on a regular basis, and another 60 doing so periodically. In January 2000, the company went from paper reports to ExpensAble.com, an ASP system from OneMind Connect of Newport Beach, Calif. "Employees are reimbursed in two days with the online system versus seven days previously," says Phyllis Lagerman, ARI's financial systems administrator.

An online T&E application also slashes the time it takes employees to fill out expense reports. "You're looking at about a 60 percent time reduction for report filing," says Tow. "What would take 30 to 45 minutes on paper takes about 15 minutes online." And reports can be filed from a laptop or computer anywhere.

The same is true at the accounts-payable end. "Our AP clerks no longer have to add check totals and make corrections," says Lagerman, "and currency conversions are calculated automatically."

"In terms of hours spent processing expense data," says Bull, "our smaller-scale clients can save the equivalent of a half to a whole person, which means about $30,000 to $60,000 per year."

The system's ability to incorporate a company's specific expense policies is another contribution to back-end time-savings. If, for example, your company imposes a limit on breakfast expenses, the system will "flag" a violation and alert the processing staff. The level of configuration in this respect is generally reflected in the transaction fees. You'll pay a little more to add your company's specific practices to the standardized, best-practices policies in the software.

Configuration levels for ASPs continue to evolve, as does the entire T&E expense management industry. However, as Tow notes, "New technologies and increasing integration requirements have made it difficult for leaders to emerge."

As a result, many smaller companies are keeping their pencils sharpened and ledgers handy for now, as they wait for the industry to shake down. "Interest in expense management applications is growing in the small business world," says InterPro's Blaschka, "but not as much as in the large business environment. T&E is not viewed as mission-critical by smaller companies, and resources are focused on more critical areas of the business."