Expense management key priority for India Inc.: American Express- IMA Study

Expense management key priority for India Inc.: American Express- IMA Study

Expense management key priority for India Inc.: American Express- IMA Study

Expense management key priority for India Inc.: American Express-IMA Study

After revenue growth, expense management is the next focus area for finance leaders

A recent research undertaken by American Express has found that expense management is the priority focus area for businesses in India after revenue growth. The research titled Travel Expense Management: Rising Focus, conducted by IMA for American Express, reveals that about 89% of companies are prioritising on expense management in line with their aspirations of revenue growth, ensuring efficient cost management of controllable expenses like travel. Moreover, with amalgamation of automated expense management solutions and corporate cards, business travel is expected to evolve, bringing greatest ROI and business advancement in the long run. In line with business and revenue growth, 64% of CFOs interviewed expressed a growth in business expenses by up to 10%, and hence the need to control these expenses.

Commenting on the findings of the survey, Ms. Saru Kaushal, Vice President and General Manager, Global Corporate Payments, American Express India said,

“In a competitive business environment, it is vital for companies to combine the levers of policy, process and vendor negotiations while doing bulk purchasing in-order to maximize the ROI on controllable expenses incurred. The country’s leading corporations are ensuring optimal deployment of all expenses related to Travel by creating robust cost-efficient expense management systems.”She further added saying, “American Express helps companies seamlessly integrate their expense management policies and payments on our Corporate cards program. This helps in creating transparency and allows the finance team to drive compliance to Travel policy. The expense management solution is delivered along with sophisticated data analytics to help companies identify abnormal & out of pattern expenditure and also peer benchmarking. Over 600,000 leading corporations globally use our program to deliver saves on travel and related expenses by up to 9%.”

Travel and Expense (T&E) management second most controllable expense for services, and third most for manufacturing sector

As corporate India enters a radical change, companies will focus on travel and expense management, identified as one of the most controllable expense. With total spends of US $7.4 billion and an average per company spend of US $0.4 million on travel, lodging and entertainment (based on 2015-2016 IMA data available for 10,000 companies), there is huge scope for companies to generate savings.According to the report, with focus on business expansion in 2017, expenditure on travel, lodging and entertainment is expected to continue to increase in FY 2018 at about 10% for the services sector and 5% for manufacturing firms. Business travel has become fundamental for business growth, exploring new markets and maintaining existing client relationships. Establishing an effective and accountable travel expense management policy, will thus ensure that companies are able to keep a tab on the travel expense, further avoiding any fraud or overspend.

Sector wise spend on travel expenditure
  IT & ITeS Manufacturing Services
% age of total business expenses spent on travel 9.3% 3.5% 4.8%
% age of foreign travel in total travel expenses 70% 31% 19%

Use of automated systems to understand potential areas of saving

To drive the full benefits of automation, companies should move towards fully automated and integrated expense management systems from the predominant partially automated systems. As per the report, about 21% of CFOs feel they have fully automated and integrated systems, while about 47% of them have partially adopted automation.  Another 13% companies are ready to institute automated systems by the end of 2017.To analyse travel behavior and patterns, companies can use data analytics technology to gain a better understanding of possible areas of savings. This will help businesses gain the competitive advantage of analysing expenditure trends and take steps to ensure greater ROI.

American Express through its centralized billing platform, Business Travel Accounts (BTA) helps corporates drive compliance and transparency at each vertical by providing 24/7 MIS support. With access to MIS reports, companies can identify spending trends, out-of-pattern spends and travel policy violations. The solution also helps organisations centralise billing and consolidate all air travel bills.

 Frequent review and compliance assessment of travel policies

According to the study, about 82% corporates stressed that a clearly articulated expense management policy leads to cost saving. However, only 65% of companies have such a policy in place. Also, only about 40% of companies run routine checks of adherence to all components of the travel policy, indicating weakness in the prevalent compliance monitoring processes. To be fully effective, policy guidelines need to incorporate outcomes and should be periodically reviewed to achieve specific built in targets.

Integrating payment and expense management using corporate cards

Corporate cards are another continued area of focus for companies, streamlining management of travel expenses and valuing the visibility of expenditure trends, abnormal usage and highlighting over spent. About 48% of companies in the study expressed that they have mandated the use of specific corporate travel cards for managing travel expenses. Moreover, about 81% of top management, 59% of senior management, 52% of middle management and 21% junior management employees use corporate travel cards through their organisations. This allows companies to get the advantage of specifying expenditure limit as per the management hierarchy, and customising corporate card offerings as per the company’s requirement.

To attain a balance, some corporates are also moving to the greater use of consumer credit cards issued through a corporate tie-up. The trend is expected to boost the usage of electronic transactions especially post-demonetisation, further giving a fillip to credit card usage. Corporate tie-ups with travel service providers also help companies reduce the scope of payments. According to the report, about 97% of corporates feel that they manage travel expenses by mandating use of specific service providers and also enjoy bulk discounts offered.

Key recommendations for maximizing T&E savings:

  • Tracking T&E spends
  • Devising an effective supplier strategy
  • Implementing the supplier strategy
  • Monitoring and compliance
  • Streamlining business processes

Travel management best practices highlights: