2012 Expense Management Benchmarking Study

2012 Expense Management Benchmarking Study

Contents Introduction 3 Study Demographics 4 Travel & Entertainment (T&E) Expenditure Benchmarks 5 Expenditure Analysis 5 Travel & Expense Management Policy 6 Travel and Expenses Policy 6 Eligibility Criteria for Corporate Cards 6 Mandate of T&E Supplier Categories 7 Using Corporate Cards for Personal Expenses 8 Non-Employee Travel & Expense Management Policy 9 Measurement of Travel & Expense Management Policy Compliance 10 Travel Management (TMC) 11 Number of TMCs 11 Negotiation with Travel Suppliers 12 Expense Management Systems (EMS) 13 Use of Expense Management Systems 13 Use of Data Files in the Expense Process 14 Shared Services & Outsourcing 15 Payments 16 Party Responsible for Payment to Card Provider 16 Payment Transfer Method 17 Remittance Method 17 Conclusion 18 About American Express Global Corporate Payments Consulting 18 Disclosure The data contained in this document is not specific to individual companies and does not contain any personally identifiable information. This document contains confidential and proprietary information of American Express. No disclosure may be made without the express written consent of American Express. The information contained in this Benchmarking Study is based on benchmarking conducted by American Express Global Corporate Payments Consulting in July August 2011 and the results shown here are correct as at the time of publishing.

Expense Management Benchmarking Study Introduction American Express is pleased to present this report based on the findings of a Study commissioned by the Global Corporate Payments Account Development team with the aim of obtaining insights into client practices in the areas of: Travel & Expense Management Policy Travel Management (TMC) Expense Management Systems (EMS) Shared Services and Outsourcing Payments The Study was conducted across a sample of 45 local and multinational companies in. This report covers these findings and includes comparative references to the full sample of 276 companies drawn from the (Australia, Singapore, Hong Kong, India and ). The Study is based on data compiled by the American Express Global Client Group and Account Development team members in response to a set of questions based on their knowledge of client practices. Clarification and confirmation with client contacts were made when necessary. The American Express Global Corporate Payments Consulting team has consolidated and analysed this data to provide insights into company Best Practices at a regional as well as country level. More detailed countryspecific documents discuss findings for each country separately. Throughout the document, Best Practice tables call out the percentage of the sample in that has implemented Best Practice within their organisations. Yours sincerely Melanie Cochrane Senior Vice President JAPA Global Corporate Payments American Express page 3

Study Demographics 276 companies were covered in the Study with over 72% of the sample having a multinational presence. The majority of companies covered in the Study have less than 500 Corporate Cards with T&E Expenditure up to $5M USD. 45 companies were covered in the sample, of which 17 were local companies and 28 were multinationals. Respondents by Market 16% Local 17 76 28 200 Total 45 276 84% Balance of Charge Volume 2010 T&E Expenditure ($USD) Total Local ese in 0 5,000,000 51% 70% 40% 48% 5,000,000 10,000,000 11% 6% 14% 18% >10,000,000 38% 24% 46% 34% Number of Cards 2010 Number of Corporate Cards Total Local ese in 0 499 31% 24% 36% 53% 500 1000 18% 18% 18% 17% >1000 51% 58% 46% 30% page 4

Expense Management Benchmarking Study Travel & Entertainment (T&E) Expenditure Benchmarks Expenditure Analysis On analysing annual spend by these companies at a T&E commodity level, we have identified the following benchmarks in and the : Expenditure Analysis and Airline 52% 50% Hotel 14% 22% Restaurant & Entertainment 9% 14% Ground Transport 2% 4% Other T&E Commodities 15% 18% 0 10 20 30 40 50 60 Expenditure Analysis Category Total Local ese in Airline 52% 83% 38% 50% Hotel 14% 8% 17% 22% Restaurant & 14% 2% 19% 9% Entertainment Ground Transport 2% 0% 3% 4% Other T&E Commodities 18% 7% 23% 15% s relatively high Restaurant and Entertainment expenditure is attributable to the practices of client entertainment in that country. Airline spend at local ese companies is 83% of total spend, which reflects the popularity of centrally billed Airline products in local ese companies. page 5

Travel & Expense Management Policy Introduction There are many variables for companies to consider when developing a Travel & Expense Management policy. Well-informed decisions based on full information and complete data integrity can assist greatly in reducing costs and increasing business efficiency. Key aspects of policy reviewed in the Study include: Travel and Expenses Policy Eligibility Criteria for Corporate Cards Mandate of T&E Supplier Categories Using Corporate Cards for Personal Expenses Non-Employee Travel & Expense Management Policy Mandating preferred suppliers Measurement of Travel & Expense Management Policy Compliance Eligibility Criteria for Corporate Cards When considering eligibility criteria for Corporate Cards, providing for a broader coverage of employees who travel or entertain for business purposes ensures greater compliance, and increases spend visibility and employee satisfaction. 48% of companies in the JAPA sample provide Cards to all employees who incur T&E or business expenses. In other companies, criteria for Corporate Card eligibility is linked to management level, spend volume, or employee discretion. In, 40% of companies provide Corporate Cards to all employees who incur T&E or business expenses. It is Best Practice to base the eligibility criteria for Corporate Cards on all employees who have T&E or business expenses as it ensures one expense process for all employees. Findings Travel and Expenses Policy A Travel and Expense Management Policy is key to guiding employee behaviour and is a basic component of a Best Practice Corporate Card program. In the regional sample of large companies, 97% had a policy in place, and policy usage was consistent across all countries. met the regional average, with 100% of companies in the sample having a Travel and Expenses policy. page 6

Expense Management Benchmarking Study Mandate of T&E Supplier Categories Mandating the use of a preferred TMC, Card Provider and Hotels is Best Practice and helps to control costs and drive better deals. In the case of Airlines, companies may choose to mandate best fares rather than preferred Airlines. The Study shows that in the : 98% of companies mandate a TMC 66% of companies mandate a Card Provider 59% mandate an Airline 56% mandate a Hotel In terms of the results for : companies trends were similar to regional trends but local companies had a significantly lower mandate for Airline, Card Provider and Hotel. There is an opportunity for local ese companies to review their sourcing arrangements in these areas as significant savings may be achieved. Mandate of T&E Supplier Categories TMC 100% 98% Card Provider 60% 66% Airline 44% 59% 36% Hotel 56% 0 20 40 60 80 100 Mandate of T&E Supplier Categories Mandate Category Total Local ese in TMC 100% 100% 100% 98% Card Provider 60% 47% 68% 66% Airline 44% 18% 61% 59% Hotel 36% 12% 50% 56% A further finding is that most companies have preferred Airline and Hotel arrangements to take advantage of negotiated fares and rates. However, a large proportion of companies still allow travellers to choose the best available options in these categories. page 7

Using Corporate Cards for Personal Expenses The results of the Study highlight differences in company Travel & Expense Management Policies, particularly regarding whether Cardmembers are allowed to incur personal expenses on their Corporate Cards. On a regional basis, 26% of companies allow Corporate Cards to be used for employees personal expenses. However, despite enabling a measure of employee convenience, this is not Best Practice. Allowing personal expenditure on Corporate Cards skews company reporting and may result in increased expense processing costs as corporate and personal expenses need to be separated. Local ese companies are more likely to allow personal expenses on Corporate Cards than the regional average, with 33% allowing personal expenses. Use of Corporate Cards for Personal Expenses Total 22% Local ese 33% in 14% 26% 0 5 10 15 20 25 30 35 page 8

Expense Management Benchmarking Study Non-Employee Travel & Expense Management Policy Many companies engage significant numbers of nonemployees, (including contractors and consultants), who incur travel costs on behalf of the company in the course of their business. While the majority of these companies choose not to provide them with a Corporate Card, Best Practice in this area is to ensure that all nonemployee Airline and Hotel expenditure is booked using the company s TMC and is paid for using a corporate payment solution. This allows the company to ensure their contracted rates are used and that expenditure on travel incurred for the company is reported in relevant Card and Travel reporting systems. In terms of the, the Study found that: 46% of companies in the sample pay for Airline and Hotel charges centrally, and reimburse other expenses to contractors and consultants afterwards. 42% of companies require contractors and consultants to invoice the company for expenses, which are then reimbursed by Accounts Payable (AP). This process is used extensively in India and. 12% of companies use a Corporate Card process to pay for non-employees expenses. based in reveal some differences to the sample, including: 38% of multinational companies in pay for Airline and Hotel charges centrally and reimburse other expenses to contractors and consultants afterwards. 100% of local ese companies in the sample require contractors and consultants to invoice the company for expenses, which are then reimbursed by AP. Non-Employee Travel & Expense Management Policy Pay Air/Hotel, reimburse other expenses 33% 46% Invoiced for T&E expenses and paid by AP 42% 53% Provide Standard Corporate Card 9% 14% Provide Individual Liability Corporate Cards 0% 3% 0 10 20 30 40 50 60 Non-Employee Travel & Expense Management Policy Total Local ese in JAPA Region Pay Air/Hotel, reimburse other expenses 33% 0% 38% 46% Invoiced for T&E expenses and paid by AP 53% 100% 46% 42% Provide Standard Corporate Card 14% 0% 16% 9% Provide Individual Liability Corporate Cards 0% 0% 0% 3% page 9

Measurement of Travel & Expense Management Policy Compliance Implementing a Travel & Expense Management Policy is an important part of a Corporate Card program. The extent to which policy compliance is reviewed or measured increases the likelihood of policy adherence. In the, companies use reporting, auditing and external consultants to measure compliance with policy, with many companies using more than one method. Best Practice is to use a combination of methods to measure compliance, including Card Reporting, TMC Reporting and Audit of Expense Reports. The results reveal that of the companies studied in the : 23% use a combination of Card Reporting, TMC Reporting and Audit of Expense Reports, which is considered Best Practice. 61% use one or more tools but not all three preferred options 16% have no process to measure policy compliance. The findings for reveal that: are more likely (40%) to use no process to measure policy compliance but interestingly the percentage that uses the Best Practice combination (26%) is in line with the regional average. This presents an opportunity for ese companies to become more rigorous in their compliance measurement, which will drive savings in their T&E procurement programs. Best Practices Travel & Expense Management Policy Best Practice Benefits Total Provide Corporate Cards to all employees who incur T&E or business expenses Mandate TMC, Card Provider and Hotel Suppliers Don t allow personal expenses on Corporate Cards Use corporate payment solutions for non-employees Measure policy compliance using Card and TMC Reporting and Audit of Expense Reports Greater compliance, spend visibility and employee satisfaction Keep costs in check and drive better deals Reporting shows corporate spend only. Reduces risk of card delinquencies Ensures correct reporting of corporate expenditure. Minimises process cost Ensures consequences for non compliance, and higher compliance rates Local ese in JAPA Region 40% 18% 50% 48% 26% 7% 38% 44% 78% 67% 86% 74% 47% 0% 54% 59% 26% 25% 26% 23% page 10

Expense Management Benchmarking Study Travel Management (TMC) Introduction TMC relationships have a high impact on the value for money that companies receive for their travel-related spend. A vital part of the travel-procurement process is negotiating the best rates with suppliers in the industry. A fundamental requirement for negotiating the best deals is a clear understanding of current expenditure patterns. The Study focused on 2 key questions: The number of TMCs a company uses for travel bookings The data used in the travel supplier negotiation process. Number of TMCs Consolidating TMC expenditure to a single mandated supplier will typically result in volume discounts and the highest value for money. In the, 80% of companies have a single, mandated TMC. The findings for reveal that: 89% of companies have a single, mandated TMC. The remaining 11% of ese companies have 2 or more TMCs. TMC Breakdown 0 Managed Internally / via Internet 0% 2% 1 Single Mandated TMC 89% 80% 2 TMCs 3 TMCs 4 TMCs 5 or more TMCs 5% 11% 0% 3% 3% 3% 3% 1% 0 20 40 60 80 100 page 11

Number of TMC Providers Total Local ese in 0 Managed Internally / 0% 0% 0% 2% via Internet 1 Single Mandated TMC 89% 92% 88% 80% 2 TMCs 5% 0% 8% 11% 3 TMCs 0% 0% 0% 3% 4 TMCs 3% 0% 4% 3% 5 or more TMCs 3% 8% 0% 1% Negotiation with Travel Suppliers When negotiating with travel suppliers, Best Practice is the use of Card Reporting and TMC Reporting to establish an accurate picture of expenditure in major categories. There can be gaps in spend recognised using each reporting method. For example, where a Hotel booking is made outside the TMC, but paid for using the Card, the Hotel spend would be recognised on the Card Reporting but not TMC Reporting. By comparing both reports a full picture of current expenditure is revealed, which enables maximum volume discounts to be obtained. In, benchmark information highlights that: 43% of multinational companies used both Card and TMC Reporting, in line with the average. No local ese companies in the sample used these reports for travel supplier negotiations, indicating an opportunity for them to drive incremental savings in their T&E Procurement Programs. Best Practices Travel Management Best Practice Benefits Total Single mandated TMC Use Card and TMC Reporting to manage travel supplier negotiations Volume discounts and highest value for money Accurate picture of expenditure in major categories will enable more effective supplier negotiations and volume discounts Local ese in JAPA Region 89% 92% 88% 80% 28% 0% 43% 41% page 12

Expense Management Benchmarking Study Expense Management Systems (EMS) Introduction The reconciliation of T&E expenses by travellers is widely considered to be a time-consuming and therefore expensive process, which can be significantly improved by using an automated EMS. Our Study reviewed the types of EMS (packaged EMS purchased from a vendor, in-house developed EMS or manual process) used by companies and also established whether this was further automated for Cardmembers by using a data file from Card Provider systems to pre-code expense data. Findings Use of Expense Management Systems Data files from a Card Provider allow the pre-coding of expenses when combined with an EMS. The combination of a packaged EMS with data files is regarded as Best Practice. In the 88% of companies regionally use an automated process, either a packaged EMS from one of the leading vendors, or an in-house EMS built for internal requirements. The findings for reveal that: Local ese companies in the Study had not invested in packaged EMS. 75% of local companies preferred to use in-house EMS to meet their requirements. The remaining companies (25%) preferred to use a manual process. companies in were more likely to use a packaged EMS (68%) than an in-house EMS (24%). This may be due to global systems and processes in place in these companies. Using a packaged EMS is good practice as it helps to minimise the time taken by travellers and back-office staff in the reconciliation process, as well as allowing out of the box implementation of best-in-class expense processes. Use of Expense Management Systems Packaged EMS 41% 62% In-house EMS 26% 44% Manual Process 12% 15% 0 10 20 30 40 50 60 70 80 page 13

Use of Expense Management Systems Total Local ese in Packaged EMS 41% 0% 68% 62% In-house EMS 44% 75% 24% 26% Manual Process 15% 25% 8% 12% Use of Data Files in the Expense Process The Study reveals that in the : 51% of all companies use data files. 90% of companies with a packaged EMS used data files from their Card Provider to pre-code information for Cardmembers. Of those without a packaged EMS, this use of data files was lower (47% for in-house EMS and only 13% for manual processes). The findings for reveal that: 71% of companies with a packaged EMS used data files in the expense process. Of companies with an in-house EMS or manual process, 36% were actively considering or open to the option of moving to a packaged EMS. This is possibly because packaged EMS systems enable lower maintenance costs, allowing best-in-class processes to be implemented without large time investment from internal IT resources required to maintain in-house systems. Best Practices Expense Management Systems Best Practice Benefits Total Packaged EMS with Data Files Process efficiency, reduction in paperwork, faster reconciliation and payments Local ese in JAPA Region 29% 12% 46% 56% page 14

Expense Management Benchmarking Study Shared Services & Outsourcing Introduction Findings The Study reviews the usage of two approaches to the management of T&E processes. Shared Services Centres a consolidation approach, where activities associated with a process are brought together in a single location. For example, a company may process all business units expense claims in a single location Outsourcing an extension of the Shared Services concept, where functions previously completed by the business or Shared Services Centre are completed by a third party. Back-office financial functions for example, Corporate Card administration are a natural fit for Shared Services Centres as they touch the whole business and require ongoing administrative work. These functions can benefit from the economies of scale, automation and control that can be enabled by a Shared Services or Outsourcing model. Implementation of a packaged EMS system is often the first step taken by companies moving T&E functions to a Shared Services or Outsourcing model, as the packaged EMS provides process standardisation across the business. The Study reviewed: The usage of Shared Services and Outsourcing across the sample. Use of Shared Services and Outsourcing to manage Card-related functions. Differences in EMS usage across businesses with and without Shared Services Centres. Internal or outsourced Finance Shared Services Centres are in place for more than half (52%) of companies in the. In : 42% of companies use Shared Services Centres. There are opportunities for companies with Shared Services Centres to move Card-related functions, or move more Card-related functions, into the Shared Services Centre, which is Best Practice. Of companies in with Shared Services only, 44% use the Centre for 1 or more Card-related functions such as Payments, Expense Reporting, Receipts and Auditing. with Outsourced Shared Services are much more likely to have a packaged EMS in place (80%) than those with no Shared Services at all (33%). This is due to the process standardisation that needs to occur for outsourced centres to be effective. Best Practices for with Shared Services/Outsourced Centres Best Practice Benefits Total Move Card related functions to Shared Services/ Outsourcing centres Packaged EMS is implemented when moving to Shared Services or Outsourcing Reduce administrative work in business units Ensure consistency and automation of process across the business Local ese in JAPA Region 44% 33% 46% 50% 53% 0% 62% 70% page 15

Payments Introduction When implementing or changing a corporate payment solution, many companies are interested in benchmarks regarding the type of payment process used. The Study has reviewed company practices as they related to the following aspects of the payment process: The party (Cardmember or Company) responsible for paying the Card Provider. The payment transfer method used to make payment to the Card Provider. The method used to send a remittance advice (if required) to the Card Provider. These practices have been correlated with the average Client-Held Days (CHD), which measures the average time taken by companies to pay their Card Provider. Higher CHD adversely affects rebates and incentives and may also indicate a higher incidence of late payment fees or liquidated damages. Findings Party Responsible for Payment to Card Provider The possible options are: The company pays the Card Provider in full, and manages Expenses internally afterwards. The company pays the Card Provider for Approved Business Expenses after the Expense Report process. The company pays the employee for Approved Business Expenses after the Expense Report process, and the employee pays the Card Provider. The Study found that in the : 73% of companies paid the Card Provider. 27% of companies paid Cardmembers The fastest payment method is to pay charges in full, which takes on average 3.7 days less than paying Cardmembers on approved expenses. The results for reveal the following picture: 34% of companies paid the Card Provider. 66% paid Cardmembers for expenses, significantly higher then the average. Local companies were most likely to have a process where the Cardmember was paid for approved expenses (88%), and the Cardmember paid the Card Provider. An important policy decision regarding Card payments is deciding who will be responsible for paying the Card Provider. Party Responsible for Payment Company pays in full prior to Expenses Process Pay Card Provider for approved business expenses Total 7% 27% 66% Local ese 6% 6% 88% 8% 40% 52% in 14% 59% 27% Pay Cardmember approved expenses, Cardmember pays Card Provider page 16

Expense Management Benchmarking Study Payment Transfer Method For companies that pay the Card Provider directly, there are three payment options: Electronic Funds (Wire) Transfer (EFT) Direct Debit Cheque Findings for the reveal that: 92% of companies use Electronic Transfer methods such as EFT or Direct Debit, with the remaining 8% using cheques. using Direct Debit pay on average 7.5 days faster than those paying by cheque. The Study results for highlight the following: The usage of Direct Debit is much higher than the regional average (69% vs 23% regionally). that use Direct Debit have lower CHD on average compared to those that use EFT/ Wire Transfer. Local ese companies are more likely to use Direct Debit (88%) than multinational companies in (56%). Payment Transfer Method EFT/Wire Transfer Direct Debit Cheque Total 31% 69% 0% Local ese 12% 88% 0% 44% 56% 0% in 69% 23% 8% Remittance Method Where payment needs to be made for multiple Cardmembers, and is not made in full, the electronic remittance method enables the automatic allocation of payments to Cards. Other methods such as email (with full Card numbers obscured) and fax are processed manually by the Card Provider. The Study found that in the : 53% of companies pay using the electronic remittance method, with Australian and ese companies most likely to use this method. Electronic remittance is the fastest payment method. On average, companies using electronic remittance have Client-Held Days that are 3.5 days better than those using fax. The Study results for show: 78% use electronic remittance and 22% use a faxed remittance. page 17

Best Practices Payments Best Practice Benefits Total Company makes the payment to Card Provider Company controls payment process and can manage outstanding balances on Cards Local ese in JAPA Region 34% 12% 48% 73% Best Practice Benefits Total Send payment and remittance advice electronically Payments are transmitted and allocated most efficiently. Lower Client-Held Days optimise rebates and incentives Local ese in JAPA Region 78% 88% 71% 49% page 18

Expense Management Benchmarking Study Conclusion We trust that the 2012 Expense Management Benchmarking Study has proved useful to you in terms of providing visibility and insights into Best Practices in and the. We also hope that these Best Practices will assist you and your Company in making further improvements and enhancements to your own policy and practices. If you would like to find out more about how to apply these Best Practices in your own Company, or if you are interested in any other aspect of the Benchmarking Study, please contact your American Express representative. For the full Study on the 276 companies included in the, please visit www.americanexpress.com/ems2012 About American Express Global Corporate Payments Consulting Global Corporate Payments Consulting delivers value to Global Corporate Payments clients by identifying and leveraging cost-saving opportunities via Card, Purchasing and Expense Management programs. With more than 25 years consulting experience, Global Corporate Payments Consulting delivers customised cost-management solutions that create positive economic value for our clients organisations. Our customised solutions are designed by a team of industry experts with in-depth experience in travel and entertainment management, corporate purchasing, research and senior-level management consulting. Scan the QR code with your smartphone to be taken directly to the web page. page 19

Copyright 2012 American Express Company. All rights reserved. JAPAN: americanexpress.com/japan American Express International, Inc. Incorporated with Limited Liability in Delaware, U.S.A. Registered Trademark of American Express.