best practices Commercial Card Integration with Expense Reporting Applications

best practices Commercial Card Integration with Expense Reporting Applications

Table of Contents 1 Introduction 1 2 Study Overview 2 3 Expense Reporting Market Trends 3 4 Why Integrate? The Value Proposition 4 5 When to Integrate? 6 6 How to Integrate? 7 a. Integration Planning and Solution Configuration 7 b. Integrated Expense Reporting Process Description 13 c. Integration Implementation Resources and Timing 17 7 Ongoing Integration Management 18 a. Expense Reporting Policies and Procedures 18 b. Reporting 18 c. Audit/Control Considerations 19 d. Issuer and Provider Involvement 20 8 Summary of Recommended Practices 21 9 Issuer Integration Role 23 10 Company Integration Role 24 11 Integration Case Studies 25 12 Glossary of Terms 27 13 Appendix Expense Reporting Providers Overview 28

1 Introduction In the last five years, large and midsized companies have widely adopted Expense Reporting technology to automate their travel and entertainment expense (T&E) reporting and reimbursement processes. Companies also have increased their use of commercial cards, such as corporate cards and commercial one cards, for the purchase and payment of travel and other business-related services. Consequently, to optimize the benefits of implementing commercial card programs, companies need to understand how to integrate their programs with Expense Reporting technology. Commercial card data integration can be the mechanism for cardholders to reconcile and receive approval for their card purchases. The approved data can then be integrated into a company s Accounts Payable and General Ledger systems for travel spend reimbursement and reporting. Automation of this process can reduce paper handling, increase expense controls, and reduce employee time. This guide provides information on the integration process and its ongoing management. Specifically, it documents the activities, benefits, costs, and recommended practices relating to the integration of commercial cards with Expense Reporting systems such as Gelco, Concur, Geac, Ariba, and Outtask. Please contact your issuer for additional information about the commercial card integration process and its benefits. If you are interested in integrating your commercial card with e-procurement and ERP systems, please refer to Visa s Commercial Card Integration with e-procurement and ERP Applications Best Practices. Note: Survey results, research, and recommended practices are intended for informational purposes only and should not be relied upon for marketing, legal, technical, tax, financial, or other advice. The actual costs, savings, and benefits of commercial card integration may vary based upon your specific business needs and program requirements. Visa is not responsible for your use of the survey results, research, recommended practices, or other information, including errors of any kind, or any assumptions or conclusions you might draw from their use. 1

2 Study Overview Visa commissioned Deloitte Consulting to conduct a study in mid-2005 to learn how companies have successfully integrated their commercial card programs with Expense Reporting technologies. Deloitte interviewed a number of large and midsized companies that have integrated with systems such as Concur, Geac, Gelco, Ariba, and Outtask. These companies come from a wide range of industry groups, including consumer business, financial services, manufacturing, and professional services. They have had commercial card programs in place for at least five years and have paid an average of $15 million annually through the program. Although a majority of the participants have Visa Commercial card programs in place, American Express and MasterCard clients were also included. Key managers interviewed included the Travel Program Manager, Accounts Payable Manager, Card Administrator, and Information Technology (IT) Manager familiar with the integration process. In order to gain insights and information on the card program and the integration process, the interviews focused on the following topics: Commercial Card Program Details size and characteristics of card program Expense Reporting System Details system and version used, implementation date, number of upgrades Integration Process key decision factors for integrating, details of the integration design and steps Ongoing Management Process new processes developed due to integration, reports used Financial Implications cost of the integration and benefits realized due to integration Issues/Lessons Learned issues encountered during the integration process, key learnings to share with other companies Deloitte supplemented the learnings from the company interviews with commercial card business and technology requirement documentation provided by Expense Reporting providers. Deloitte found that the study participants gained significant benefits from card integration with Expense Reporting systems. The savings benefits cited ranged from $900,000 to $4.5 million annually. The companies achieved these benefits through investing in an Expense Reporting system and integration resources, at a one-time cost ranging from $500,000 to $2 million. The system implementation and commercial card integration took companies from six to twelve months. 2

3 Expense Reporting Market Trends Companies began the implementation of Expense Reporting solutions in the 1990s, driven by a need to streamline operations, increase employee satisfaction, and realize cost savings through increased automation and availability of information. Today, approximately 40 percent of large companies and 10 25 percent of small and midsized companies have Expense Reporting solutions in place. 1 Moreover, about 63 percent of CFOs are planning to implement Web-based Expense Reporting solutions within the next two years. 2 As the market grows, Expense Reporting providers are offering a wide range of options for customers. Hosted Solution: Companies are outsourcing T&E functions to major providers in order to avoid software licensing and management costs. In-House Web-Based Solution: More providers are offering enhanced web-enablement capabilities that allow companies to make Expense Reporting timelier and speed up reimbursement for employees who are traveling. In-house Web-based solutions can also incorporate best practices faster than hosted solutions as they allow companies to have greater control over technology and processes. In fact, one Expense Reporting provider stated that more than 90 percent of new customers in 2004 chose its Web-based expense management solution over non-web-based licensed software. 3 Digital Receipt Filing: Through digital receipt filing systems, employees fax receipts to a designated number where the reports are digitally stored for approval and warehousing. While many companies have yet to adopt this method (it is estimated that only 15 percent of companies use digital receipt filing), the practice is gaining wider acceptance, especially since the IRS updated its receipt-management guidelines and clarified that companies can use electronic or imaged receipts in place of paper. 4 The IRS also requires records of travel expenses, expense reports, and charge card statements to be archived for a minimum of three years after the tax return filing date, 5 a cumbersome process for traditional paper-based methods. Reconciliation of All Indirect Spend: Some vendors now offer expense management solutions that automate the expense reporting, reconciliation, and approval of all indirect spend. These solutions offer features that incorporate commercial and purchasing cards in their processes and reporting. Expense Reporting providers include Concur Technologies, Geac (which recently purchased Extensity), Gelco, Outtask, and Necho. E-Procurement and ERP vendors such as Ariba, SAP, and Oracle also offer Expense Reporting modules. 1 PayStream Advisors, June 2005 2 CFO Research Services, 2003 3 Annual Report, Concur Technologies, 2004 4 Corporate Travel, Expense Management Disconnect Persists. BTNonline.com. December 6, 2004 5 www.irs.gov 3

4 Why Integrate? The Value Proposition Companies can realize a number of benefits by integrating their commercial card programs with their Expense Reporting and ERP systems. Those benefits include process improvements and cost savings, better data management and control, and increased end-user satisfaction. Process Improvements and Cost Savings Expense Reporting systems can decrease the cost for companies to process expense reports. Integrating commercial card data into an Expense Reporting system automates the expense reporting, approval, and reimbursement process. In fact, an Aberdeen Group study estimates that employees can save up to 67 percent of their time completing expense reports by using an automated report, pre-populated with card data. Additionally, companies can save up to 80 percent of their expense report processing costs in Accounts Payable. 6 These process efficiencies resulted in annual savings of approximately $900,000 to $4.5 million for companies in our study. 7 Companies in the study also realized increased supplier negotiation savings through the greater access and understanding of total employee T&E spend that results from commercial card integration. Benefit Description One company in the study realized a 60 percent reduction in expense reporting processing costs after implementing a T&E solution. Another company experienced a 66 percent reduction in FTEs in the Accounts Payable department. A company cited that expenses were approved two to four days faster due to commercial card integration. Lower expense report processing costs (employees) Lower expense report processing costs (A/P) Increased savings from supplier negotiations The overall processing time for expense reports decreases as it becomes easier and faster for employees to create, submit, and approve expense reports, resulting in cost savings. For example, one company in the study realized a 60 percent reduction in expense report processing costs after implementing a T&E solution with integrated card data. The company also stated that expenses were approved two to four days faster due to the integration. Electronically available expense reports decrease manual processes such as data entry in Accounts Payable, resulting in a reduction of FTEs. One company was able to realize a 66 percent reduction in FTEs in the Accounts Payable department through the use of an Expense Reporting solution pre-populated with commercial card data. Companies that pre-populate employee expense reports with commercial card data find that their employees have a larger incentive to purchase via the card. Employees appreciate the reduced manual entry of data on commercial card purchases. Aggregating T&E spend on a card program provides a comprehensive view of travel spend for supplier negotiations. 6 Aberdeen Group. Expense Management Automation. March 2001 7 Based on savings of $16 to create an automated expense report (versus paper-based) plus savings of $36 to review and reimburse an automated report (versus paper-based) per Aberdeen Group. 4

Better Controls and Data Management Commercial card data is a primary source of the detailed travel spend data (airline, hotel, rental car) used by companies to negotiate with suppliers, report on travel savings performance, and track employee compliance with policies. Integration of card data with Expense Reporting technology can improve the accuracy of spend information as the report is pre-populated with data versus manually keyed. Benefit Description One interviewed Accounts Payable administrator noted, After integrating the card data with our system, we are able to identify unreasonable meal expenses much more easily. Greater control and compliance with policies Detailed data for spend analysis and decision-making Commercial card integration allows management to run detailed compliance reports to confirm commercial card is within preferred supplier and spend policies. One company s Accounts Payable administrator noted, After integrating the card data with our system, we are able to identify unreasonable meal expenses much more easily. By integrating commercial card data into an Expense Reporting system, companies have access to detailed data for various analyses. Detailed Level III data can be used to improve negotiations with suppliers by doing a spend analysis. Companies can also use the T&E spend information to ensure they are meeting spend targets in accordance with supplier contracts. One company noted a 50 percent reduction in auditing efforts due to the improved data collection process. Improved data collection process and audit An automatic, paperless process results in less time spent auditing paper based expense reports, which are hard to read and understand. One company interviewed noted a 50 percent reduction in auditing efforts due to the improved data collection process. Employee Satisfaction Finally, a majority of the companies interviewed cited employee satisfaction as one of the main reasons for implementing an Expense Reporting solution pre-populated with commercial card data. Employee satisfaction was driven primarily by fewer manual entries and quicker reimbursement cycles. A post-integration survey conducted by one of the companies interviewed in the study cited an 85 percent positive response from users. Benefit Description Reduced manual entry of data Faster reimbursement Many companies have stringent guidelines on the level of detail required in expense reports. Integrating card data into the Expense Reporting system by prepopulating the detail makes this process less cumbersome for employees. One company conducted a post-integration survey and cited an 85 percent positive response from users. An automated Expense Reporting process, pre-populated with commercial card data, enables faster expense report completion. The automated workflow results in faster approvals. The more efficient submission and approval process results in faster expense reimbursement for employees. 5

5 When to Integrate? Most companies in the study agree that commercial card data should be integrated with an Expense Reporting system at the time of card program implementation. This is the preferred integration approach as it sets the stage for a best practice card program. A card program manager at a beverage manufacturer stated, Our card integration was done as a part of our program implementation, so we did not see this as a separate process. The integration was seamless and required few resources as a result of our issuer s involvement. Specifically, the advantages of integration during commercial card program implementation include: More timely realization of integration benefits Easier access to the needed integration IT, Travel, and Finance resources as all are available for the card program implementation Issuer resources on site to provide integration assistance Integration planning that helps set the goals and strategies for the card program as a whole End-user and senior management buy-in and adoption of the program Those study participants that did not take the preferred approach either did not have an Expense Reporting system in place when their card program was implemented or did not know about the benefits of card program integration during implementation. Those companies that did their technology integration later were able to design and execute a successful integration by taking the following measures: Timing the integration with a system upgrade Demonstrating that the integration business case was aligned with card program objectives Gaining senior management and stakeholder support and assistance for the integration Obtaining the needed guidance from issuer and Expense Reporting provider resources A card program manager stated, Our card integration was done as a part of our overall Expense Reporting integration, so we did not see this as a separate process. The integration was seamless and required few resources as a result of our issuer s involvement. 6

6 How to Integrate? a. Integration Planning and Solution Configuration During the Integration Planning and Solution Configuration phase, companies in the study that successfully integrated their commercial card programs with Expense Reporting technologies focused their efforts on forming a core team, developing integration objectives and strategies outlined in a business case, selecting an Expense Reporting solution, gaining the support of senior management, and designing robust training programs. Step 1: Form Core Team The study revealed that a key success factor for optimal integration is the deployment of a multifunctional team to ensure that all aspects of the Expense Reporting process, various stakeholder needs, and current technologies are considered in the integration design and implementation. This team can have representatives from: Travel Procurement/Sourcing Commercial Card Program Management Accounts Payable Financial Reporting Information Technology The companies interviewed indicated that those involved in the integration had clear roles and responsibilities. Many of the companies also selected a dedicated resource that understood all aspects of the integration to lead the integration. According to one of the interviewed companies, a key success factor of the integration was developing a list of the main stakeholders early in the project. When the integration is implemented and new policies and procedures are introduced, senior management sponsorship is critical for success. To gain their support, during the planning process the team should provide management with a clear understanding of integration benefits. Furthermore, the core team should develop a company-wide communication plan and deploy change management tools and methodologies supporting any cultural changes. Companies that effectively communicate and create awareness are more likely to optimize their card programs. In addition to internal resources, companies should look to external support during the Integration Planning phase. Some of the companies in the study found that the lack of external experts during integration delayed the overall project time line. Commercial card issuers can provide a great deal of support, having experience with clients who have gone through similar efforts. In addition, issuers may be able to dedicate IT resources to work with companies during integration planning and implementation. For the companies interviewed, the typical integration team consisted of an average of five internal employees with the issuer and the Expense Reporting provider offering active assistance. On the next page is an example of what a typical implementation team might look like. According to one company, a key success factor of the integration was developing a list of the main stakeholders early in the project. 7

Figure 1: Recommended Integration Team Travel, Procurement, and Card Groups IT Department Act as a primary driver of the integration Create business requirements/business case Select the technology to be implemented Manage the overall integration project Maps data fields Develops and implements functionality Provides post-integration IT support On average, companies in the study spent between $8 million and $33 million annually in travel related expenses and paid 63-95 percent of those expenses with the commercial card. Issuer Expense Reporting Solution Vendors External Resources Provides system selection guidance Shares recommended integration practices Works with the company to configure data files and process flows Provides examples of performance reports Aid in understanding the technical implications of the integration Assist in configuring staging tables and other files needed to transfer data Assist in ensuring that the data flow is seamless and fits business requirements Serve as ongoing support throughout the integration process Core Team Advisory Team Step 2: Define Integration Objectives, Characteristics, and Metrics The core team outlines a clear integration plan and objectives. Integration objectives need to be fully aligned with the overall commercial card program goals and strategies. These objectives can also be captured in a well documented business case outlining the benefits, cost, and timing associated with the integration. Some key card program objective questions that the core team should address during the Integration Planning phase include: Spend on the commercial card program All companies in the study have sought to drive a significant amount of T&E spend on the card in order to take advantage of the benefits associated with commercial card integration. On average, companies in the study spent between $8 million and $33 million annually in travel-related expenses and paid 65 95 percent of those expenses with the commercial card. These organizations indicated that they have specific initiatives in place, including education and card use mandates targeted at increasing spend on the commercial card. Company- vs. Individual-paid cards During the integration phase, companies should determine whether commercial card charges will be paid by the company or the individual. Organizations in the study that chose to issue company-paid cards wanted to ensure timely payment to the issuer. Companies that implemented individual-paid cards cited the minimization of risk exposure as the main factor behind their decision. The choice of a company- or individual-paid card program has an impact on the overall Expense Reporting integration process. This will be discussed in more detail in Step 2 of the Integrated Expense Reporting Process Description section. 8

Personal expenses and cash advances All companies in the study indicated that their employees are strongly discouraged from charging personal expenses on their commercial cards, regardless of whether the liability rests with the company or the individual. However, companies did allow employees to charge certain personal expenses such as hotel movies and other entertainment that cannot be easily separated from an overall hotel bill. Most companies in the study do not permit cash advances as they prefer greater visibility into employee spend. New commercial card approval guidelines Companies in the study have similar criteria regarding new card approvals. In most instances, the approval of a commercial card is based on the annual travel an employee undertakes. For example, one company decided that all employees who travel for business more than twice a year should receive a card. Some of the organizations interviewed stated that the approval is at the manager s discretion. Depending on the company s line of business and the amount of employee travel, 10 75 percent of employees have cards. In addition to identifying commercial card program integration objectives, the Integration Planning phase should also define integration performance metrics. These metrics measure success of the integration roll-out and ongoing card program integration performance compared to expectations. Examples of performance metrics include: Annual spend on the card Annual number of transactions on the card Number of cardholders as a percent of employees Number of delinquent payments Employee reimbursement turnaround time Number of non-electronic expense reports submitted Some of the companies interviewed track these metrics actively on a monthly basis; others choose to perform quarterly or yearly reviews. Participants in the interviews periodically share these metrics with senior management to provide visibility and support for the program. Depending on the company s line of business and the amount of employee travel, 10-75 percent of employees in the companies interviewed have cards. Step 3: Perform Solution Selection (Hosted vs. In-House Solution) Selecting an Expense Reporting solution is a critical step in the card integration process. Choosing an optimal solution can benefit a company in many ways. A decision that is well tailored to meet the needs of a company can result in lower costs, streamlined processes, increased control, and end-user satisfaction. Some companies in the study chose to outsource the system while others followed an in-house model of traditional or ASP licensing. Although they differ in terms of the system they choose, best practice companies follow a five-step process when selecting a system. The high-level approach is outlined in the following figure. Figure 2: Expense Reporting Solution Selection Process 9

Phase 1: Conduct a Needs Assessment The first phase in selecting an Expense Reporting solution is to understand the needs of the company. Companies that are considering implementing an Expense Reporting system often consider the pain points of the T&E process, such as manual data entry and a timeconsuming submission and reimbursement process. Companies use these pain points to formulate and document business requirements. Examples of business requirements include: Ability to integrate with internal technology systems Ability to integrate with commercial card data User-friendliness Ease of implementation Support options Quantitative and qualitative implications of pain points followed by carefully documented business requirements can serve as the foundation of a strong business case for any solution. Phase 2: Understand Internal Capabilities The next phase is to conduct an internal assessment of company capabilities. This includes formulating a thorough analysis of the following: Technological Capabilities What are the company s technological capabilities? With what systems would the new solution need to integrate? Resource Availability How many resources will be required for ongoing support? Do internal resources possess the skill sets necessary for effective management of each of the system options? Unique Characteristics What is the company s annual T&E spend? How many employees will be using the system? Phase 3: Analyze the Options The third phase of the process is to analyze the system options that are available. There are three options from which companies may choose: A traditional license-based model An ASP licensed/lease-based model An outsourced model 10

The following table describes the various options and discusses their high-level advantages and disadvantages. Figure 3: Analysis of system options option description Advantages Disadvantages Traditional license-based model The solution is licensed An annual maintenance fee is paid Application is run internally on corporate data centers Customizable Easy to integrate Control over integration process Availability of and control over Expense Reporting data Greater access to underlying code Expense Reporting process ends at the creation of a file for employee reimbursement Settlement is not addressed Need for internal IT implementation and maintenance resources with the proper skills Difficult to predict maintenance/ enhancement costs Longer implementation time ASP licensed/ lease-based model The solution is licensed An annual maintenance fee is paid Application is hosted in an outsourced data center Control over integration process Option of external IT maintenance support Only limited internal IT resources needed for implementation Expense Reporting process ends at the creation of a file for employee reimbursement Settlement is not addressed ASP technology standards may be imposed May not be as secure as information rests with the ASP Difficult to predict maintenance/ enhancement costs Outsourcing model An end-to-end (from creation of expense report to payment) solution is leased An enterprise set-up, user, and transaction fee is paid Application is hosted in an outsourced data center Solutions leverage best practices learned through various client experiences Limited internal resources required Predictable costs of maintenance Faster implementation than other options Variable quality of service Potential issues with security Lack of flexibility with customization Lack of control over data access Phase 4: Map Needs/Capabilities to Options The fourth phase in selecting an Expense Reporting solution is to map company needs and capabilities to the various system options. Solutions differ in terms of cost and features offered and therefore it is necessary to conduct a thorough analysis of the solution that will present the best business case, both in qualitative and quantitative terms. It is crucial that companies understand the total cost of ownership for each of the alternatives, including the following costs: Hardware Software Databases Networks Implementation Administration One company whose employees traveled extensively chose an Expense Reporting solution that was more user-friendly, and therefore somewhat costlier. 11

Qualitative analyses should also be considered. For example, one company whose employees traveled extensively chose an Expense Reporting solution that was more user-friendly, and therefore somewhat costlier. A manufacturing company made the decision to outsource all operations such as bank settlement and employee reimbursement to an Expense Reporting provider. This enabled their Accounts Payable department to focus on more strategic activities. For a majority of the companies interviewed, a detailed needs and capabilities assessment balanced by a strong business case dictated the solution that was employed. Phase 5: Select/Configure System to Automate Processes Once the due diligence is complete, a company selects and configures the system. System selection should be made only after receiving input from various stakeholders, including end-users. Companies in the study configured systems to minimize burdensome processes such as manual data entry and approvals. A manufacturing company made the decision to outsource all operations such as bank settlement and employee reimbursement to an Expense Reporting provider. This enabled their Accounts Payable department to focus on more strategic activities. Step 4: Develop a Robust Training Program and Support Prior to rolling out the Expense Reporting and commercial card integration, the core team develops a robust training program. Companies in the study indicated that having user-friendly and accessible training material is fundamental for the quick and successful adoption of the system. Study participants viewed online training and demonstrations as the best training method and considered other methods such as CD materials, paper materials, and classroom training to be less effective relative to cost, time, and/or learning. Another important factor for the quick adoption of the new Expense Reporting process is the availability of support staff such as a Help Desk. Participants in the study emphasized that companies need to appropriately staff the Help Desk with an adequate number of trained professionals. The number of support staff should decrease over time as end-users become familiar with the new system. Recommended Practices: Establish a multi-functional core team with clearly defined leadership and accountability for the integration during the Integration Planning phase. Actively seek guidance and support from the issuer by involving the issuer s account executive in the early stages of planning. Gain senior management support for the commercial card program and integration. Define integration objectives and ensure that all stakeholders have similar objectives with regard to expanding the card program. Design and communicate the integration performance metrics to senior management and business unit leaders. Follow a disciplined approach to selecting an Expense Reporting solution. Develop a robust training program prior to the release of the new Expense Reporting process and solution. Staff a Help Desk with an adequate number of resources trained to answer questions about the Expense Reporting system and the integration. 12

b. Integrated Expense Reporting Process Description The study findings show that, rather than one standard approach, there are a number of variations for integrating commercial card utility and data with an Expense Reporting solution. Two primary factors drive these differences: solution selection (hosted or in-house) and card liability (company- or individual-paid). Specifically, companies Expense Reporting integration processes can differ in the following areas: Level of payment data required (Level II vs. Level III) Timing of employee expense submission Approval process requirements Timing of payment to issuer and employee (monthly, bi-weekly, simultaneous, etc.) Source of payment (Expense Reporting provider vs. company) It is important that each company selects the process that best addresses its organizational needs. We will examine process variations in more detail on the next three pages. The high-level process can be divided into five main steps: 1) issuer statement submission; 2) expense report creation; 3) receipt submission; 4) approval(s); and 5) payment. The following diagram depicts a generic Expense Reporting process flow that incorporates commercial card data: Figure 4: High-Level Expense Reporting Process 13

Step 1: Issuer Statement Submission All companies in the study received commercial card transaction data on a daily basis from the issuer. Depending on which Expense Reporting solution is being used, the data may need to be formatted prior to upload. Once the data is initially mapped, the data transfer and upload to the Expense Reporting system is automatic and seamless. Companies in the study differed in the transaction data elements they requested from the issuer for Expense Reporting. For example, some companies did not have the capability to capture detailed airline or tax information due to a limitation in their Expense Reporting system configuration. In general, companies request as much data detail (Level II and Level III) as is available by working actively with the issuer. The following figure illustrates the type of data captured and transferred by issuers for Expense Reporting: One manufacturing company s Expense Reporting system sent automatic email notifications to employees to remind them that charges could be verified online. Figure 5: Expense Reporting Data Elements Transferred by the Issuer general Information supplier Information accounting Data tax Information Card Number Transaction Date Posting Date Bank Reference Number Order Number Amount Reimbursement Amount City Description Country Code Source Amount Source Currency Supplier ID Supplier Name Airline Data: Airline Name Ticket Number international or Domestic Fare Class Routing Hotel Data: Hotel Name Number of Nights in a Hotel Merchant Category Code (MCC) Expense Code Cost Center Local Tax Identifier Local Tax Amount Step 2: Expense Report Creation Once the file from the issuer is uploaded, the data populates the Expense Reporting system based on business process rules. All companies in the study uploaded commercial card data daily. When employees enter the Expense Reporting system to create and submit a report, they are able to view their commercial card transactions for input into the expense report. The creation of an expense report consists of the following activities: Verification of charges The employee reviews all the commercial card charges shown in the Expense Reporting system. If a charge is disputed, the employee is responsible for resolving it with the issuer or supplier. All companies interviewed in the study required that charge verification be performed prior to charges becoming delinquent or at least every 30 days. One manufacturing company s Expense Reporting system sent automatic email notifications to employees to remind them that charges could be verified online. 14

Indication of personal charges Expense Reporting systems allow the end-user to indicate online which commercial card transactions are personal expenses and, therefore, not reimbursable by the employer. Such expenses include hotel movies and other travel amenities not covered by the company s travel expense policies. Companies that issue company-paid commercial cards may deploy different approaches to collect the personal expense charges. Some companies require their employees to write a check equal to the personal expense amount and attach it to the receipts; other organizations automatically deduct from the employee paycheck the amount of the personal expense. For individualpaid cards, the employee is responsible for paying the issuer for all expenses, and the employer reimburses the employee for the business-related expenses. Addition of out-of-pocket expenses Employees add to the expense report out-of-pocket travel expenses that are not placed on the card but are reimbursable. Addition of comments The majority of the Expense Reporting systems allow the end-user to add comments to each expense field online. For example, end-users can specify the reason for a business dinner and the attendees at the dinner. Modification of General Ledger (G/L) codes G/L codes for commercial card transactions can be pre-defined by working with the issuer. If the G/L code is pre-defined, it is then pre-populated into the Expense Reporting system with the other commercial card transaction data elements. Some of the participants in the study indicated that they allow their employees to modify all G/L codes. Other organizations impose limitations on these modifications. For example, one company allows its employees to change meal codes but not taxi, parking, and other travel-related codes. One company in the study required employees to fax receipts along with an identifying bar code so that it could maintain an electronic file of the receipts and match the file to the expense report via the bar code. Step 3: Receipt Submission Once the expense report is created, employees are required to provide their purchase receipts. Companies in the study differed in their receipt submission policies and procedures. The travel expense amount that triggered the receipt requirement varied between $25 and $75. The mechanism to forward those receipts also differed: some companies required the paper receipts to be mailed while others required their employees to fax those receipts with an identifying bar code. The recommended approach is to store the receipts electronically regardless of whether they are scanned in Accounts Payable or scanned and faxed by the employee. The electronic receipt file can be linked to a specific Expense Report via a bar code. Expense Reporting providers such as Gelco can manage the receipt imaging process for their clients. Step 4: Approval(s) Expense Reporting systems enable an automated Expense Report approval workflow. During a typical approval process, the employee s manager validates the expense submission amounts and reason codes against the company s budget and policies. A majority of interviewed companies required only one manager approval for a report. All Expense Report approvers should have up-to date information on company T&E policies and procedures. 15

Step 5: Payments As mentioned earlier, companies in the study differed in the timing and source of payment to both the issuer and employees. Payment timing A majority of the companies in the study made payments to their issuer on a monthly basis. Those that paid more frequently did so to take advantage of the savings associated with more frequent payments. The timing of payments to employees differed as well. Most companies in the study incorporated travel expense reimbursement as part of the payroll cycle (e.g., bi-weekly). Payment source There are two sources of payment to the issuer: the Expense Reporting provider or the company. For example, one company, whose Expense Reporting provider paid the issuer, funded a bank account every two days in the amount of the companyapproved commercial card transactions. The Expense Reporting provider used the funds in this account to pay the issuer. The Expense Reporting provider also paid the employees for out-of-pocket expenses. The transactions were populated from the Expense Reporting system to the General Ledger and aggregated by G/L code and Cost Center code. This method allowed the company to eliminate the maintenance of employees in the Accounts Payable system. Alternatively, a company can make a direct payment to the issuer and employees. Once an Expense Report is approved, it is pushed into the company s Accounts Payable system. If the money is owed to an employee, a voucher is created with the employee as the payee. If money is also due to the issuer (assuming a company-paid commercial card program), a voucher is created with an amount due of $0. When the issuer s statement is received, it is paid in one ACH payment. The single issuer payment is replaced in the General Ledger with the transaction detail from the $0 vouchers. One company whose Expense Reporting provider paid the issuer funded a bank account every two days in the amount of the company-approved commercial card transactions. The Expense Reporting provider used the funds in this account to pay the issuer. Recommended Practices: Ensure the Expense Reporting solution captures sufficient data detail, and work with the issuer to design the card transaction data file. Leverage the Expense Reporting solution capability to capture out-of-pocket spend and to indicate non-reimbursable, personal card transactions. Submit and electronically store receipts. Train approvers to follow company policies and procedures and provide them with up-to-date policy information. 16

c. Integration Implementation Resources and Timing Implementing the integration may appear to be a challenging process; however, the companies in the study have shown that, with the right mix of internal resources who know when and how to use advisors such as the issuer, the process can be quite simple. Resources Integration costs largely stem from the full-time and part-time employees required to manage the integration process. Other costs incurred include third-party consulting fees. The cost of the Expense Reporting system implementation and card program integration for the companies interviewed ranged from approximately $500,000 to $2 million. The total cost is largely dependent on the following variables: Size of the company and the card program Hosted vs. in-house system selection Cost of the system selected Number of external resources used Breadth of the training program Geographic span of the cardholders Speed of implementation The cost of the Expense Reporting system implementation and the card program integration for the companies interviewed ranged from approximately $500,000 to $2 million. Timing For most companies in the study, the Expense Reporting system implementation and card program integration took anywhere from six to twelve months. This time line included system selection and negotiations, integration configuration, pilot roll-out, and training for the entire organization. A majority of the companies performed the card program integration during the Expense Reporting system implementation. The integration schedule was largely dependent upon the scale of the project as well as other factors such as concurrently running projects or lack of full-time dedicated resources. Interviewed companies indicated that the integration effort was quick relative to other application integrations, but they emphasized the need to roll out the new system in a staged pilot approach to ensure that the right procedures and controls were built in and thoroughly tested. Recommended Practices: Integrate the card program at the same time as the Expense Reporting system or card program implementation. Consider a pilot roll-out of the integration to end-users. Time the integration so that it does not conflict with concurrent high-priority projects. 17

7 Ongoing Integration Management a. Expense Reporting Policies and Procedures Companies in the study documented and distributed the T&E policies and procedures to employees. The T&E policies contained the following content: Travel organization chart with contact information Travel-sourcing guidelines, emphasizing the use of preferred suppliers T&E expense guidelines, emphasizing the travel-booking process and use of commercial card for travel expenses End-user requirements for commercial card reconciliation T&E approval guidelines Control and audit procedures for travel expenses The companies reviewed and modified the policies as needed or at least once a year to incorporate any changes in the card integration process. One company cited the active use of credit/refund transaction reports to confirm that refunds on spend previously expensed, such as airfare, are deducted from expense reports. b. Reporting Companies interviewed in the study considered reporting to be one of the most important benefits of their commercial card program and its integration with the Expense Reporting system. A variety of T&E reports can be generated by the Expense Reporting solution, the Card Reporting Solution, and the ERP system. Companies in the study created card program management reports within the following four categories: overall travel spend, commercial card use, expense reporting system use, and integration process performance. Overall Travel Spend Travel spend data can be used by the travel management and sourcing groups to understand drivers of costs and to identify cost-savings opportunities through renegotiation of supplier contracts and sourcing initiatives. With card program integration, companies have greater access to and understanding of total spend regardless of payment method and can create the following reports: a. Spend by category b. Spend by supplier (e.g., air carrier, hotel) c. Spend by business unit and cost center d. Custom reports (e.g., Travel City Pairs, Lodging Folio Spending, and Transaction Detail) 18

Commercial Card Use Commercial card data can be used to measure the overall success of the card program and to identify areas for growth and improvement. Some of the key reports include: a. Spend volume relative to goals b. Compliance with card policies/procedures c. Personal charges reports d. Credit/refund transactions reports e. Delinquency and aging reports f. Business and cost center reports Expense Reporting System Use Expense Reporting system use can be tracked to measure the effectiveness of the implementation and to identify areas for improvement. The actual performance can be compared to the business case developed at implementation to ensure that the value of the system is being realized. Key reports include: a. expense Reporting System Utilization measured by the number of expense reports created within the system versus outside of the system b. Spend savings with T&E suppliers Integration Process Performance The overall success of the integration of the card program with the Expense Reporting and ERP systems can be tracked and measured to identify areas for improvement. Some the key metrics that can be used for integration reporting include: a. Integration benefits relative to business case b. Integration costs relative to business case c. Number of non-system expense reports submitted d. Push/pull to ERP success and failure rates e. User satisfaction score One manufacturer interviewed in the study audited a minimum of 10 percent of each employee s expense reports. c. Audit/Control Considerations A company s control and audit strategy and practices should balance visibility, required effort, and processing efficiency. Companies in the study proactively audited their T&E transactions in order to confirm compliance with policies and procedures. Key elements of a company s audit and control processes may include: Audit review scope identifying the number of reports/receipts to be audited Review frequency identifying the group responsible for the reviews and the frequency of the reviews Review triggers identifying the key measures to indicate expense reports for additional review Sampling methods designing the ways in which audits are conducted (e.g., random, rotating-basis) Record retention retaining proper documentation and receipts to comply with IRS and internal requirements Compliance reporting identifying the number of non-compliant transactions 19

Audits can be triggered by a certain event (e.g., large personal expense amount on the commercial card) and/or performed at random. For example, one manufacturer interviewed audited a minimum of 10 percent of each employee s expense reports. Another company in the study audited new employees reports (first five reports), any report with an airplane ticket costing more than $5,000, and reports indicating abnormally high spend. d. Issuer and Provider Involvement Even after the integration, many companies in the study continued to schedule regular meetings with their issuer. One program manager stated, Our card program enhancements have not ended with the card integration. We meet with our issuer every six months to discuss further improvement opportunities. Companies in the study also held post-integration dialogs with Expense Reporting solution providers to gain further insights on how to streamline processes. One program manager stated, Our card program enhancements have not ended with the card integration. We meet with our issuer every six months to discuss further improvement opportunities. Recommended Practices: Disseminate T&E policies and procedures throughout the company, allowing for multiple ways of access. Update policies and procedures regularly. Establish/monitor key metrics that are directly linked to the integration objectives, including overall travel spend, commercial card use, expense reporting system use, and integration success measures. Explore/use reporting functionality offered by various tools (e.g., issuer s reporting system, Expense Reporting system, ERP system) to conduct detailed analyses. Create a comprehensive and targeted audit process to ensure that T&E policies and procedures are followed. Schedule regular meetings with the Issuer to review/understand improvement opportunities for the card program. Hold regular dialogs with the Expense Reporting solutions provider to understand how processes can be further streamlined. 20

8 Summary of Recommended Practices Theme Recommended Practice page Establish a multi-functional core team with clearly defined leadership and accountability for the integration during the Integration Planning phase. Actively seek guidance and support from the issuer by involving the issuer s account executive in the early stages of planning. 7 7 Integration Planning Gain senior management support for the commercial card program and integration. Define integration objectives and ensure that all stakeholders have similar objectives with regard to expanding the card program. Design and communicate the integration performance metrics to senior management and business unit leaders. Follow a disciplined approach to selecting an Expense Reporting solution. 9 7 8 9 Develop a robust training program prior to the release of the new Expense Reporting process and solution. Staff a Help Desk with an adequate number of resources trained to answer questions about the Expense Reporting system and the integration. 12 12 Expense Reporting Process Timing Ensure the Expense Reporting solution captures sufficient data detail, and work with the Issuer to design the card transaction data file. Leverage the Expense Reporting solution capability to capture out-of-pocket spend and to indicate non-reimbursable, personal card transactions. Submit and electronically store receipts. 15 Train approvers to follow company policies and procedures and provide them with up-to-date policy information. Integrate the card program at the same time as the Expense Reporting system or card program implementation. Consider a pilot roll-out of the integration to the end-users. 17 Time the integration so that it does not conflict with concurrent high-priority projects. 14 15 15 16 17 21

Theme Recommended Practice page Disseminate T&E policies and procedures throughout the company, allowing for multiple ways of access. 18 Update policies and procedures regularly. 18 Ongoing Management Establish/monitor key metrics that are directly linked to the integration objectives, including overall travel spend, commercial card use, expense reporting system use, and integration success measures. Explore/use reporting functionality offered by various tools (e.g., issuer s reporting system, Expense Reporting system, ERP system) to conduct detailed spend analyses. Create a comprehensive and targeted audit process to ensure that T&E policies and procedures are followed. 18 18 19 Schedule regular meetings with the issuer to review/understand improvement opportunities for the card program. Hold regular dialogs with the Expense Reporting solutions provider to understand how processes can be further streamlined. 20 20 22

9 Issuer Integration Role The company and the issuer are jointly responsible for overall integration success. Companies should use the issuer s experience to assist and guide them in the integration process. Issuers should invest in developing best practice recommendations regarding integration benefits and costs, system selection considerations, integration process design, file configuration, and report generation and usage. The role of the issuer is critical to the success of card integration with an Expense Reporting solution. Issuer checklist 1. Share recommended commercial card integration practices. 2. Assist the company with developing an integration business case by sharing data on benefits and costs associated with commercial card integration. 3. Provide guidance during the Expense Reporting solution selection process. 4. Work with the company to determine data requirements, and design and deliver the card file to integrate with the Expense Reporting system. 5. Provide change management assistance by sharing recommended practices, lessons learned, and tools and methodologies. 6. Assist in the planning of a pilot. 7. Assist in the development of training materials by reviewing and sharing templates and lessons learned from other clients. 8. Share examples of T&E policies and procedures. 9. Provide sample spending reports for supplier negotiation and spend-compliance tracking purposes. 10. Provide examples of objectives and metrics to help the company understand program successes and improvement opportunities. 23

10 Company Integration Role Companies planning to integrate their card programs with Expense Reporting systems should consider taking the steps outlined in the following checklist to obtain optimal benefits from integration. Company Checklist 1. Form a team consisting of various stakeholders to oversee the integration process. Identify a project owner and team members with clearly defined roles and responsibilities. 2. Clarify and document the integration strategy, objectives, and performance metrics. 3. Develop a business case for commercial card program integration. Provide the business case to senior management to gain support for the project. 4. select a solution based on the findings of the business case and taking into account the organization s business requirements. 5. To ensure the integration meets user needs, design the integration and pilot it with a select group of users before rolling it out to all employees. 6. Use issuer integration resources for additional assistance during the integration. 7. Clearly communicate the integration process and benefits to the organization through memos and training programs. 8. Develop and distribute necessary training materials through Web-based and classroom educational programs. Include a policies and procedures discussion as part of the training. 9. Develop T&E spend and program activity reports along with a control and audit process to ensure compliance with policies and procedures. 10. Regularly track card integration performance metrics. 11. Share performance metrics with senior management to continue their support for the program and integration. 24

11 Integration Case Studies Study 1: International manufacturing company an international manufacturer engaged in the production, sale, and marketing of alcoholic beverages Employees: More than 15,000 Annual Sales: More than $4 billion Annual T&E Spend: More than $33 million Annual Commercial Card Volume: More than $29 million Integrated Systems: issuer card transaction file, Gelco, and SAP pre-integration post-integration Pre-Integration Environment: Paper-intensive process resulting in inefficiencies In-house handling of all receipts processing Company-initiated payment to the issuer Employees using manual processes with little technology interaction Objectives: Streamline processes Increase the amount of spend paid by the commercial card Create a user-friendly process integration benefits Greater level of data captured in SAP (i.e., Level II/Level III) Ability to perform detailed data analysis Savings of 2.5 FTEs who were previously engaged in manual T&E processes 87 percent of T&E spend is now captured on the card Traceability of electronic reports Quicker payments to employees Greater control the end-to-end integrated process includes seamless data flows from the following systems: Issuer card transaction file T&E Solution: Gelco Expense Link ERP: SAP High-Level Process Flow: Data from the issuer file is automatically populated into Gelco G/L codes are automatically generated by Gelco End-users make modifications and charges are reconciled within Gelco Reconciled charges are uploaded into a server and then pulled directly into the G/L in SAP (charges do not go through A/P) Payment/Reimbursement: Company credits a zero balance account once a statement is received and Gelco makes the payment to the issuer Gelco pays employees through a zero balance account Employees are paid twice a month after charges are verified integration costs Low cost and quick integration Resources required: 3.5 FTEs Duration of integration: 12 months Other costs: training expenses Total cost of integration: $462,000 Key Drivers of Success Conducted a six-month pilot prior to the implementation to foresee challenges and assess user responses Created a robust and mandatory Web-based training program for new system card users Implemented an extensive change management program with the issuer s help to educate end-users about new T&E processes Actively worked with the Issuer to understand the opportunities for improvement, with regular meetings to review card program performance Held regular dialogs with the T&E solution provider to understand how processes could be streamlined further 25

Study 2: financial services company a financial services provider of lending services, credit card products, and consumer deposit products in retail and wholesale banking Employees: More than 14,000 Annual Sales: More than $4.5 billion Annual T&E Spend: $3.5 million Annual Commercial Card Volume: $2.9 million Integrated Systems: issuer card transaction file, PeopleSoft pre-integration post-integration Pre-Integration Environment: Many disparate technology systems with little integration Infrequent data feeds between systems Reimbursement process took more than two weeks Long and arduous audit process Checks issued to employees for reimbursement Objectives: Increase the number of cardholders Generate more spend paid by commercial card Realize process efficiencies integration benefits Greater compliance due to increased visibility in the data 50 percent reduction in T&E staff 85 percent positive response from end-users Increase in number of cardholders, resulting in more spend on the card 50 percent reduction in auditing efforts Automation of the payment process Faster reimbursement Greater level of detail captured in PeopleSoft for enhanced reporting (e.g., MCC code, amount, airline ticket number, number of hotel nights, etc.) the integrated process includes seamless data flows from the following systems: Issuer card transaction file T&E Solution: PeopleSoft ERP: PeopleSoft High-Level Process Flow: Commercial card purchase information is sent to a customized staging table Data is frequently pulled from the staging table into PeopleSoft s My Wallet Employees use PeopleSoft s My Wallet to select appropriate transactions for their expense reports Upon approval, the files with Level III information are uploaded to G/L every 15 minutes Reimbursement: No checks are issued to employees; direct deposit is made to accounts Employees are reimbursed in as few as four days after a supplier submits a charge for which the employee should be reimbursed integration costs Resources required: 10 FTEs Duration of integration: 12 months Other costs: travel and training expenses Total cost of integration: $960,000 Key Drivers of Success Developed the integration strategy after obtaining recommendations and approvals from Human Resources, Supply Chain Management, Finance, and IT departments Benchmarks the Expense Reporting system with other companies of similar size to ensure that the solution is optimized Images barcodes to receipts and links them to expense reports for easier traceability for audit purposes For added control, manager approval occurs only after all receipts are uploaded into the Expense Reporting system Conducts pre-pay audits for expenses greater than $75 that do not have receipts and for expenses that have taxable implications (such as gift certificates) Conducts post-pay audits by taking random samples Runs a monthly Personal Charges Report that summarizes users with more than three personal charges, and reports users to department managers in order to curb out-of-policy purchases charged on the card 26

12 Glossary of Terms ACH: A nationwide batch-oriented electronic funds transfer system that provides for the interbank clearing of electronic payments for participating financial institutions Company-paid card: A commercial card assigned to an employee for which the company pays the issuer for the business-related charges Commercial card: A generic term encompassing all of the card types a company can use: purchasing cards, corporate cards, fleet cards, and commercial one cards Commercial one card: A card that combines the functionality of purchasing, fleet, and corporate cards, allowing cardholders to place procurement, fleet, and travel spend on one card Corporate card: A type of commercial card, also known as a travel and entertainment (T&E) card, that is an effective tool for managing travel and other business-related spend, reducing cash advances, and providing travelers with an easy, fast, and safe method of payment while on the road e-procurement system: Any product or trading network enabling companies to purchase goods and services from suppliers online Enterprise Resource Planning (ERP) system: A software system that integrates company-wide data and provides information to users in any part of an enterprise, such as Finance, Project Management, Sales and Distribution, Planning and Production Management, and Human Resources Expense Reporting system: A software product or system allowing for expense data to be captured from employees General Ledger (G/L): A company s financial record containing all reconciled expense transactions, typically organized by organizational boundaries and commodity types Individual-paid card: A commercial card assigned to an employee for which the employee pays for the charges and then is subsequently reimbursed by the company for business-related charges Level II data: Non-financial transaction data that accompanies Level I data through clearing and settlement; data varies by spend type; sample elements for airline purchases include merchant name/original ticket number, passenger name, departure date, and origination city; sample elements for lodging purchases include hotel folio number, daily room rate, summary tax elements, and room nights; sample car rental elements include days rented, daily/weekly rental rate, and summary tax elements Level III data: Includes the same information captured at Levels I and II, plus additional data elements; data varies by spend type; sample elements for airline purchases include passenger name, travel agency code, and detailed information for up to 198 legs of travel; sample elements for lodging purchases include a no-show indicator, check-in date, and telephone charges; sample car rental elements include check-out date, car class code, and insurance charges Procurement: The purchasing of goods and services necessary to efficiently conduct business Reconciliation: The process in which card purchase receipts are matched to card transaction statements, card transactions are allocated to the appropriate G/L code and Cost Center code, and necessary approvals are obtained 27

13 Appendix Expense Reporting Providers Overview Provider* Description Concur Year Established: 1993 2004 Revenues: $56.7 M Description: Provider of automated corporate expense management solutions. Solutions include: Concur Expense: an automated expense management solution covering the entire expense management process Concur Payment: automates the payment cycle from submissions to approval Geac (Extensity) Year Established: 1971 (purchased Extensity in 2003) 2004 Revenues: $610 M CAD Description: Provides core financial and operational solutions and services to improve business performance. Solutions include: Expense Management: includes features such as expense reports, timesheets, payment requests, travel plans, and expense management reports Geac Enterprise Solutions: includes four solutions that provide financial and project management capabilities and extend ERP functions over a Web-enabled platform Gelco Year Established: 1994 2004 Revenues: More than $56 M Description: Provides outsourced travel and expense management services and solutions for corporations and non-profit organizations. Solutions include: Expense Management for Business: includes features such as expense reporting, payment, reimbursement, receipt, audit, reporting, and analysis for businesses Expense Management for Public Sector: includes features such as travel management, online reservation, reporting, analysis, payment, receipt, and audit services for government agencies, government contractors, and higher-education institutions 28

Provider* Description Necho Year Established: 1995 2004 Revenues: $23.8 M CAD Description: Provides expense management solutions and outsourcing services for small, midsized, and large corporations. Products and services include: Necho Expense: an expense management solution that drives the entire expense cycle from pre-authorization to receipts imaging Necho Boomerang: an expense management product that is run on a Notes/Domino platform NavigatER: a Web-based T&E expense processing solution that can be hosted by Necho or the client Outtask Year Established: 1999 2004 Revenues: Privately held Description: Provides and hosts travel and expense management solutions. Product suites include: Vinnet Expense Management: automates the expense capture, submission, approval, and reimbursement process Cliqbook Corporate Travel Management: provides end-to-end corporate travel, expense, and supplier management Cliqbook Travel Agency Management: offers a tool that enables travel agencies to offer their travel services Vinnet Voice and Cliqbook Voice: offers access to a voice-activated system to update personal travel and expense information Works Inc. Year Established: 1997 2004 Revenues: More than $12 M Description: Develops enterprise application software products for large and midsized organizations. Products include: Payment Manager: connects payment management automation with the global credit card network through partnerships over the Web Card Manager: a streamlined version of the Payment Manager for organizations with simpler needs * company web sites, annual reports, and the OneSource database (www.onesource.com) were used to create the provider profiles. All facts and figures provided were publicly available information as of September 23, 2005. Product offerings are subject to change and may vary from published sources. Accordingly, it is recommended that you independently review and verify provider details. Survey results, research, and best practice recommendations are intended for informational purposes only and should not be relied upon for marketing, legal, technical, tax, financial, or other advice. The actual costs, savings, and benefits of commercial card integration may vary based upon your specific business needs and program requirements. Visa is not responsible for your use of the survey results, research, best practice recommendations, or other information, including errors of any kind, or any assumptions or conclusions you might draw from their use. 2007 Visa U.S.A. Inc. All rights reserved. V7084901-0307-ecd 29