Expense Report Innovation
Despite innovations in automating expense reporting processes, filing expense reports remains among the major pain points across the business travel industry.
A survey of 359 frequent business travelers by financial infrastructure provider Banyan earlier this year showed that while most had good behavior with expense reporting—90 percent said they filed them within a week of returning from travel—more than half said the time it took to fill them out was the biggest burden in the process. More than 60 percent said it took 20 minutes or more just to organize the materials to file the report. The survey took it so far to find out what other unpleasant task the travelers preferred to filing expense reports. About a third said it was a worse experience than a dental appointment or renewing a driver’s license.
The process is no cakewalk for expense managers either. Joint research between the Global Business Travel Association Foundation and lodging-as-a-service provider HRS last year showed nearly one in five expense reports filed have an error, and correcting them cost an average of 18 minutes and $52 per report. TravelBank cofounder and CEO Duke Chung said his company’s figures show finance departments average about 3,000 hours per year correcting expense reports.
With a popularity on par with the dentist drill, it’s no wonder that multiple fintech, expense management technology and other suppliers have adopted a “kill the expense report” mantra, as travel buyers and travelers themselves would not exactly be lining up as mourners.
“Expense reports are annoying, and they don’t provide any value to the submitter,” EAB SVP of business solutions Steven Mandelbaum said. “It’s an age-old problem that if you solved, the world would beat a path to your door.”
But don’t break out the all-black wardrobe just yet.
Already Dead?
Talk of ending expense reports usually boils down to the idea that the process of requiring every purchase to be detailed on a report—whether that is grouped by month or trip, per a company’s policy—and then requiring approval by a manager prior to reimbursement is an antiquated practice.
“If I’m taking a candidate to lunch at the restaurant down the street, the whole notion of a report doesn’t make sense in this context, to have to create this shell thing to put my transaction in and then go submit it as a report,” said Michael Sindicich, EVP and general manager of Navan Expense.
That’s not to say there isn’t value in grouping certain expenses together, he said, particularly if companies want to keep tabs on costs per trip or costs around a certain event, such as an internal meeting. But if all the pieces are in place to know that expenses are within policy and whether they were associated with travel or another purpose, the step of an employee grouping those together and filing them becomes unnecessary.
To that end, Navan is saying “mission accomplished” when it comes to eliminating expense reports and, as a step further, expense management, in terms of automating the process of uploading receipts, sending a report for a “rubber stamp” manager approval and then on to finance before being pushed into an ERP for reimbursement, Sindicich said. Navan’s position as a travel management company means it should know whether someone is on a trip, which helps with reconciliation, but it also has a fintech component as a card issuer, as well as its Connect capabilities that enable companies to configure travel policy controls on their own corporate cards, Sindicich said.
The idea is that, from the employee standpoint, they simply pay for their expenses and get reimbursed without having to do anything, he said.
“Expense reports are annoying, and they don’t provide any value to the submitter. It’s an age-old problem that if you solved, the world would beat a path to your door.”
— EAB’s Steven Mandelbaum
Emburse chief product officer Richard Crum said it’s not always so straightforward. While small, simple businesses have “plenty of options” to kill the expense report, bigger companies with established processes in keeping track of finances, and perhaps a philosophy of making sure every expense is approved, might be more reticent to throw out expense management procedures.
“I’d like to meet the CFO of a bigger business who agrees with killing the expense report,” Crum said. “They’d say we need employee spending capture to be more timely, and it’s got to be done accurately. We have to make sure that we get the documentation for substantiation—tax and reporting implications—and make sure we can close our books.”
Mandelbaum said determining the purpose of a trip is a big obstacle to an expense-report-free utopia. While it’s one thing for systems to determine whether expenses are in policy or provide details about the purchase or vendor, making sure they are properly categorized—to the right department, or an internal trip versus a client-facing trip, for example—is more difficult to automate.
“There’s only so much artificial intelligence can do,” Mandelbaum said. “I haven’t seen a tool that solved the purpose problem well.”
SAP Concur, the marketshare leader for automated expense management, aims “to automate expenses as much as possible,” according to VP of spend management solutions Bres Longstreth. Rather than snuffing out the expense report, the company can eliminate a “significant portion of expensing,” he said.
In total, about 80 percent of expenses are approved when first submitted and potentially could be approved without a formal report—an employee spends $5 on a coffee while attending a known event in the SAP Concur system, for example. About 15 percent of expenses are rejected due to errors that an intelligent system could potentially correct.
“It’s those last few percent of expenses that a customer’s compliance team wants highlighted for further review,” Longstreth said. “SAP Concur’s goal is to build the smartest, easiest-to-use system for surfacing those anomalous few percent of expenses that need more scrutiny.”
Friction Free Lodging Expenses? Some Start with Form of Payment.
Lodging remains a big challenge for expense management, as hotel bills need to be itemized to separate taxes and incidentals from room rates. On that front, corporate lodging platform HRS has been building its “lodging as a service” technology to capture lodging spending across segments and includes invoice management and automated VAT reclaim, SVP and managing director for the Americas Will Pinnell said. Besides its own technology, HRS also has made acquisitions including travel invoice management provider Itelya and digitized payment technology PayPense.
Virtual card technology is a central component in an ecosystem with limited or no expense reports, as they enable companies to put controls on exactly how much and for what the card can be used. They also can be distributed to non-employees or those within a company who do not have their own corporate cards.
“Virtual cards have laid the foundation for companies to think about payment in a different way,” Pinnell said. “A lot of corporate travel takes place for individuals that don’t work for a company, and companies have gotten smarter about how to issue cards to travelers who are not employees.”
Closing the Payment Gap
Travel and expense integration, a key to reducing expense reporting pain, has been a focus for years—Concur’s acquisition of Outtask, a pioneering move in integrating travel and expense from a single vendor, is only a few years away from its 20-year anniversary. But integrations on the payment side have proliferated only recently. Traditionally, corporate card programs have sat either “totally decoupled” or “very loosely integrated” with expense management platforms, but the Covid-19 pandemic in particular “really accelerated the fintech side of corporate card management,” Mesh Payments CEO and cofounder Oded Zehavi said.
Mesh is one of several fintech providers to launch a travel solution in the past few years, alongside Ramp, Coupa and Brex, which launched a new travel booking service built with Spotnana earlier this year. The goal, Zehavi said, is to “close the triangle” in the real-time integration of cards to expense while increasing accuracy of travel to expense data.
“When you do it in real time, and can attach the receipt immediately, it brings new levels of data and accuracy,” he said. “The alternative is to wait 48 hours, which most of the non-modern systems do, in which time you might have potentially thrown the receipt away.”
Most recently, payment and expense management provider Center, which CEO Naveen Singh has described as a “card-first” offering, also launched an integrated travel and expense offering built on Spotnana infrastructure. While, among beta customers, use of the travel tool has covered 60 to 70 percent of bookings, Center’s broader vision is to apply controls and policy around bookings that occur outside of the travel tool. “It enables CFOs to create a policy that works, not just for travel booked on the integrated tool but that automates expenses irrespective of the booking source,” Singh said.
It’s not just the newcomers on the payment side tightening their travel connections. Citi, for example, in recent weeks announced a partnership with Navan for a jointly branded travel and expense offering. U.S. Bank, meanwhile, acquired TravelBank in 2021 and more recently announced a combined travel, payment and expense offering.
Easing the burden of expense reporting was one reason TravelBank was started in the first place, with automated approval flows and accounting tool integration. Coming together with U.S. Bank, however, provided “an amazing innovation opportunity,” Chung said.
“Banks are traditionally protective of all transaction data, and having access to card data isn’t something that has been available for many years,” he said. “With the work we’re doing with U.S. Bank, this all starts to come together.”
If You Build It…
Stepping back, the move to a world of limited to no expense reports seems like a big step, especially considering the lag in adoption even of widely available integration opportunities. A survey of more than 300 accounting and finance professionals by Center early this year showed that about a third were still using some combination of manual processes, such as spreadsheets and paper, to manage their expenses. While significant, it did mark a “sizeable” drop from a similar survey by Center in 2021, when that percentage was at 48 percent.
Manual processes happen mostly among small and midsize travel programs, though some large companies will cling to them as well, Concur’s Longstreth said, stemming from “inertia, hesitancy to mandate employee behavior, cost, accessibility, and lack of awareness of the benefits and potential savings that can come from automating travel and expense processes.”
Even such “worst practices” as asking employees to use personal cards for expenses can be hard to let go of for some companies, as employees might be accustomed to racking up massive rewards for personal use from big-ticket business travel expenses.
Can Blockchain Take Us Back to the Future with a Direct Pay Option?
New distribution and direct-booking models could open to further ways of reducing expense reporting via bypassing the payment side altogether. As part of PwC U.S.’s new blockchain-powered TMC, which earned its travel leaders Travel Manager of the Year honors from BTN this year, the advisory firm included a direct-connect and direct-pay configuration. Since, under the structure, airline payments aren’t coming from the corporate card and rather a direct ACH wire, the company was able to remove airfares as an expense item for travelers. Hotels and car rental companies could get a similar set up—and that is on PwC’s roadmap—although such a set-up could never totally eliminate expense reports unless a company was able to do the impossible task of setting up a direct-connect with every single potential vendor.
Over time, however, the burden of expense reports will only become a bigger dissatisfier among employees. Will Pinnell, a longtime tech executive for BCD Travel and now SVP and managing director for the Americas for HRS, noted that Millennials today make up about 35 percent of the workforce, and by 2030, they will be more than half, alongside Generation Z and younger travelers who have never known a world without social media and mobile devices. As such, they will have a lot less patience for labor-heavy processes for the simple reward of being reimbursed for their expenses.
TravelBank’s Chung agreed. “Imagine going home to watch Netflix tonight and everything was in black and white,” he said. “When you go to your workplace, and it comes time to use the tools to do our jobs, that’s what it can feel like.”
The trick is changing the mindset when companies are looking to implement solutions, Emburse’s Crum said. Oftentimes, they are looking for solutions that can simply help improve the processes they have in place rather than looking at a better process altogether.
“We’re leaning in to help companies understand the ideal way to use this software,” Crum said. “When you craft policies, set limits and implement rules and have all this set up, you don’t have to feel tethered to the way you do it now.”
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