How visibility can help CFOs reduce business travel expenses?
Now while it is gradually picking itself back up again, companies need to recognize that travel and expense management need not remain the same as it has always been.
Instead, it can be revamped and substantially improved to favor a more straightforward, efficient, and all-around cheaper experience for all business travel stakeholders.
With a projected 68% hike in global corporate travel by the fourth quarter of 2023, businesses now have the unique opportunity to understand why it is a significant cost center and how increasing its visibility can help reduce the expenses and inefficiencies in prospective travel.
Why CFOs need to improve travel management visibility
Most businesses and CFOs are yet to comprehend how Enterprise Resource Planning (ERP) software non-specific to corporate travel can complicate and prolong the corporate travel management process resulting in the reduced visibility of variable costs.
This occurrence should not be the case considering that one of the primary functions of the CFO is to manage fixed and variable costs to protect businesses from unnecessary expenses.
It also falls upon the CFO to ensure financial forecasts are generated based on travel expenses and their associated cost centers.
A CFO cannot do this when low visibility in corporate travel expenses and post-facto reconciliation can yield inaccurate reports and misleading forecasts.
To avoid this, CFOs must consider increasing visibility in the entire CTM system and understand the benefits of post-facto versus real-time travel reporting.
Remember, corporate travel visibility can be a cost center that significantly impacts the business’s financials. Let us explore some problems enterprises face due to low visibility in travel management.
Disconnected ERP system
Almost all businesses invest in capable ERP software. While larger organizations utilize advanced ERPs such as SAP and Oracle, smaller-scale companies use basic systems such as Tally and Intuit.
These finance systems may be adequate to manage and track expenses, reconciliations, and audit trails from a general standpoint.
However, they are not effective or cost-saving when planning and managing corporate travel and its associated costs.
Corporate travel expenses for business travelers occur during every stage of the travel process, from planning to trip completion.
Where some organizations authorize ticketing and accommodation through vendors, others allow employees to purchase the tickets that the business will reimburse for later.
Either way has its complications that can cost the company unwarranted expenses. When travel is involved, the expenses continue for the CFO, accounting department, and management long after the business travel completion.
These costs occur because a lot of time and resources go into collecting, reviewing, approving, and issuing reimbursements for all travel-related expenses.
When travel occurs, the business’s travel policy allows travelers to make business-related expenses eligible for post-travel reimbursement.
The problem is that the traveler does not always know the extent of expense coverage in the corporate travel policy due to a lack of visibility.
For instance, some corporate policies may cover employee meals throughout the trip, while others may cover only weekdays and business hours on weekends. The employee may or may not be aware of this and submits all the messy physical invoices of all expenses in any case.
It is the job of the travel desk and accounting department to sift through these bills manually and process reimbursement approvals and rejections several days and, in some cases, months after travel completion.
During this time, the company and the traveler are at odds, each incurring their problems.
In such cases, how can the ERP software without the right expense tracking tools be a suitable solution to simplify this process and provide real-time estimates to all the business stakeholders?
The simple answer is that it cannot. Hence an immediate need for a more intelligent solution to rehaul the entire process of travel expense tracking.
Reconciliation of travel invoices
Upon travel completion, employees submit all the physical receipts and documentation of the completed travel to the accounts department and wait for reconciliation to avail of their reimbursements.
During this period, the accounting division reconciles the employee corporate card expenses, cash advances, and other out-of-pocket expenses made with personal payments based on justified reasoning per the travel policy.
When employees lose or suffer damaged receipts, the reimbursement may be delayed or, in some cases, not processed at all, resulting in employees suffering losses.
In some cases, employees try and secure duplicate receipts from the source of the expense. This is not always an easy task, especially during international travel.
The worst part about this entire process is that due to the lack of real-time visibility, processing reimbursements take several days and working hours for the accounting team.
Speeding up the process requires a shift from the age-old method of post-facto reconciliation toward a real-time reconciliation system that allows employees to submit expense reports as and when they transpire.
Audit trail (Unsure which cost center to apply to)
Traveler spending may vary depending on the complexity of what the business travel policy covers.
When expenses are made on the business’s behalf and submitted all in one go, it adds an added strain on the accounting division to trace and reconcile the source of the travel expense and place it in an appropriate cost center.
Often the accountants are provided with vague bills and incomplete or fragmented data, causing them to speculate or guess the unavailable expense details.
This potential human error affects the business by tainting the audit tail and causing discrepancies. When the CFO uses this incorrect financial information to make expense predictions and travel budget approximations, inaccuracies further affect the process.
Smart ERP software can help avoid guesswork in the reconciliation process for real-time allocations of the correct cost centers where the travel expenses belong.
Recurring variable cost
Variable costs are unexpected costs that differ from trip to trip. They depend on many factors, including location, nature of the business trip, trip duration, and other factors.
An ideal system must be in place to best approximate and assign budgets reflecting variable costs.
Tough to put a figure in advance
For most businesses, indirect business travel expenses are tricky to estimate proactively. This is especially the case in larger companies with an employee count of over a thousand.
In such instances of potential dynamic travel expenses, how much to spend on travel, what the entitlement is, and what the reimbursement amount is, are frequently recurring questions troubling the CFO.
To answer these common questions, many businesses and CFOs have created an admin team acting as a nodal center for the entire management of travel expenses.
In an attempt to drive efficiency even further, businesses have appointed a set of approved vendors for all travel aspects, from ticketing to accommodation, through whom travelers can make all related bookings and transactions.
The challenge with this system is that you have to wait for a month until all the vendors submit invoices and only then create a reconciliation mechanism. You might lose GST input credits and incorrectly assign expenses to cost centers during that time.
For most mid to large-size companies, getting a handle on corporate travel expenses is a post-factor reconciliation. Only after travel completion does the CFO get a picture (most often obscure) of all costs that transpired during the trip.
The goal of a CFO should be to change this mindset to adopt an approach where real-time reporting helps generate accurate travel budgets that delight both the traveler and management.
The current approval system is one of the biggest contributors to corporate travel becoming the substantial cost center it is today.
This system followed by most organizations dictates that while planning travel, aspects such as transport, stay, accommodation, and others require approvals from different hierarchical levels of the business.
Securing approval takes time
This manual approval system is often subject to significant delays while relaying travel requirements and information back and forth between the traveler, vendors, and management to seek approvals.
Time costs money in all aspects of travel, and prices are known to shoot up in minutes.
In most of the cases we have observed, by the time the final approvals come in, the trip becomes needlessly more expensive than it should have been.
Unfortunately, it is a common misconception in the corporate world that this is an acceptable practice as there is no other alternative.
This belief is inaccurate, as several more innovative options are currently in the market today that help businesses and CFOs mitigate this messy process by streamlining the planning and implementing travel processes.
What corporate travel visibility can bring
Although the traditional ERP system has benefits and functionalities, it does little to solve corporate travel management problems.
On the other hand, an intelligent ERP system helps travelers and businesses achieve better travel planning, implementation, and post-completion reconciliation experiences while being cost-effective.
Here are some of the ways companies can achieve efficient and cost-effective travel:
Smart ERP system gives access to real-time reporting
Smart ERP systems bring an unfounded level of transparency and visibility to the entire travel experience.
They allow travel managers and the CFO to create a concise plan for travel at a fraction of the cost they incur when using old-school systems. It also gives stakeholders a clear view of all travel expenses from start to end in real-time.
Through smart ERP systems, physical invoicing is almost entirely unnecessary, allowing travelers to increase trip productivity by focusing on the business trip targets and agenda.
Integrates travel policies with ease
The corporate travel policy can be a confusing and complicated document that may not convey acceptable and unacceptable travel expenses to employees.
Smart ERP systems offering better visibility help convey the coverage to travelers clearly through a user-friendly interface with all the necessary information.
This smart solution allows businesses to be transparent on the travel budget directly with all stakeholders, providing an elaborate budget distribution into each cost center. Thus, providing much-needed information on spending limits fixed for each travel cost center.
Accurately distribute among cost centers
Smart ERP software eliminates the confusion and guesswork involved in post-travel reconciliations.
Through real-time tracking and information sharing, employees can now upload all relevant invoices and accompanying information at the time of the expense directly to all relevant stakeholders and the accounting division.
The accountants can view and assign clear cost centers to each expense in real-time, decreasing the chances of reconciliation discrepancies while increasing accuracy.
How Tripeur solves CTM visibility
Tripeur’s system gives you visibility by shifting how things happen and making the entire cost visible in real time to the CFO. Adapting to our system can accurately assign your corporate travel budgets.
Let’s assume you, as a CFO, want to allot ten lakh rupees on your monthly travel budget. You can formulate how the ten lakhs will be used by assigning and distributing it in smaller amounts to several pre-defined cost centers.
Afterward, you can remotely get a real-time view of what is happening to the money compared to the budget whenever you log in.
Every corporate travel action, including posting invoice credit notes, happens on our platform.
We can create the big picture of all business travel aspects for CFOs to view in real-time. Our systems are ushering in a complete paradigm shift from outdated post-facto systems to accurate real-time reporting.
That is a significant change in the corporate ecosystem we at Tripeur strive to bring about.
When the entire travel process follows post facto intelligence, our system is bringing forth a change into real-time intelligence. Contact us to find out more.