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The T&E Dance – First Steps will save your company up to 20%

By on March 2, 2009 in Expense, Travel with 0 Comments

travel * entertainment expensesDid you know that on average, approximately 20% of a company’s T&E (travel & entertainment) spend is out of policy?  CFO’s often wonder why they can’t put our finger on the bleeding that occurs within the depths of their organizations.  They meticulously review the budget, activities and policies that are believed to control spending habits but still don’t have the supporting data that will lead them to the source.  What’s worse is that many corporate executives don’t even realize there is a problem, because the T&E numbers that were submitted to them are right on target!

As a former business owner, consultant and for-hire sales professional, I’ve been on multiple sides of the expense process.  Yes, for a time I was that guy on the road 80% of the time trying to keep track of my expenses from the hotel room.  You better believe I could make my expense reports dance and show just about whatever I wanted…and so can most of the road warriors in your organization!  I was not one of those guys who abused the system but trust me, the opportunity was always there.  From my experience, I’d bet that a better part of 50% of weekly expense submitters take advantage of lack of policy & oversight.  I was also the executive of a SMB technology/consulting company.  I tried enforcing multiple policies to control spending, but still could not gain any significant visibility into T&E spending. I asked a lot of questions but inevitably had to depend on the data sent to me by the various areas of the organization.  When I did find big spending areas, it was typically a result of the expense submitter not realizing that they could have been more efficient with their expenditures.  I speculated that it wasn’t always what we were spending money on, but how we were spending it.  We then put in the policies, oversight and system (employee spend management solution) to correct the problem.

Research suggests that:

  • An estimated 20% of a company’s T&E spend is out of policy
  • T&E spend is one of the largest controllable expense categories (typically second only to payroll)

So what is the answer?  There is not a definitive answer to this problem but I have seen executives take action and immediately see encouraging results.  If you want to begin controlling your T&E spend, we suggest you start with:

  • Establishing and enforcing a company-wide T&E expense policy to shape (not micro-manage) the behavior of the employees incurring the expenses
  • Put a system in place to give you insight into the actual spending behavior (ex. Are they booking a flight for $600 when they could be spending $300 by doing XYZ? When they submit their $45 dinner bill…is $20 of it for alcohol that is out of policy?)
  • Create a system of checks and balances or an approval process with teeth. Sometimes the very presence of this will reinforce the company-wide policies to reduce the spend

Sources:
Aberdeen Travel & Entertainment Expense Management Report, August 2006
Quick Facts on Expense Reporting, ExpenseWire, February 2009

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