Travel and Entertainment (T&E) is a critical expenditure category for nearly all organisations. Typically, it is the second largest controllable expense after salaries and benefits. In all cases, however, it is no longer regarded as best practice but essential practice for a successful T&E programme to deploy a corporate card, advises Master Card in this month’s SmartProcurement.
Corporate cards meet five core strategic objectives for a company travel programme:
• Controlling costs through improved policy compliance and budget monitoring.
• Increasing purchase savings through improved supplier negotiations.
• Increasing process savings through automated payment and reconciliation of T&E expenses.
• Looking after the needs of travellers through reduced bureaucracy and improved duty of care.
• Improving travel-related processes for other corporate stakeholders, such as finance and human resources.
The below outlines how each of the above objectives are met and how these objectives clearly deliver benefits for one of the most important stakeholders of all: the person responsible for buying and managing travel.
TRAVEL MANAGEMENT OBJECTIVE 1:
Controlling costs through improved policy compliance and budget monitoring.
A travel policy is the backbone of any managed travel programme. It has many functions, such as fulfilling duty of care obligations and it is also key to controlling travel costs. Among its savings-related objectives, a travel policy usually ensures:
• Travellers do not spend above approved limits or make unauthorised purchases with company money
• Travellers use preferred suppliers to access preferential pricing
TRAVEL MANAGEMENT OBJECTIVE 2:
Increasing purchase savings through improved supplier negotiations.
Detailed card management information gives travel managers accurate data about how much they spend with each airline, hotel and many other categories of T&E supplier. Knowing exactly how much their company is spending helps travel managers obtain consistently better deals from suppliers for two main reasons:
• Suppliers can make a precisely tailored offer if they have a clear picture of the client’s spend.
• High-quality management information is a convincing indicator to the supplier that the client can measure and, therefore, effectively manage its travel spend. It tells suppliers that the client is able to steer policy and deliver business to preferred suppliers and redirect bookings to rival suppliers if an acceptable discount is not offered.
TRAVEL MANAGEMENT OBJECTIVE 3:
Increasing process savings through automated payment and reconciliation of T&E expenses.
A corporate card automates payment and reconciliation of T&E expenses, thus eliminating time-consuming paper-based invoicing and enabling several other key corporate processes to be automated.
TRAVEL MANAGEMENT OBJECTIVE 4:
Looking after the needs of travellers through reduced bureaucracy and improved duty of care.
Good travel management is about minimising cost to the organisation, but it is also about maximising service to the traveller. Companies have duty of care obligations that are critical for legal and reputational reasons. It is also in a company’s interests to protect travellers as their most important assets and minimise their time taken up with travel administration. Automated feeds flow spend data from cards into the general ledger of an enterprise resource planning system. Data feeds are sent daily in a compliant format that can be imported easily into the financial software the company uses.
TRAVEL MANAGEMENT OBJECTIVE 5:
Improving travel-related processes for other corporate stakeholders.
Corporate cards provide distinct benefits for at least five different functions within a finance department:
• Treasury—Improved liquidity, Lower payment costs, Improved banking relationship, Better visibility of cash flow, Elimination of cash advances
• Accounts Payable—Efficient payment, Internal assignment of costs, Lower administrative costs
• Financial Systems—Streamlined processes companies can extend their Days Payable Outstanding (DPO) by 53 percent from the typical 30 days from date of T&E invoice up 53 percent to 46 days for payment by corporate card.
• Audit/Compliance—Control through pro-active enforcement of travel policy, Control through reporting
• Budgeting/Planning—Budget tracking and forecasting also explains the vital services cards perform for other key company stakeholders
A summary of the benefits of corporate cards:
• Allow travellers to avoid paying business expenses out of their own pocket.
• Saves them the bureaucratic burden of obtaining cash advances.
• Considerably speeds up expense reclamation, especially if travellers are using an automated expense management system with a pre-populated card feed.
• Avoids the security risk of travellers carrying large amounts of cash.
• Provides insurance and assistance services in the event of travel emergencies.
