There’s no guarantee employees will follow your written travel and entertainment expense (T&E) policy. In fact, a recent Certify trends study found that 73 percent of companies with a written T&E policy in place either leave compliance to the responsibility of the individual employee or review expense reports manually to identify violations. For companies manually reviewing reports, it’s simply not possible to catch every policy violation through sampling, be it a calculation error, honest mistake or intentionally fraudulent behavior. Especially as headcount or the number of company travelers grows.
So, how can organizations ensure employees are following both the spirit and the letter of the corporate travel policy with every item expensed? One way to solve the challenge of policy enforcement is by transforming the manual expense reporting process to one that utilizes web-based automation software. Let’s take a closer look at the three areas of expense management automation with the greatest potential impact on compliance.
Integrated travel booking services
Many of today’s web-based expense management systems offer an integrated online travel-booking service or can be easily configured to work with one. And while not every business trip requires airfare or other travel-related services, for those that do, integrated travel booking offers two unique and powerful features that make employee compliance easy. First is lowest logical fare, which works by automatically identifying the best available rates for any given itinerary. The traveler is then offered only those rates and booking options that are within policy, taking into account any additional guidelines for duration of travel, connecting flights, etc. While this can sometimes limit flexibility for the business traveler, it also assures accountants and travel managers the employee did actually purchase the lowest fare available at the time of booking, and not just the most convenient fare.
Hard expense category spending caps
Expense category spending limits or spending caps aren’t exclusive to an automated system. However, unlike a manual process, an automated solution can incorporate a company’s policy spending limits directly into the system, making enforcement of those limits automatic. Take meal spending, for example. The cost of a meal varies significantly from city to city, so setting a per diem or per meal limit is a great way to manage costs. Rather than trying to determine what a reasonable expense might be for lunch in San Francisco versus Indianapolis, spending limits set a standard across the board for what the company deems acceptable.
Integrated corporate cards
One of the most powerful features for controlling employee T&E spending and strengthening compliance is an integrated corporate card, also referred to as a purchase card or p-card. Corporate cards help control costs primarily by improving reporting oversight while providing an automated payment and reconciliation process for T&E expenses. Issuing corporate cards to traveling employees means every purchase they make on the road provides detailed information about each transaction—amount, vendor, location, date, currency, and more. Corporate cards also allow for specific policy controls to be built in, including spending limits, limiting the number of allowable transactions, and blocking certain merchant category codes or specific vendors deemed to be outside of policy.
The features described here are just a few that can help your organization encourage its employees to embrace the corporate travel policy and improve overall compliance rates. Once you’ve done the hard work of defining your T&E policy and getting it all down in writing, don’t limit your opportunity with an honor system approach or manual review process. Taking steps to automate enforcement and compliance will help you quickly realize all the potential of your company travel policy.
Robert Neveu is president of Certify Travel & Expense.