No one likes filling out expense reports. And the process is not only frustrating for employees, but costly for their employers.
Automating the process, according to a new report by the Aberdeen Group, can cut those costs dramatically.
As the economy continues to stagnate, companies have focused increasingly on cutting expenses. While they have invested considerable time and money into e-procurement and supply chain applications aimed at controlling the costs of purchasing indirect and direct goods, less attention has been paid to employee-initiated expenses.
But expense management automation, says Aberdeen senior analyst Christa Degnan, “offers as much opportunity, if not more, as e-procurement in reining in costs.”
The average time it takes for an employee to manually fill out an expense report is over half an hour, according to Aberdeen. Automating the process can cut that to 18 minutes.
More importantly, it takes accounts payable departments 22 minutes on average to review manual expense reports, check the math, and verify the policies. With an automated solution, integrated business rules handle most of that, so reports can be processed in five minutes.
That translates into dollar savings, according to Aberdeen: processing expenses manually costs $48 per report on average, but after automation that cost falls to $18.
Payback in four months
Dupont, the chemical manufacturing giant known for creating Teflon, Lycra and Kevlar, among other products, is one company which has seen dramatic savings from automating its expense reports.
About half the employees at the Wilmington, Del.-based company file expense reimbursement claims. The firm processes more than 400,000 expense reports per year.
In 1998, DuPont began replacing a mainframe expense reimbursement system with Web-based technology from Concur Technologies, of Redmond, Wash. The mainframe system let DuPont reimburse employees, but wasn’t able to provide the company with much insight into employees’ expenses. And the system was available only in the U.S., so workers in Canada and Mexico, for example, still filed their expense reports on paper.
The new Web-based system provided DuPont with a dramatic return on investment, paying for itself in the first four months. The company saved $25 million on employee expenses in the first two years, and continues to save $10 million a year from the system.
Much of the savings come from being able to mine the data for useful information. For example, the new system let DuPont figure out how much its 5,000 sales representatives in the U.S. were spending on things like office supplies and phone expenses. Armed with that information, DuPont was able to negotiate savings in many areas, from pens to airport parking.
Tying the system in with employees’ corporate credit cards has also cut costs. Under the old system, managers were required to review paper receipts from employees. Now, 92% of DuPont’s employee-initiated purchases are made using the corporate card and can be brought into the automated expense management system without paper backup. As a result, DuPont is saving the premiums that overnight express delivery services charged to move those paper reports and receipts for approval.
So far, DuPont is using the system in the U.S. and Canada, as well as in Mexico and South America. DuPont expects to see further savings as it rolls out the system to its employees in Europe and Asia, which it will do this year.
Not a Priority
According to Aberdeen, less than 20% of businesses have a Web-based like solution like DuPont’s in place. “Many companies consider travel expense an inevitable cost of doing business,” says Aberdeen’s Degnan, “and didn’t see how much money they could save by doing things differently… It just wasn’t a top priority.”
The tight economy is changing that, however. Employee-initiated expenses account for one in five operational dollars a company spends, according to Aberdeen. “The recession and the post Enron climate have shown companies that this is an area that they must take a look at,” says Degnan.