December 2008 - The rapid rise in travel costs this year has forced many companies to take a hard look at travel policy, practices, technology and contracts. Having done that, AstraZeneca Pharmaceuticals believes it has the "three Rs in place: the right strategy, right people and tools, and right management support to manage our travel and entertainment spend," according to expense reimbursement manager for North America Michael Herubin.
The prescription for that strategy, Herubin said on a June webinar sponsored by expense vendor Infor and
Business Finance magazine, includes a strong global policy, a centralized organization to manage the T&E processes, mandated use of strategically sourced preferred suppliers (including the corporate card and travel management company), frequent employee communications and the implementation of technologies that include online booking, expense reporting and travel data reporting.
While AstraZeneca has yet to integrate its travel systems, all charges initiated by any designated travel booking option automatically are charged to corporate American Express cards, which "automatically feed the expense reporting system," Herubin said. The technology allows AstraZeneca to monitor and reinforce policy.
"After your payroll expense, T&E expense for most companies is probably your largest area of controllable spend," Herubin said. "With $63 million in spend in the U.S., it's easy to see why we need to pay serious attention to managing this category. If you don't pay attention to it, or you don't manage it correctly, you're going to lose control of these expenses, risk noncompliance and it's just going to cost you money."
The right strategy begins with a strong global policy, Herubin said. London-based AstraZeneca has a baseline global policy, but allows regional addenda to cover nuances for its three regions: North America, Europe/Middle East/Africa and Asia-Pacific.
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Organization:
Wilmington, Del.-based U.S. headquarters of AstraZeneca
Pharmaceuticals, with 2007 sales of $13.35 billion and 12,200 employees; global 2007 revenues of $29.6 billion and 60,000 employees |
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Volume:
$63 million in U.S.-based 2007 travel spend, of which air comprised 48 percent and lodging 31 percent on 140,000 submitted expense reports |
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Challenge:
Develop the right policy, strategy and technology to effectively manage T&E spend on a regional and global basis
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Approach:
Approach: Global policy with regional addenda, centralized travel management, preferred supplier mandates |
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Solution:
Mandated use of corporate card, online booking tools, agency and automated expense reporting system, but enticed travelers to comply with fast, easy process that also captured 99 percent of travel spend on card |
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In the United States, a centralized travel management organization manages all T&E processes, supplier negotiations and activities. But the finance department manages all expenses, including travel expense reporting, and works closely with travel management on policy, compliance, reporting and vendor relations, Herubin said.
"We have a big list of preferred suppliers that we strategically source to help us with travel. Every year we're taking a look at who we use for air, rail, hotels and tweak the list continually to get the best deals and best negotiations." Quickly communicated are such changes as the recent enhancement that allows travelers to book online "chauffeured, limo or shuttle services to airports. But we could do better coming up with a regular process or communications program about our policies to remind employees. You have to continually educate people about policy," Herubin said.
A Carrot Or Stick?
Beyond education, Herubin said, companies need to make it as easy as possible
to follow the preferred booking path. AstraZeneca's "one-stop shop" for travel
services includes links to its two-year-old American Express online booking tool, Southwest Airlines' Swabiz site, airport parking reservations and approval forms for spousal travel. Travelers also can find safety and security information, passport and visa help, maps and driving directions, currency converters, flight trackers, health advisories and even international business etiquette tips. All preferred suppliers and updates to services also can be found there.
"It's travel made easy, and it drives compliance," Herubin said. AstraZeneca mandates use of the online booking sites, travel agency, preferred vendors, corporate card and expense reporting solution. Herubin is the first to acknowledge that "you have to have management support behind that, but you need to mandate to get people to utilize the process and tools that you've put in place."
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"With $63 million in U.S. spend, we need to pay serious attention to managing this category. If you don't manage it correctly, you're going to lose control of these expenses, risk noncompliance and it's going to cost you money."
— Michael Herubin, AstraZeneca Pharmaceuticals expense reimbursement manager for North America
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Use of a corporate card on which "you want to drive as much spend as you can" is critical to the program, he added. "It enables tremendous data collection, process efficiencies and helps reduce risk."
AstraZeneca requires the corporate card to be used wherever possible, easing the burdens of expense report compilation and payment when travelers comply. With 92 percent card utilization across all travel categories-including meals, ground transportation, tips and other typical cash outlays-AstraZeneca is well above the average utilization of 61 percent, or even the best-in-class rate of 72 percent, identified by the Aberdeen Group in an April 2008 report.
Concocting Compliance
Education, technology or both appear to be working as AstraZeneca captures "99 percent of its travel spend in the United States on our corporate card," Herubin said. "Ninety-nine percent of air, car rental, rail and limo services spend are
with our preferred vendors," he said.
Other strategies are a mix of both carrots and sticks. The company makes it as easy for possible for employees to follow policy to book online via Amex or Swabiz, with all charges automatically billed to corporate credit cards. Corporate cards hold individual liability, meaning employees are responsible for paying balances so they "have some skin in the game," Herubin said. However, the company automatically pays the bills reconciled and approved via the automated expense reporting solution. All card charges are pulled into the system to ease reconciliation. Accessible "anytime, anywhere, the automated expense reporting system offers automatic dropdowns, lookups for project codes or costs centers; it makes it very easy to use this tool," Herubin said.
The high percentage of card usage and accompanying credit card detail that flows into the company's expense reporting solution means that employees have to fax in only a small percentage of receipts-mainly hotel and expenses over a
certain dollar threshold.
About half of AstraZeneca's travelers are in sales and allowed to submit expense reports every two or three weeks, Herubin said. Nonsales employees are allowed to submit expense reports on a monthly, rather than a per trip, basis. The company tries to minimize the number of expense reports filed in order to contain secondary audit costs, which are outsourced and charged per expense report.
Among the savings that automated expense reporting tools provide, Herubin said, are costs per transaction, time spent completing and approving expense reports, less paper to move and store, and less time spent keying in data. But automated expense reporting also provides automated auditing and improved T&E policy enforcement and compliance, he added.
Such technology makes it easy for Herubin and his team to configure business rules that trigger policy reminders, requests for explanations or other messages when violations occur. The first time a traveler phones the agency to book travel, which costs three times more than online booking, prompts a reminder to use online booking. A repeat violation triggers a request for an explanation. Nonuse of corporate cards also triggers various messages.
"You don't want these rules to fire in a way that irritates employees. You can develop parameters around [the policy reminders] to control how they fire," said Herubin, who oversees nearly $200 million in spend on T&E or procurement cards, or expense reporting.
When explanations are requested and collected, the tool includes these in the approval request for the traveler's supervisor "to remind the manager of this rule and explanation." The expense reporting tools also provide a goldmine of data. The only challenge, Herubin said, is to how best extract and "turn into actionable information" policy violations, trends and negotiating leverage.
"It's critical to use these tools to feed back information to your travel folks and others to gain more compliance," Herubin said. Combined with American Express quarterly reports, he added, the company has visibility to see where costs increased "because our employees didn't do what we expected them to do." For example, "If the flight times chosen by our employees negated the lower fares offered by almost $250,000, that's critical information that the travel manager can take, try to fix and fine-tune our travel management process."
Last year, the reporting helped the company identify the hotels around headquarters that had been used for meetings, and AstraZeneca "cut them all off this year," he added.
Herubin is convinced that the technology investments are helping AstraZeneca save money but can't identify a specific return on investment. "I can tell you for certain with expense management systems, you will get at least a two year or less payback. There are definite reductions to be had to full-time equivalents, audits, data entry costs, postage and paper." But the tools also can help companies increase card rebates and control card losses. "When I first came here," Herubin said, "we had $250,000 in credit card losses, now it's $50,000."
