September 2008 - In a quest for a more efficient travel procure-to-pay process, Paramount Pictures last year mandated use of a new corporate card, automated expense reporting and switched to expense reimbursement via payroll instead of checks. The new procedures delivered not only process efficiencies, spend visibility and control, but also savings of more than $300,000 from headcount reduction and a card rebate of $300,000 on $30 million annual card spend, Paramount senior vice president of strategic sourcing Rick Smith said in July during a National Business Travel Association session in Los Angeles.
Paramount isn't the only company that has profited by streamlining and automating antiquated travel and expense processes, according to results of the 2008 Visa Global Procure-to-Pay and Commercial Card Best Practices Study. Interviews conducted by Deloitte Consulting of 90 executives at 60 large and midsize companies around the globe identified 63 best practices. Among them was a dramatic rise in the use of online booking and expense tools within
surveyed corporations during the past six years.
Responsible for Paramount's companywide purchase-to-pay initiatives, including all aspects of the travel program, Smith said an early 2007 review highlighted costly inefficiencies. Paramount at the time had an onsite, full-service travel agency that charged air and sedan reservations to business travel ghost cards that were later manually reconciled. Employees used their own credit cards for other travel expenses and cell phone bills, and sought reimbursement through an expense report based on an Excel template. Both the travel pretrip authorization and expense report required two authorizing signatures before an expense reimbursement check was issued. The accounts payable system listed the employee name as the primary vendor and only a few actual travel suppliers. Consequently, identifying spending with each supplier was a challenge.
Then, Paramount in July 2007 introduced its new process. Corporate cards were issued to all travelers and use was mandated. The company opted for corporate liability cards, but relied on credit limits, merchant code limitations and other usage controls. Paramount opted to tightly control expense categories and limits. To purchase items over a certain dollar amount or out of pocket requires finance approval. Officials considered department manager approval of exceptions, but instead opted for finance as it "allows us to control it. People have to call first and explain why they need an increase in their limit."
At the same time, Paramount introduced a new expense reporting system with daily feeds of all card transactions. The automation has paid big dividends. "Over 96 percent of T&E spend is on the corporate card," Smith touted, with the remainder mainly for taxis, gratuities or other cash-intensive outlays. With most expenses captured on the card, Paramount requires few receipts; those that are needed are faxed in and attached to reports. The success has prompted Paramount to expand the U.S. program to the rest of the world.
"We didn't have the best process," Smith said. "Too often people will automate an existing process. But what you need to do is work on your process at the same time you're automating. We really took it as an opportunity to redo the way we do things." He noted that finance questioned every pre-existing requirement. If the response was "because that's the way we do it," it wasn't enough to justify inclusion in the new automated process.
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"Too often people will automate an existing process, but you need to work on your process at the same time."
— Rick Smith, Paramount Pictures senior vice president of strategic sourcing
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In the latest study of procure-to-pay practices, Deloitte found dramatic increases in technology adoption in 2008, compared with 2002 findings. For example, more than 90 percent of companies surveyed had an expense
management tool by 2008, a tripling from the 2002 findings. More than 80 percent had an online booking tool and electronic invoicing, both double the ratios reported in 2002. Nearly 80 percent of respondents said they had an e-procurement tool in 2008.
The top 10 P2P best practices identified, according to Deloitte principal and consultant Jennifer Steinmann, were:
• Integrate commercial card program objectives into enterprisewide performance improvement initiatives, such as cost cutting, carbon reduction or other green projects
• Gain support from senior management and stakeholders
• Make procure-to-pay a center of excellence
• Automate from start to finish
• Create a commercial card program management framework
• Establish a formal supplier management program
• Develop an enterprisewide controls strategy for your procure-to-pay process and commercial card program
• Commit to ongoing scrutiny of P2P processes to identify improvement opportunities
• Expand review and identification of commercial card optimization opportunities
• Use sophisticated reporting and spend analytic tools to monitor and optimize spend
"All of the companies talked about procure-to-pay as a continuous improvement process," Steinmann said during the NBTA session. One result that proved such ongoing program optimization, she added, was the rise to 7 percent in 2008 from 5 percent in 2002 of the "card spend as a percent of total spend. That's a substantive increase," she said.
