How finance teams can proactively manage travel spend before it happens

Controlling how employees spend company funds on travel has been one of the biggest historic challenges for finance teams. Most company spend is governed by purchase orders, with payments made in relation to specific invoices from the company’s own bank. The data is available, transparent and can be analyzed to spot any inconsistencies. But controlling travel spend, which is most company’s largest discretionary spend area, is much harder. 

Employees increasingly organize their own travel, empowered by corporate self-booking tools for search, booking and payment. This can help with visibility, particularly if the corporate uses lodge or virtual cards to pay. However, pre-trip spend like air and hotel bookings only represent 50-60% of the money spent on travel. What about the rest? 

The remainder is spent during the trip on meals, taxis and entertainment and it is almost always paid-for using the traveler’s own payment method like a credit or debit card, connected to the traveler’s own bank account. This situation resulted in the cumbersome and decades-old: pay, expense, reclaim process that’s common to anyone who travels on behalf of a company. Indeed, our own recent survey found that the average business traveler spends $485 per trip from their own pocket before being reimbursed. 

Today’s process is broken 

Not only is this a headache for the traveler who must collect paper receipts, complete expense forms and submit them within the company’s expense system, it’s equally unsatisfactory for finance teams tasked with controlling, accounting and reconciling this spend.  

When an employee pays for on-trip items themselves it greatly reduces the automated controls a company has on funds spent. Firstly, asking employees to spend and then reclaim introduces the potential for fraud and error, perhaps a hotel invoice that includes breakfast when breakfast falls outside policy, or mileage allowances for road trips which are hard to check. Then there are those occasions when employees lose the receipt but still need to be reimbursed. Whilst this type of error is probably rare, the company has very limited visibility and can’t be sure. 

When an employee is on a trip for business they’re often not in contact with their manager, perhaps it’s late in the day and they need to make a decision about whether they pay the entire bill for an expensive meal for the team. Of course, policies for such situations can be set and communicated in advance but there’s no way to reflect those policies on the ground. 

Similarly, finance teams receive visibility into in-trip spend only several weeks or even months after it has taken place. This makes it harder to take corrective measures to preserve their company’s cashflow during times of austerity. With improved visibility, it’s easier to scale travel back if necessary. 

Digital payments can reinvent the expense process 

Rather than trying to introduce more ineffective controls to a business travel expense process that’s fundamentally flawed, what if we completely reinvented the process? What if we could optimize spend before it happens versus controlling it after the fact? 

Thanks to innovation in digital payments it is now becoming possible to send employees a virtual card to their mobile phone, stored within a digital wallet, which takes payment from the company’s bank account. This is the key to reinventing expense management for travel.

Travelers pay from the company bank account, which means the company sees rich data about each and every payment that’s made. There’s no longer any need to rely on employee submitted expense claims that can be hard to validate, because on-trip spend is now fully visible and therefore much more controllable. 

Additional innovations can boost this impact still further, with scanning software that uses a digital signature to certify  the  receipt so it has the same legal and financial validity as a paper receipt. Moves are afoot to also enable these digital receipts to automatically inform expense claims. By recognizing the date on a scanned receipt, the system automatically allocates the receipt to a specific claim. Similarly, tools for automatic mileage calculation bring greater transparency to road trips.  These automation and pre-population features make for more accurate and timely filings while reducing the burden on the traveler. 

Similarly, with fully digitized payments and expense corporates are in a better position to apply an automated VAT reclaim process for any travel expenses the company incurs, further simplifying life for finance teams.   

Enforceable spend controls  

But what about that expensive meal? Well digital payments also allow specific spend controls to be ‘programmed’ so they can be enforced at the point of payment.  

The programmability of virtual cards means companies can specify the financial value of the card, which merchants the card can be used with, how long it remains valid and other factors.  

For busy finance teams travel expenses are transformed from an opaque, difficult to control process to a much simpler and more automated set-up that doesn’t require significant manual oversight. To achieve this outcome different stakeholders within finance, procurement and travel management must collaborate to rethink their company’s approach to travel payments and expenses. The good news is, the digital tools required are now coming online. 

If you’d like to know more about how new payment innovation is helping to transform business travel expense management please download our new report here.