research report the state of expense management 2021

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1 The state of Expense Management 2021 RESEARCH REPORT Explore more on rydoo.com Rydoo © 2020

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The state of Expense Management 2021

RESEARCH REPORT

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Table of Contents

Introduction – An Unprecedented Year for Business

Our Key Findings

Part 1 – Expenses

Part 2 – Travel & Expenses Policy

Part 3 – The Role of Digitisation

Conclusion – Challenges in the Year Ahead

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Covid-19 has turned the findings of our first annual survey into a vital snapshot of travel & expenses (T&E) and the world of work in a time of extraordinary change. How are companies dealing with the expense process when so many are working from home? What are people expensing in this ‘new normal’? Are there any signs that business travel has a future in the short-to-medium term? And do companies now see digitisation as a must-have tool?

For our first annual T&E survey, conducted between September 2019 and August 2020, we have drawn on data from Rydoo users across France, Germany, Austria, Switzerland and the UK. In addition, to explore wider attitudes to digitisation and T&E policy making, we have enlisted the services of a third-party survey consultancy, Censuswide, who questioned more than 200 financial directors at companies with 500-5,000 employees.

Across our research, we explore the latest patterns in spending habits – travel, food and office equipment – and how businesses are implementing their policies. We’ll also explore what the pandemic has done for the move to digitisation. ‘Software as a service’ has accelerated across industries during Covid-19, and some of this may be due to companies digitising their finance-department operations. After all, it’s hard to file paper expenses from your home office.

Although this has undoubtedly been a difficult year, through our research we can see a way forward. There is a route through the coming months and years for companies willing to digitise their expenses to fit around employees’ working lives, refocus to streamline costs and build an environmentally friendly travel policy by reducing the reliance on overseas travel.

Introduction – An Unprecedented Year for Business

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Our Key Findings

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Spending increased in April by 40% compared to the previous month, potentially due to large purchases of IT software and office equipment.

Violations fell during lockdown, either because there were fewer expenses or because what was being expensed was less open to fraud and errors.

The consistency of expenses filed and the lack of peaks and troughs means line-by-line expense app users are changing their working habits and making claims in real time.

German, Austrian and Swiss companies are less likely to suffer policy violations, have stricter rules and check their policies less often than their French peers.

Two-thirds of companies have either completely digitised or ‘mostly’ digitised their finance team functions.

The greatest reservations for companies regarding digitisation are the number of options in the market (39% of respondents) and trust (37%).

In terms of digitised systems, connected and accurate data is prioritised by just under a fifth of all companies, closely followed by cost control.

Despite the amount spent, the number of expenses processed fell by 62% in April, having been consistent throughout the previous months under review. Although expenses pick up as economies reopen in May, it was not to the same extent as earlier in the period under review.

French companies make a significantly higher number of claims compared to other countries and suffer from more policy violations (more than 4% of all expenses). French companies are also likely to check policies more often (once per week).

Although many countries saw a recovery in expenses from May onwards, the number of expenses processed in the UK remained at depressed levels, as the economy was slower to move out of lockdown restrictions than much of continental Europe.

During and following lockdown, travel expenses were focused on car journeys, as rail and air travel were reduced to very low levels. Rail travel fell from an average of 3,020 expenses per month between September 2019 and March 2020 to 118 between April and August 2020. Over the same time periods, air travel fell from 442 expenses on average to just 68.

Only one in 14 companies across Germany, Austria and Switzerland are prioritising the cooperation of their IT and finance teams. That number rises to two in five UK companies, who said, ‘Very closely, consulting on all software decisions and meeting regularly’ best describes how their finance teams and IT teams work together on technical solutions and business issues.

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From September 2019 to March 2020, we can see that money spent on expenses per company is fairly steady across jurisdictions. We then see a surprising uptick in the cost of expenses from April, as economies feel the effects of lockdown and many employees start working from home. In every jurisdic-tion, April was a more expensive month than March, particularly in France, where employees filed almost four times as much in expense claims.

The general uptick across regions in April is likely due to home working and making larger expense claims than usual, particularly one-off purchases of IT software and office equipment. It’s interesting, however, that smaller increases were seen in Germany and Switzerland, which may be an indication of how well prepared these countries were for working from home.

The below chart provides an overview across countries of the number of claims made, and we can see where Covid-19 and lockdowns have had the greatest impact. Employees may have been making large expenses in April, but without spending on services like hospitality, they were making far fewer claims.

Following lockdown, the number of expenses processed recovers, rising throughout June and July, before levelling off – never reaching the levels seen between September and March. It is possible that during this time more employees were going back to the office, booking trips and making reservations. And although there are significant rises in the number of expenses processed at this time by French and German companies, the UK only picks up modestly. This may be due to lockdown restrictions in the UK being lifted at a slower rate than in much of continental Europe.

These eye-catching results also reveal the larger number of expenses processed by France, followed by Germany throughout the period. As we will discuss in more detail below, French companies review their policies on a weekly basis and this may, in part, be due to the number of expenses being made by employees.

Austria is higher in April than other jurisdic-tions, though this is the case throughout the year. Spending may be higher in Austria due to the nature of the businesses in the country – businesses may require more business travel. However, this would not fully explain the country’s June expenses, which may be so high as a result of pent up demand fol-lowing lockdown. It will be interesting to see if Austrian companies continue to outspend their peers to such an extent in our 2020-2021 survey.

Amount spent on expenses

The number of expenses made

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Fig. 1

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Expense apps have changed working habits and account for the consistency of expenses processed in the six months before lockdown, with little in the way of peaks and troughs. Mondays are busier, as we will find, but ex-penses are spread out throughout the week. The consistency of the data demonstrates that line-by-line expense apps are encourag-ing real-time expense management – filing is not being put off. And the importance of a digitised service is surely seen in the fact that expenses processed continued at a fairly consistent, albeit reduced, rate throughout lockdown – this may not have been possible with paper receipts.

As discussed above, many larger expenses were incurred in April, despite there being a smaller number of expenses altogether. We can see the clear increase in the amount spent on office equipment and IT during lockdowns in Europe below.

The amount spent on both office equipment and IT increases considerably, but does start to trail off as we enter the summer months. Despite that, office equipment expenses rose from an average of 2,916 expenses per month in the first seven months of the period to 4,367 from April – a 33% increase. Similarly, IT expense claims rose from an average of 207 expenses per month to 869 – a staggering 76% increase. In fact, there were four months between September and March where Ry-doo’s users made no IT expenses. Whether we see more IT and equipment

The impact of line-by-line expenses

What are companies expensing?

An up and down year for travel and hospitality expenses

Fig. 3

expenses in the year ahead will depend on whether companies continue to allow their workers to remain at home in 2021 as vaccines are rolled out and restrictions are lifted. It has been noted that some companies have em-braced the work-from-home message, while others have encouraged employees to return to the office. It will be interesting to see if some sectors and countries continue to make expenses that indicate more employees are working remotely.

The amount spent on travel and food re-mained lower, even after restrictions began to be lifted. Food and beverages spending increased following lockdown, but never reached the levels seen between September and March – which were remarkably consist-ent, with only a small dip during Christmas. In terms of travel, we can see how Covid-19 has affected rail and air travel, the latter of which almost came to a standstill. Rail travel fell from an average of 3,020 expenses per month between September 2019 and March 2020 to 118 between April and August 2020. Over the same time periods, air travel fell from 442 expenses on average to just 68. And although road travel also decreases, it remains fairly consistent as a percentage of overall expens-es (as we can see from the above chart), as people continue to use their cars, where it is far easier to practice social distancing. It may take some time for this situation to improve substantially. People have either not wanted – or not been able – to take public transport.

In our second-quarter paper on the impact of Covid-19 on business travel, we noted that train travel may become preferable to air travel after the pandemic. This is something we will be watching for in the months ahead. Trains are roomier, circulate the air better and social distancing can be more easily practised. We also asked whether businesses would consider video conferencing to be enough in the future? We concluded that even if there is a reduction in travel and hospitality spending, we were not sure if the ‘you need to be in the room’ attitude would ever really go away.

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Expenses become less spread out throughout the month as the Covid-19 pandemic starts to have an effect on spending habits. This could, in part, be due to employees putting through expenses from home, rather than on the road. Without any meetings to attend, real-time ex-penses through a line-by-line expense app are less spread out across the month, as people

Violations fell during lockdown, which may simply be due to fewer expense claims being made. There may, however, be more to it than that. Indeed, a greater percentage of expens-es in recent months have been on items where there is less room for either fraud or mistakes, such as office equipment. Without hospitality – restaurant meals and drinks – there is less likely to be such issues as over-expensing and duplicate expenses.

Our third-party research demonstrates that most companies check their policies every three months or more. This chimes with our

How have submissions changed?

Violations and how companies review T&E policies

are stocking up on the equipment they need for the weeks ahead. The nature of what is being expensed could also account for bulk expense claims – IT software packages and office equipment orders can all be made at once.

We can also see that Mondays are higher for expenses than most other days, with very little at the weekends. Weekends will always be a quiet time, but were higher prior to lockdowns, possibly on account of travelling employees.

findings that two-thirds of companies have either fully digitised or largely digitised their expense functions – there may be less urgen-cy to review policies when they are built into the system and alert users of any errors in real time.

Part 2 – Travel & Expenses Policy

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Fig 5: Answers per region to the question ‘How often do you review your expense policy?’

Fig 6: Answers per region to the question ‘What areas of the finance department did/would you digitise first?’

German, Austrian and Swiss companies are more likely to have strict rules that are closely followed (50% of companies say this is how they ensure their policy is followed), which explains why they can check their policies less

frequently (47% check their policy every two months or more). As more companies plan to digitise, we will be watching these figures closely – a T&E policy that changes less is good for business and good for employees.

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The only real outlier was France, where companies are more likely to check their T&E policies every month or more regularly (40% of respondents compared to 33% overall) and only a third state using strict rules to ensure policies are followed. France also remains the outlier in terms of violations. French users of the Rydoo line-by-line expenses app are more likely to commit expense violations – 4.2% of

expenses made over the past year contradict-ed company guidance. This is a startling figure, given that the next worst offender is the UK, with 0.04% of expenses flagged as violations. But why might this be? Are French businesses creating more arduous policy documents and changing them too often? Are French employ-ees using the app differently to employees in other countries?

Part 3 – The Role of Digitisation

Even without the Covid-19 pandemic, the accu-racy, adaptability and security of cloud-based systems is vital to the future of how people work – especially if they are working off-site.

Our third-party survey asked how far along companies were in the digitisation of their fi-nance departments. Two-thirds of respondents said either, ‘Completely, all our processes are online with no paper’, or ‘mostly, all the major functions’ were digitised. This underlines how far many businesses have come in recent years, and it will be interesting to see if future surveys show that this trend has accelerated following the pandemic.

At the industry level, finance and sales, media & marketing are most likely to have entirely digitised their finance departments. Both of these industries also put an emphasis on accuracy, which is understandable given the amount spent on hospitality in both finance and marketing. Accuracy will be an even more pressing issue in finance, where regulations are tighter when it comes to entertaining clients. Undoubtedly, such regulatory concerns are part of these companies’ policies.

There are, however, still some reservations when it comes to digitisation, and it is here that we see some interesting differences be-tween markets. Too much choice was the most popular reason among all companies (39% of respondents), closely followed by trust (37%). Given that the priorities for digitisation include accuracy and security, this is not surprising. And it is where we, in part, see the UK as something of an outlier. Digitising expenses is less of a priority than in much of Europe (see Fig 6), while UK companies are more likely to be worried about allocating budget to such a project (41% of UK companies versus 30% overall) and are more concerned about securi-ty (37% versus 31%).

As the way we work changes, the push for digitisation is as strong as ever

Most significant reservations

101 Rocketrip, Overspend Report – 5 Signs your Company Spends Too Much on Business

Fig 7: Answers for regions and per region to the question ‘What are the hurdles or blocks at the moment for digitisation?’

The focus on choice and trust also shows that businesses are well aware of the dangers of making the wrong choice when it comes to digitising their processes. The decision companies are making is for the next 10–15 years – the chosen vendor needs to grow with the client. Ask yourself, what are our require-ments? What do we need this technology to do from day one and what do we need it to do five, 10, 15 years from now? The process is long and complex, and there are many questions companies need to ask. So, caution is to be expected. It’s worth bearing in mind, however, that given the benefits of digitisation, caution can be debilitating.

Many businesses, especially larger companies with embedded legacy systems, find the pros-pect of implementing a significant enterprise resource planning system (ERP) daunting. And it is true that for a newer company, an ERP can be implemented and immediately begin work-ing with all areas of the business. But, for all companies, implementing individual digitised systems that cover reporting, budgeting, pay-ments and expenses offer fast implementation and a quick turnaround in term of seeing the benefits.

For example, a T&E cloud-based system can be up and running in as little as 100 days,

quickly allowing for real-time management and oversight of the expense management process. On average, 10-12% of a company’s annual budget is spent on expenses related to busi-ness travel, second only to rent as an operating expense.1 Today the entire T&E process – from booking a business trip, to submitting expenses on the go and getting reimbursed – can hap-pen online, which helps to drastically reduce the total spend. Finance teams are also able to collate up-to-date information, making the total spend far more transparent and allowing for analysis and long-term strategizing. The cost of implementation can be quickly recouped in the savings generated by the new system.

Connected and accurate data is prioritised by just under a fifth of companies, closely followed by cost control. These issues will be important in a world where more people are working more remotely. It will be interesting to see if the desire to go paperless is higher on the agenda at the end of 2021 than it is now. It is unsurprising that accuracy would be priori-tised at any time, but particularly during a time when people are not meeting face to face.

Digitisation priorities

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In terms of actual digitised functions, expensing is not as much of a priority across Europe as budgeting, management reporting, invoicing and planning. Even those who have fully digitised their processes do not rank expense management highly. However, one could argue that it is difficult to genuinely achieve successful budgeting, management reporting and planning without a robust expense process.

An Avanade study reported that businesses expected an ROI of 17% from digital transformation as a whole2 over the entire project often lasting several years. In our report ‘The ROI of automating your travel & expense management’3 we showed that the ROI for implementing Rydoo can reach up to

Fig 8: Answers to the question ‘What are the current accounting priorities of your finance department?’

How IT and finance teams work together is something we have been writing about for some time. Two in five Companies in the UK were most likely to claim that their IT and finance departments worked closely together. Given that UK companies were prioritising the digitisation of more revenue-generating functions, this is perhaps unsurprising. As only one in 14 companies across Germany, Austria and Switzerland are prioritising the cooperation of their IT and finance teams, the UK is certainly further along, despite putting less of an emphasis on expense management. However, it’s worth noting that 90% of respondents in Germany, Austria and Switzerland agreed that there was ‘Some communication to discuss what products to use.’ Although IT and finance may not work closely in these countries, given high number of digitised processes, it is unsurprising that most of the companies in our survey claimed some level of collaboration.

500% within just six months. You’re certainly getting a lot more value for your money when investing in an expense management solution.

How are companies working towards digitisation?

2 https://www.martechvibe.com/news/businesses-anticipate-17-roi-from-digital-transformation-activi-ties-over-next-12-months/ 3 https://get.rydoo.com/the-roi-of-expense-management-automation

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Fig 9: ‘How has the team changed in the last year (due to the impact of covid-19 and the new ways of working)?’

We also asked if companies had changed the makeup of their finance teams in the wake of Covid-19. Given that UK companies are less likely to have digitised their expenses (51% of respondents ensure their process is followed by checking it manually) compared to other functions, it is unsurprising that they have had to make more changes to their

teams in order to accommodate for still using a manual expense process when employees may be away from the office. Without digitised processes in place, companies need larger finance teams that can continue to complete more administrative tasks. In contrast, those with digitised processes can concentrate upon analysis and planning.

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We have identified three potential issues for the year ahead:

1) Finance teams and travel & expense polices continue to adapt as the world of work changes

The top challenges identified by companies in Europe were connecting data points and finding the right skills for their finance teams. We expect to see in next year’s survey that the pressures of the pandemic will have forced companies to change or simplify their expense policy and further alter the finance department that is already changing from one with an ad-ministrative to a more strategic function.

2) Working from home means a change for company expenses. Travel and hospitality will see a slow pick up in the next year but will not get back to the same level as before the pandemic

We expect to see that employees will start to go back to the office but will also remain working more remotely compared to before the pandemic. The T&E trends we have seen in the past year will continue with changes in types of expenses. We predict a slow pick-up in the future of business travel during the year but it won’t go back to the same rate we were used to.

3) Digitisation needs to be accelerated in the months and years ahead, so we need to clear away the things that are standing in its way

Will the reservations we have identified in this survey continue to outweigh the benefits

of digitisation? With remote working becom-ing the norm, companies simply can’t ignore cloud-based solutions any longer.

Behind these potential issues are the chang-es no one could have anticipated. And some changes to elements of T&E may turn out to be permanent. Travel expenses, for example, are likely to be limited for some time, as a mixture of cost saving and employee reticence weigh on the travel industry. What we have wit-nessed, however, is an approach to expenses that suits the way people work today. Line-by-line expenses are made regularly and in real time, throw up very few mistakes, and don’t require paper and an internal mail system to work.

With many companies citing accuracy and compliance as key requirements, we can ex-pect to see greater levels of digitisation in the year ahead. And although expenses are not many companies’ top priority for digitisation, it’s clear they are a vital piece of the puzzle.

Conclusion – Challenges in the Year Ahead

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Rydoo reinvents and simplifies business travel and expense management for high-growth companies. With a team of 350 employees, Rydoo operates in more than 60 countries and has over 10000 customers.

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