Keeping your business moving 02 | WELCOME 03 | RESEARCH 05 | TRAVEL EXPENSES 07 | PAYMENT PRACTICES 09 | VISIBILITY & COMPLIANCE 11 | CASE STUDY
IN ASSOCIATION WITH JANUARY 2018
Welcome UNCERTAINTY HAS ALMOST BECOME THE new reality in business. With the full impact of Brexit on the economy and our future trading relationships with the continent unclear, businesses are facing a particularly volatile market. This means that planning ahead is absolutely vital: without clear insight into their spend and finances, it’s far harder for companies to negotiate unexpected potholes in the road. Unfortunately, while many businesses appreciate the importance of having a clear overview of their expenses, a lot of finance professionals are relying on opaque manual processes that make it impossible to glean actionable insight into the way their money is spent. Meanwhile, a lack of automation around invoicing and lengthy payment terms means many smaller companies can find their cashflow unexpectedly slowing to a trickle.
Keeping your business moving
While we’ve seen some positive movement on some of these issues in recent times – for example with the introduction of the government’s Reporting on Payment Practices and Performance Regulations in April 2017 – it’s clear there is still plenty that needs to be done to help businesses manage and keep track of their cashflow and reporting responsibilities. Luckily, there are plenty of things entrepreneurs, execs and finance professionals can do to start introducing more clarity into the way their businesses handle spend, compliance and invoicing. Whether they’re looking to fight fraud, expunge errors, keep tabs on their travel expenses or ensure their operation is following the letter of the law, advice is at hand for companies looking to get their books in good order and keep their business moving.
Plugging the leaks
SMEs are increasingly looking to gain better oversight of their spend management CASH-FLOW MANAGEMENT, BUDGETARY oversight and regulatory compliance are familiar headaches for SMEs already grappling with the challenges of developing new products and services, attracting customers and scaling their operations. In this context, effective spend management is critical to everything from reining in budgets and informing decision-making to maintaining good relationships with key suppliers and talented employees.
And there is plenty of evidence backing this up. A recent SAP Concur study, carried out by leading market research firm Vanson Bourne, shows that almost all smaller businesses – defined as those with ten to 499 employees – agree that total control over spend management will be important in the next few years, with 12% identifying it as their top priority. Managing cash flow was ranked as one of the top three priorities for SME finance departments in the next 12 months by 52% of respondents, while balancing the books and budgeting; and ensuring external compliance are both being prioritised by 40%. But the research also reveals the extent of the challenges facing these businesses, especially when it comes to overseeing company travel, employee 3
expenses and supplier invoice processes. Over a quarter of SME finance leaders – in sectors as diverse as manufacturing, retail, business services, finance and IT – say the way their organisations control employee expenses are mostly or somewhat inefficient, which rises to more than a third for travel bookings. And this is hitting them in their pockets: around a third of SMEs concede their travel, expenses and invoice spend usually or always goes over budget in a financial year. Evidently finance leaders are eager to tackle these holes in their companies’ books. Asked about the greatest challenges their finance teams face, 46% of respondents identified errors and mistakes as one of their prime concerns, while 42% identified timeconsuming data capture being one of the factors that keeps them up at night. Upping oversight and automation Certainly it seems that some SMEs’ issues when it comes to managing spend are down to insufficient oversight. A lack of upfront visibility into spending was identified by 18% of respondents as being a priority, while one in five have just some or even no visibility over these areas of spend. Keeping your business moving
And the opacity of SMEs’ spend is undoubtedly in part down to a lack of automation, with 31% of finance professionals listing paper-based processes as one of their biggest concerns. Half of SME respondents described their travel processes remain mostly or entirely manual, while 44% said the same of their employee expenses. Accounts payable and financial analysis systems are more likely to be automated but 28% also admitted these processes are still largely manual. One of the many drawbacks of manual systems is that they limit the extent to which a rapidly growing business can connect its various systems and achieve a more joined-up and integrated approach to spend management. However, it is clear SMEs are well aware of the downsides of disconnected systems and the associated visibility issues: their inability to connect data across systems and processes was a major bugbear of 19% of finance professionals. And almost one third of organisations strongly agree that their own travel, expense and invoice systems could be better connected with each other to give a more holistic view of spend, with a further 56% slightly agreeing. Confidence in compliance Clearly, if businesses can see and report on company-wide spend from one place, they can use the integrated data to take a more strategic view, facilitate better cost control and set more accurate goals and targets. But alongside improved business efficiency, one of the biggest benefits of automated and connected systems – which clearly signal out-of-policy options and flag anomalies – is that they help to avoid non-compliance before it is ever allowed the chance to become a problem. Although lack of compliance with HMRC or other government regulations comes relatively low on the list of companies’ top challenges, it was still raised by 14% of SME finance leaders. When respondents were asked whether their processes were always compliant with government regulations, 18% said they were not very or not at all confident travel spend was compliant, while 17% said the same for expenses and 11% for invoices.
finance leaders lack confidence or don’t know that employees always comply with travel and expense (T&E) policies when booking travel and claiming expenses, while 18% showed the same lack of confidence when employees are purchasing goods and services on invoice. The research also highlights concerns over VAT claims. Nine out of ten smaller businesses say they reclaim less than 100% of their eligible VAT, while 59% reclaim less than 50% of their entitlement. This means they are missing out on legitimate claims that could save their businesses money. Premium talent While it should be pretty clear how this lack of clarity can impact a business’s bottom line, it appears to have as significant a knock-on effect on people as profits. Most SME finance leaders feel the challenges identified in the survey have a negative effect on job satisfaction, with one in five describing this as substantial and a further 54% observing a slight decline. As well as adversely affecting morale and raising workplace stress levels, this can lead to high employee turnover, loss of talent and increased recruitment and training costs. However, for organisations that do address these issues there’s scope to boost job satisfaction and productivity. Nearly two-fifths of finance leaders that have improved their processes and systems in the last few years say the changes have not only led to more efficient use of finance employees’ time but have also enriched employee experience. They have also resulted in faster payments for 56% of respondents and reduced costs for 48%. In an increasingly complex and uncertain financial environment, the benefits of automating and bringing together disconnected spend management are clear: SMEs can focus less energy on timeconsuming administration and mitigating compliance risks and more on driving strategy, controlling costs, enhancing employee satisfaction and building reliable supply chains for the future. Unfortunately, ascertaining how they can tighten up processes in these areas is easier said than done.
SMEs are also sceptical about how compliant processes were with internal policies. One in five Keeping your business moving
The business of travel
Keeping up with evolving technology and staying on top of travel spend means SMEs will benefit from embracing automation THE WORLD OF BUSINESS TRAVEL IS evolving rapidly. New technologies, the sharing economy and greater choice mean employees are arranging trips in increasingly diverse ways. Alongside more traditional channels, such as corporate booking tools and travel-management companies, many organisations now offer staff the freedom to book directly with suppliers to take advantage of cheaper deals and greater flexibility. For SMEs and startups less constrained by traditional models and legacy policies, these trends are even more pronounced and likely to continue. And there is plenty of evidence to support this. For example, the 2015 Great British Travel Association (GBTA) Business Traveler Sentiment Index revealed that tech-savvy and socially minded millennials are almost twice as likely to want to travel more for business than baby boomers. Not only this but, according to the 2017 GBTA Index, more than half of UK-based millennial travellers also agree that using expense-management software contributes to their satisfaction when expense reporting, compared to 25% of boomers. As millennials make up an evergrowing proportion of business travellers – and therefore travel-related expenses – it makes sense that businesses adapt their travel management systems to match young people’s needs and the technologies at their disposal. So how do smaller businesses maximise costsavings, job satisfaction and efficiency without losing oversight of travel and associated expenses? On the one hand, they need to support employees in finding deals that make sense for both the business and the traveller; on the other, they need to maintain complete visibility of spend data, control itineraries and, crucially, ensure employee safety and wellbeing. 5
Going automated A recent SAP Concur study of finance leaders found that more than a third of those working for SMEs – those defined as having ten to 499 employees – believe their organisations are mostly or somewhat inefficient at managing travel bookings and 31% say their organisation’s travel spend usually or always goes over budget in a financial year. The survey also shows that travel bookings are the least automated spend process for SMEs, with more than half saying these are entirely or mostly manual. Unfortunately, SMEs relying on spreadsheets and manual processes to manage travel and expenses are ill-equipped to cope with the modern businesstravel market. Although the most popular booking method among SME employees remains the corporate booking tool – which was mentioned by 34% of respondents – this is closely followed by booking directly with suppliers, which was preferred by 27%. This means that businesses using paperbased processes are unlikely to have insight into travel spend until claims are filed. Without systems to bring increasingly disparate travel data together and integrate it with thirdparty solutions, SMEs will find it difficult to see and report on travel spend, which limits their ability to aggregate preferred supplier data, control costs and oversee employee itineraries. As well as being prone to inefficiencies and errors, manual processes are not conducive to compiling easily manageable, cohesive data. Conversely, automation can have untold benefits for SMEs. First of all, it can help companies establish early visibility of booking information and itineraries, capture real-time data and check for anomalies and out-of-policy spend, which significantly reduces the Keeping your business moving
chances of receiving nasty shocks when expenses are filed. Not only this but digital, automated solutions can more seamlessly integrate with other corporate systems and platforms, gather supplier data to help negotiate discounts and deals, reimburse employees in a timely and efficient manner and maximise a business’s VAT reclaim.
Just a fifth of SME respondents to the SAP Concur survey are completely confident that managers thoroughly check all T&E claims submitted by employees, with 38% somewhat confident and 5% not confident. Furthermore, on average, finance teams or external providers only audit 44% of travel claims for duplication errors or fraud.
In light of this, there should be plenty of incentive for SMEs to seek out reliable automated systems, whether they have just a handful of employees travelling locally or globally or several hundred.
Despite this, a more systematised approach can prove more popular with those filing claims. Most employees want to do the right thing by their employers – especially those in the SME sector, where relationships tend to be stronger and more personal – which means it can prove both popular and effective to embrace solutions that facilitate error checks and audits, automatically apply T&E policies and guide employees.
Training your sights on travel costs The earlier a business can see planned travel costs, the better. If they know what is happening, they can ensure money is available and approve, decline or edit requests at the beginning of the process. Yet three-quarters of SME finance leaders say the finance team only sees travel costs after trips are booked and 11% of these only see costs once a business trip is completed. If organisations see expenditure soon after booking, they may still be able to get refunds if necessary but this may tie up significant resources. If the business only gets visibility even further down the line when it receives a bill or expenses claim, the problems are magnified, making it difficult to allocate budgets effectively and removing any flexibility to rein in costs. Early visibility also prevents leakage or blind spend, highlights patterns and helps the business build the data necessary to negotiate better rates with suppliers. Another risk associated with late visibility and disconnected or deferred data is that it hampers employers’ ability to look after the health, safety and welfare of travelling employees. Currently, just half of SMEs are completely or mostly confident they can quickly and accurately locate business travellers in an emergency, leaving the other half only somewhat or not confident of this.
Mobile technologies can make travel smoother for employees and businesses throughout the process. Business travellers can, for example, upload receipts straight to expense claims, saving individual and collective business resources, as well as speeding up oversight and reimbursement processes. At the same time, employers can access spending details in real time, wherever and whenever they are incurred. Tech-savvy travellers expect their companies to stay ahead of the curve, just as businesses expect their staff to utilise the latest technologies and perform to the best of their ability. Cloud-based infrastructure that integrates seamlessly with other systems not only improves efficiency and reduces costs; it also allows all users to keep on top of industry changes, constantly updating and aligning with regulatory and internal requirements.
Do the right thing Automated, integrated systems can also improve internal compliance. Fragmented or manual processes make it difficult to identify out-of-policy spend before it is incurred and violations will not be flagged until it is too late. Keeping your business moving
Cultivating a new payment culture
Tightening up payment processes can deliver greater efficiencies and help protect SMEs from errors and fraud EVERY SMALL BUSINESS IS FAMILIAR WITH the UK’s late-payment culture. They also know only too well the impact it can have on everything from cashflow, costs and budgets to innovation and investment decisions. In the worst cases, the end result could be the collapse of the business. Recent research by Bacs Payment Schemes revealed the staggering sums at stake, with UK SMEs spending a total of £2.2bn chasing overdue payments. And the Zurich SME Risk Index estimated that in early 2017 more than half of Britain’s SMEs were waiting for overdue bills to be settled, with £44.6bn in late payments outstanding. To help address the problem, the government’s Reporting on Payment Practices and Performance Regulations came into force from April 2017, obliging large companies to report the proportion of payments 7
made within 30 days, within 30 to 60 days and more than 60 days, as well as the proportion of payments that are made late – regardless of how long they took to pay. This reporting requirement doesn’t apply to the vast majority of smaller businesses but it does heighten the corporate world’s focus on payment practices and should help improve transparency for all sizes of business. It will also drive cultural and behavioural change and provide greater certainty. Perhaps most importantly, SMEs will now have access to publicly reported data when providing goods and services to larger customers and more leverage in negotiating terms. This should provide greater clarity, expose organisations with poor payment practices and help SMEs better judge who to work with. Keeping your business moving
Late-payment pain Given their vulnerability to late payments, SMEs are well placed to understand and appreciate â€“ perhaps even more than their larger counterparts â€“ the importance of efficiently managing accounting systems and cashflow, addressing inefficiencies and avoiding contributing to the scourge of late payments that has negative knock-on effects across the economy. Nevertheless, when SAP Concur recently asked finance managers in smaller businesses whether the time their organisations take to pay suppliers is in line with what they would like it to be, just 19% said payments are always on time, 28% admitted that payments are sometimes late and 15% said they are often or consistently late. The average number of days SMEs take to pay a supplier is 24, which is considerably better than the 31 taken by large organisations. However, 29% admit to taking a month or more to pay suppliers once an invoice is received. Although not under pressure to report, small firms clearly still face challenges in terms of their payment practices and have plenty of room for improvement. Not only can automated, connected invoice systems and processes provide a better snapshot of ongoing business commitments, they can also help improve oversight in the purchase of goods and services and schedule payments so that they optimise cashflow. Virtuous circles More efficient systems can also foster stronger supply-chain relationships, which can improve service and save costs. Some of the most tangible advantages of automated systems include encouraging suppliers to provide early payment discounts, avoiding late-payment charges and being in a position to negotiate better supplier prices. In a more indirect way, they can even contribute to creating a virtuous circle that may break the current impasse, whereby many businesses paid late by their own customers pass on the delay to their suppliers.
said they had seen faster payments as a result of improvements made to systems and processes, 48% reduced costs and 38% more efficient use of employee time. Good payment practice is obviously not limited to paying suppliers on time; it is also about controlling costs, which makes it vital to check that any invoices being paid are accurate, honest and not duplicated. When asked about the greatest challenges faced by finance teams in relation to processes, a quarter mentioned fraud and abuse. And yet 52% of respondents say less than half of their invoices are checked by the finance department or an external service provider for duplication, errors and fraud. The absence of these kinds of checks opens the business to a range of risks. More than a quarter of SMEs say their accounts-payable systems are still entirely or mostly manual. Paper and spreadsheets do not have the workflows and triggers necessary to keep the process moving and shorten the payment cycle; they can also be time-consuming and make it almost impossible to integrate and aggregate data. In this situation, duplications and errors are common, as multiple copies may exist at different stages of the process before being captured and processed. In addition, cybercriminals are increasingly sending fake invoices in the hope they may slip through thanks to opaque processes. The current supply-chain dynamic is one of uncertainty overlaid with a lack of clarity and accountability, leaving businesses unsure when they will be paid and with few options if payments are late. Automated, integrated solutions can help address this. On the one side, they can reduce the time and effort spent on chasing and fulfilling unpaid invoices; on the other, they can help tackle the UKâ€™s cumbersome and stifling late-payments culture by speeding up payment processes, increasing visibility and reducing the potential for error and fraud.
Encouragingly, it seems as if smaller businesses recognise the importance of upgrading their accounts systems. When asked whether they had made any changes to systems and processes in the previous 12 months, nearly three-fifths said they had improved their invoice processes. Overall, 56% Keeping your business moving
Cracking the compliance conundrum Introducing joined up systems doesn’t just give SMEs greater understanding of spend: it can also make it easier for companies to remain compliant with the law IN AN INCREASINGLY COMPLEX REGULATORY environment, having the right data at your fingertips has become an imperative in business. This is particularly true in the case of managing company travel, employee expenses and supplier invoice processes. For smaller organisations and startups focused on growing and developing their business, compliance can seem like an uphill struggle and a distraction from their core objectives. Yet the price of getting it wrong and falling foul of regulation includes prosecution, fines and reputational damage – not to mention all the expense of putting things right. And compliance with government regulations, including HMRC requirements, is not the only issue. To keep control of costs and promote accurate budgeting, businesses also need to be confident that employees are complying with internal T&E and other policies. Failure to audit expense claims can lead to spiralling costs and a poor culture, as 9
exaggeration or lack of attention to detail becomes the norm. Employers also need to comply with duty of care and health, safety and welfare requirements. Without real-time visibility and joined up systems, they cannot be sure where their employees are when they travel for business, which means they could run into problems locating them in the event of an emergency, putting the employees and the business at risk. Gaps in compliance When SAP Concur asked finance leaders in smaller businesses to list their key priorities for the next 12 months, 40% ranked ensuring external compliance as their first, second or third priority. This made it second only to managing cashflow – which was ranked as a top three priority by 52% of finance leaders – and equal to those prioritising balancing the books. Keeping your business moving
Conversely, compliance with HMRC or other government regulations comes relatively low on the list, being mentioned by 14% of SME finance leaders. And yet there is clearly still work to be done in this area: when respondents were asked whether their processes were always compliant with government regulations, nearly one in five said they were not very confident or not confident of this for travel, 18% for expenses and 14% for invoices. SMEs also shared that they had compliance concerns related to their own companies’ policies and practices: internal compliance was mentioned as a top three priority by 19% of respondents. But one in five finance leaders lacks confidence or doesn’t know whether employees always comply with T&E policies when booking travel and claiming expenses. And a similar proportion shares the same uncertainty when it comes to complying with internal policies around purchasing goods and services. These figures show the importance SMEs attach to regulatory and other forms of compliance but also reveal significant – not to mention risky – gaps between what they want to happen and what is happening in practice on the ground. In the absence of full employee-spend visibility and comprehensive checks and balances, it’s impossible for businesses to be confident that existing data will stand up to the scrutiny of an HMRC audit, that they’re accurately reclaiming the appropriate amount of VAT based on expense type or that they are meeting their basic duty of care to travelling employees. End-to-end processes When HMRC decides to audit a company’s T&E processes, many businesses make the mistake of assuming that inspectors are only interested in the completed forms and receipts to support them. In fact, they are also interested in reviewing the entire end-to-end process, focusing on issues such as clear and enforced policies; appropriate approval processes, documentation, checks and controls; tax and VAT compliance and a robust and secure payment process.
frequent internal audits. To keep an eye out for non-compliance or suspicious activity, businesses should also employ automated, connected systems that facilitate easy access to complete and comprehensive data; provide complete T&E spend visibility and generate accurate reports on demand; automatically cross-check against expenses policies; and ideally incorporate mobile, cloudbased solutions that make it easy for employees and managers to complete and approve claims wherever they are. Essentially, this can have a huge effect on how smooth an HMRC audit is likely to be. The simpler it is to submit and audit expenses, the easier it is for employers and employees to show they are meeting regulatory and internal requirements. In an ever-changing regulatory and policy landscape, automated systems can also build-in alerts and warnings that will update as necessary to ensure nothing slips through the net. Many SMEs continue to manage their travel, AP and expenses systems separately. Yet when these systems are disconnected, businesses are left with an incomplete snapshot of spending, preventing them from seeing the bigger picture. This also hampers their ability to prove compliance across key areas of employee spending. Real peace of mind when it comes to compliance requires complete spend visibility throughout these interconnected areas. Easy access to intelligent and accurate data across the board will also speed up processing, control costs and improve productivity. Based on a combination of well-chosen software systems, well-trained people and rigorous policies, SMEs can take some of the headaches out of compliance, reducing the administrative burden and leaving them free to concentrate on wider business strategy, tapping new markets and developing new products and services.
This means that to keep on top of compliance risks, businesses need to establish a fair and flexible expenses policy that staff are likely to comply with and be on the lookout for fraudulent practices via Keeping your business moving
A world of difference
SAP Concur gives on-site engineers at Sauter Automation Ltd. a paperless way to process expenses. Sauter Automation does exactly what the name says: automation for buildings THE COMPANY SUPPLIES AND MANAGES THE environmental control of heating, ventilation and air conditioning (HVAC). Sauter Automation needed a paperless way to process the expenses of their engineers who work onsite, often far away from their managers. They chose SAP Concur because of the mobile app, ease of use, and ability to do and approve expenses on the go. “I had been looking for some years to try to automate our expenses” says John Buckley, Finance Director at Sauter. “What we had before was an entirely manual system. People filled in a form, attached receipts, and sent it off to managers to get approval.” The Challenges: Before Automation Sauter had two main challenges. Firstly, construction managers are often on-site, but pieces of paper can only be in one place at a time. “We have three offices in the UK” says John, “employees and approving managers could be in Manchester, the West Midlands, or Basingstoke and a lot of our site staff don’t come into the office, which means they had to post it, using snail mail, and things got lost.” Secondly, once the expenses had been signed off Sauter had to get them analysed and entered into their accounts ledgers, followed by a lot of analysis and entry. “It was extremely time-consuming” says John. “The purchase ledger controller said that entering expenses into her ledger was the worst part of her routine: itty-bitty, time-consuming, and frustrating. It took one to two days’ work each month just to enter the details – never mind processing the payment.
and the fact that receipts could be uploaded from your smartphone and attached to the expense claim via an app all came together to mean that SAP Concur was in pole position for us.” Why sauter automation would recommend SAP Concur “I would definitely recommend SAP Concur because it’s a fully comprehensive system that you can use it anywhere, on a PC or smartphone, anywhere you can connect to the internet. And because the process is completely virtual, approvals are all done online. The software itself is relatively easy to follow, understand and use. All of this is really important for a company who has so many people out of the office” says John. “SAP Concur is very good. The submission of expenses has become much less painful. The managers don’t have to be in one place, or where their ‘in-tray’ is. Wherever they are, their expenses are.” John Buckley, Finance Director, Sauter Automation.
Choosing sap concur, the market leader When Sauter looked at the possibilities John says that they saw very quickly that SAP Concur was the market leader with the most up-to-date methodology. “You had the best method of submitting receipts – which means no longer relying on bits of paper. The ability to handle receipts, the advent of smartphones, 11
Keeping your business moving
Connect the Dots on your Travel, Expense and Invoice Spend
Concur integrates travel, expense, ERP, invoice and credit card data to provide a single, accurate and actionable view of spending. Your company's finance team will never be left in the dark again. Expense. Travel. Invoice.
Published on Jan 26, 2018