Indian CFOs Are Tired Of Half-Baked “Automation”, AI Dysfunction, And Non-Transparent Financial Process In Spend Management
Varun Rathi, Co-founder & COO, Happay, talks about various expense management challenges faced by organisations.
“Without integrated data and a full set of digital tools, CFOs are unable to detect and quickly respond to real-time business changes. And they risk falling behind their more forward-looking peers, who are already transforming their business models and gaining a competitive advantage from their digital investments” - says a recent BCG report. It goes on to add that “Many finance organizations lack such digital basics as automated processes, the ability to integrate and analyse data, and a workforce with digital capabilities. The finance function is often hobbled by slow, legacy systems that don’t talk to one another.
Travel and Entertainment (T&E) is one such domain where most of the organisations are still processing tour reports manually. Managing travel spend is a huge challenge for large enterprises. While airfare and hotel stay forms the larger cost, there are several other micro spends like luggage fare, meals, local travel expenses etc. To compile information from varied sources into a central management system and draw relevant insights is an arduous task. It is also prone to mistakes, if not done in the right manner.
India is the world’s 10th largest business travel market and is likely to clock the fastest growth in the next five years. Even though India ranks 3rd in PPP GDP and 6th in GDP, there is huge room for growth in Business travel spends. To understand the varied needs and unique challenges of this market, Happay commissioned a ‘State of the Indian T&E Expense Management’ study where 200+ finance decision makers were interviewed. 57% of the sample had revenues over INR 1,000 Cr and half of them were very large enterprises (over INR 5,000 Cr).
Since variable expenses are incurred by companies across verticals, care was taken to randomly choose the sample to avoid sectoral biases. Primary interviews; both face-to-face as well as telephonic, were collected by the editorial team of a neutral third-party media house. Deeper insights were derived by further probing nine industry renowned CFOs, on the emerging trends from study.
Depending upon the number of vouchers processed or their T&E expenses as a percentage of OPEX, our study shows that companies have multiple options to manage it. We found that a majority are using software packages like Accounting/ ERP (50%) or have homegrown custom software (26%) to cater to this huge latent need. A small minority have integration with HRMS software (12%) or outsourced the process to a BPO service provider.
Travel & Entertainment (T&E) forms the second largest operational cost for most organizations after employee payroll. Managing T&E expenses is one of the key priorities for all organizations today. With well-managed travel policies these expenses can be curtailed to a great extent and this can have a direct impact on the company’s bottom-line. Saugata Sircar CFO & Country Finance Partner – Greater India Zone, Schneider Electric India Pvt. Ltd. summarises “Three important considerations are how do you optimise the travel & expense cost, second how do you measure it and third how do you track it?”
91% of Finance Heads felt their system is automated, still their financial process was non-transparent.
Most Finance Heads feel that ERP, Accounting software, in-house software or HRMS are the systems which can manage T&E expenses. Interestingly employees in 75% of the companies, still attach receipts to paper vouchers. Hence, half of the respondents have no idea of the possible T&E leakage points in system, questioning the overall transparency of the process.
59% of the organisations are still doing manual entry of vouchers, two third of the organisations are manually routing expense vouchers from one approver to another or using email threads to approve it. Both these processes are inefficient ways to monitor deviations in travel policy compliance. As a result, visibility into budgetary lapses, leakage prone areas and identifying the culprits are a huge challenge. Normally a cloud-based expense package, like Happay, with inbuilt policy controls and dashboards can solve the transparency problem quite easily.
Half-baked automation is useless, 56% are moving to full automation in next 6 months.
Despite digitization, our study revealed that most organizations function on an old and archaic system of expense filing, which requires manual entry of data. On an average, there is a delay of almost 45 days by the time data entry happens into the system and reconciliation is done.
To overcome this challenge 53% of the businesses, in our sample, tried to use enhancements in existing software to meet new demands of today’s digital economy. This is called ‘Partial Automation’ in T&E parlance. However, it’s interesting to note, half of them seem to be unhappy with the ‘partial’ experience and wish to move to complete or ‘full automation’ within next six months.
To understand this conundrum, our editors spoke to Mr. Nikhil Madgavkar, CFO (Farm Equipment Sector) Mahindra & Mahindra. He said, “Most of the companies realise, you need to automate and digitise. Twin requirements are how do you maximise the automation to improve productivity and how do you digitise governance and controls, rather than relying on manual. Because the moment its manual and dependant on person, the system is prone to error”.
Our study elaborates this point further. 86% of ‘No Automation’ companies required a long time and multiple people to compile data of past year for T&E audit. Irrespective of the number of vouchers processed or the size of the company, the problem persisted for half of the ‘Partial Automation’ companies. However, 80% of ‘Full Automation’ companies had no such issues.
Dysfunctional AI in most organisations is not allowing expense capture from multiple sources.
Consumerisation of business traveller is a growing trend. Today ride sharing options like Ola or Uber are available, and employees don’t necessarily have to book the traditional cabs or pay cash to autos. Similarly, businesses have tie-ups with online travel portals to book any hotel or flight of their choice depending on the travel policy. Some millennials also avail dine-in options through aggregators like Zomato or Swiggy, while staying in company’s guest house.
Three-fourth of respondents said, claims still had to be filed manually by attaching bills to paper vouchers. Quite surprisingly, despite the huge penetration of mobile devices and desktops, just 12% and 27% of companies allow employees to use these devices for recording travel claims. In order to improve productivity of the employees, a company should consider mobile integration of expense management system.
With the advent of cloud based expense management solutions, plethora of options are now available to record expenses. New innovations like our AI powered capability can auto populate employee expenses into the software.
With a digital and automated T&E platform like Happay in place, companies can gain 100% spend visibility and control, speed up their process cycle time by 7X, reduce paperwork by 96%, reduce leakage by more than 90%, and boost overall employee productivity.
Using Happay, the benefits are: -
Real-time visibility into T&E spending: Companies have full transparency into the business travel that is planned and approved, business trips completed by employees, audit trail of all expenses and reports and settlement data at their fingertips.
System-driven policy compliance: With Happay, policies are available on the system and the system alerts both employees and approvers in case any expense violates policy. Companies can easily track the top violators, the spend categories on which violations typically happen and then optimise policies accordingly.
More control over T&E costs and more cost-saving opportunities: Happay’s analytics and MIS reports help companies keep track of the top spenders in the company, top spend categories, most frequented cities of travel, top vendors used for travel bookings and more - all this data helps companies negotiate better deals with travel vendors and create more effective travel policies that consequently help reduce overall T&E costs.
Paperless and digital expense reporting process for employees: Employees can manage all their T&E expenses on the go, from their Happay mobile app. They can create travel requisitions, get their trip itineraries pre-approved by managers from their smartphones. They can capture their T&E expense data on the Happay app and web dashboard from any source: from the advances they get on their Happay cards (auto-capture of card expenses), the cash that they spend out of their own pocket or from their personal debit/credit cards. With Happay’s AI capabilities, employees can automatically import spend data from SMSs, from the invoices they receive in their email inbox, from travel vendors such as Ola and Uber, auto-receipt scans, etc. Employees use the same app to submit their expense reports, track where their report is in the approval process.
Quick approvals and reimbursements: Approvers can easily check employee travel requisitions and reports on their Happay app, review policy violations and add comments in return and take the necessary action on reports from Happay. Finance teams can do settlement and reimburse employees from the same platform.
MIS for process cycle optimisation: Happay not only helps digitise the expense reporting process for employees and approvers but it also helps companies improve their process TATs.
Opinions expressed in the article are the author’s own.