By Kyle Ferguson Chief Commercial Officer, Fraedom
Business travel is on the rise, and with it, travel spending and related expenses. The Global Business Travel Association (GBTA) projects an increase of up to 8.6% in global business travel spending this year. Macro trends, such as (slowly) improving business confidence and ongoing economic globalisation, are contributing to the rise. Another key driver is the growth of mobile working.
This is an important issue for finance teams. A recent PayStream Advisors report on the state of travel and expense management, which Fraedom co-sponsored, found that 38% of organisations spend $500,000 or more on travel and expenses, and 18% spend more than $5million. Managing an increase in spending in this area is a top management challenge for 43% of the large corporations involved in the study.
In this context, it’s more important than ever for finance professionals to find an easy, accurate and effective way to monitor and control travel and expenses, whilst giving staff the freedom to do their jobs.
However, as we’ll outline below, the study revealed that many organisations still use traditional manual methods or outdated IT systems to manage travel and expense reporting. This approach may have worked in the past, but in today’s tough corporate environment, it creates problems that can hamper operations and profitability.
Below are five key issues that the traditional approach raises:
- Poor data visibility and accuracy
Using manual or disparate IT systems to record, track and predict travel costs and expenses can leave finance teams struggling to ensure data accuracy and to provide senior management with correct and up to date reports. The PayStream Advisors study shows that over one-third (35%) of SME organisations interviewed admit to having little to no clear view of their employees’ expense spend. Obviously, this lack of visibility can lead to mismanagement of budgets and costs spiralling out of control.
- Inefficient processes
It’s vital that expenses are reported correctly and within a certain deadline. Among other things, this means that employees can be reimbursed promptly. Yet, employees of over two-thirds (69%) of companies in the report send paper receipts to their finance departments. Similarly, over half of organisations (58%) reimburse employees via cheque.
These processes make it difficult for people to file their expenses, which delays reporting and frustrates employees, who often see the process as unduly laborious. Accuracy and productivity can be eroded by such extended manual processes – receipts or cheques can be lost on the way, and claims can be attributed to the wrong people. Importantly, the re-work finance teams need to do in order to correct such errors can increase processing times and costs.
- High costs of processing
Many businesses are unaware of the costs of processing expenses, with four out of five (80%) of those involved in the PayStream study not actively tracking this. However, according to the report, the cost of manually processing an expense report was $23 on average on 2014, increasing to over $26 in 2015. In sharp contrast, this falls to only $7 per expense report amongst businesses using a fully automated travel and expense system.
- Increasing travel and expenses spend
Companies need to spend to operate and those costs are growing as confidence increases. Managing this increase in overall travel and expense spending is a top challenge for large organisations in particular. This stands to reason for those with outdated expense management practices: an increase in the volume of expenses means more work for finance teams and even higher processing costs. On top of this, the lack of visibility and accuracy makes it difficult for businesses to control unnecessary spending.
- Enforcing travel policies
Finally, a lack of visibility of travel and expenses makes it difficult for finance teams to see when purchases outside of the corporate travel policy are made. Expenses may be approved whether or not they comply. This has obvious consequences in terms of cost control and compliance with relevant regulations.
The bottom line is that travel and expense spending is a major cost for companies and, for many, is likely to increase in line with a rise in business travel. The key challenge for organisations is to control this spending while supporting the traveller who, after all, is helping to extend and enhance business operations. As this article shows, however, travel and expenses can be one of the most difficult areas for a business to control – if manual methods or outdated IT systems are used.
The good news is that newer, automated systems can make things much easier for organisations, and help improve accuracy and visibility, and reduce costs. For example, these tools can give employees mobile access, enabling them to record receipts and approve claims on the move. This means workers can manage receipts in real time and managers can minimise the approval bottleneck and the whole process is made more efficient through automation. They can also help with policy compliance. For example, when booking travel, employees can be offered options that are in policy, and nothing else. For other spending, real-time alerts can be sent to relevant teams when employees attempt to make purchases outside of policy.
In light of increasing business travel, such improvements are important to the future profitability and competiveness of many businesses. It’s vital that businesses take action rather than delaying improvements that could have a big impact on their business.
Battling Covid collateral damage, Renault says 2021 will be volatile
By Gilles Guillaume
PARIS (Reuters) – Renault said on Friday it is still fighting the lingering effects of the COVID-19 pandemic, including a shortage of semiconductor chips, that could make for another rough year for the French carmaker.
Renault reported an 8 billion euro ($9.7 billion) loss for 2020 which, combined with gloomy take on the market, sent its shares down more than 5% in late morning trading.
“We are in the midst of a battle to try to manage a difficult year in terms of supply chains, of components,” Chief Executive Luca de Meo told reporters. “This is all the collateral damage of the Covid pandemic… we will have a fairly volatile year.”
De Meo, who took over last July, is looking at ways to boost profitability and sales at Renault while pushing ahead with cost cuts. There were early signs of improving momentum as margins inched up in the second half of 2020.
The group gave no financial guidance for this year, although it said it might reach a target of achieving 2 billion euros in costs cuts by 2023 ahead of time, possibly by December.
Executives said they were confident the carmaker could be profitable in the second half of 2021, but that they lacked sufficient market visibility to provide a forecast.
Renault struck a cautious note, saying it was focused on its recovery but warned orders had faltered in early 2021 as pandemic restrictions continued in some countries.
The group is facing new challenges as the European Union tightens emissions regulations and after rivals PSA and Fiat Chrysler joined forces to create Stellantis, the world’s fourth-biggest automaker.
The auto industry endured a tough 2020 but a swift rebound in premium car sales in China helped companies such as Volkswagen and Daimler to weather the storm.
Auto companies globally have since been hit by a shortage of semiconductors that has forced production cuts worldwide.
“The beginning of the year has shown some signs of weakness,” De Meo told analysts, but added the chip shortage should be resolved by the second half of 2021. “We have taken the necessary measures to anticipate and overcome challenges.”
Renault estimated the chip shortage could reduce its production by about 100,000 vehicles this year.
The group was already loss-making in 2019, but took a sharp hit in 2020 during lockdowns to fight the pandemic, which also hurt its Japanese partner Nissan.
Analysts polled by Refinitiv had expected a 7.4 billion euro loss for 2020. The group posted negative free cash flow for 2020.
The 2018 arrest of Carlos Ghosn, who formerly lead the alliance between Renault and Nissan, plunged the automakers into turmoil.
In a further sign that the companies have been working to repair the alliance, De Meo told journalists that Renault and Nissan will announce new joint products together in the coming weeks or months.
Renault has begun to raise prices on some car models, and group operating profit, which was negative for 2020 as a whole, improved in the last six months of the year, reaching 866 million euros or 3.5% of revenue.
Analysts at Jefferies said the operating performance was better than expected. Sales were still falling in the second half, but less sharply.
Renault is slashing jobs and trimming its range of cars, allowing it to slice spending in areas like research and development as it focuses on redressing its finances. It is also pivoting more towards electric cars as part of its revamp.
It was already struggling more than some rivals with sliding sales before the pandemic, after years of a vast expansion drive it is now trying to rein in, focusing on profitable markets.
De Meo told journalists on Friday that the French carmaker will make three new higher-margin models at its Palencia plant in Spain, where manufacturing costs are lower, between 2022 and 2024.
($1 = 0.8269 euros)
(Reporting by Gilles Guillaume and Sarah White in Paris, Nick Carey in London; Editing by Christopher Cushing, David Evans and Jan Harvey)
UK delays review of business rates tax until autumn
LONDON (Reuters) – Britain’s finance ministry said it would delay publication of its review of business rates – a tax paid by companies based on the value of the property they occupy – until the autumn when the economic outlook should be clearer.
Many companies are demanding reductions in their business rates to help them compete with online retailers.
“Due to the ongoing and wide-ranging impacts of the pandemic and economic uncertainty, the government said the review’s final report would be released later in the year when there is more clarity on the long-term state of the economy and the public finances,” the ministry said.
Finance minister Rishi Sunak has granted a temporary business rates exemption to companies in the retail, hospitality, and leisure sectors, costing over 10 billion pounds ($14 billion). Sunak is due to announce his next round of support measures for the economy on March 3.
($1 = 0.7152 pounds)
(Writing by William Schomberg, editing by David Milliken)
Discounter Pepco has all of Europe in its sights
By James Davey
LONDON (Reuters) – Pepco Group, which owns British discount retailer Poundland, has targeted 400 store openings across Europe in its 2020-21 financial year as it expands its PEPCO brand beyond central and eastern Europe, its boss said on Friday.
The group opened a net 327 new stores in its 2019-20 year, taking the total to 3,021 in 15 countries. The PEPCO brand entered western Europe for the first time with openings in Italy and it plans its first foray into Spain in April or May.
Chief Executive Andy Bond said its five stores in Italy have traded “super well” so far.
“That’s given us a lot of confidence that we can now start building PEPCO into western Europe and that expands our market opportunity from roughly 100 million people (in central and eastern Europe) to roughly 500 million people,” he told Reuters.
To further illustrate the brand’s potential he noted that the group has more than 1,000 PEPCO shops in Poland, which has a significantly smaller population and gross domestic product than Italy or Spain.
The company, which also owns the Dealz brand in Europe but does not trade online, has already opened more than 100 of the targeted 400 new stores this financial year.
Pepco Group is part of South African conglomerate Steinhoff, which is still battling the fallout of a 2017 accounting scandal.
Since 2019 Steinhoff and its creditors have been evaluating a range of strategic options for Pepco Group, including a potential public listing, private equity sale or trade sale.
That process was delayed by the pandemic, but Steinhoff said last month that it had resumed.
“The business will be up for sale at the right time. It’s a case of when, rather than if,” said Bond, a former boss of British supermarket chain Asda.
Pepco Group on Friday reported a 31% drop in full-year core earnings, citing temporary coronavirus-related store closures.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) were 229 million euros ($277 million) for the year to Sept. 30, against 331 million euros the previous year.
Sales rose 3% to 3.5 billion euros, reflecting new store openings.
($1 = 0.8279 euros)
(Reporting by James Davey; Editing by David Goodman)
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