2012 Expense Management Benchmarking Study/media/Files/GCP/jp/AME248...page 3 Expense Management...

2012 Expense Management Benchmarking StudyJapan

Contents

Introduction 3

Study Demographics 4

Travel & Entertainment (T&E) Expenditure Benchmarks 5

Expenditure Analysis 5

Travel & Expense Management Policy 6

Travel and Expenses Policy 6

Eligibility Criteria for Corporate Cards 6

Mandate of T&E Supplier Categories 7

Using Corporate Cards for Personal Expenses 8

Non-Employee Travel & Expense Management Policy 9

Measurement of Travel & Expense Management Policy Compliance 10

Travel Management Companies (TMC) 11

Number of TMCs 11

Negotiation with Travel Suppliers 12

Expense Management Systems (EMS) 13

Use of Expense Management Systems 13

Use of Data Files in the Expense Process 14

Shared Services & Outsourcing 15

Payments 16

Party Responsible for Payment to Card Provider 16

Payment Transfer Method 17

Remittance Method 17

Conclusion 18

About American Express Global Corporate Payments Consulting 18

Disclosure The data contained in this document is not specific to individual companies and does not contain any personally identifiable information. This document contains confidential and proprietary information of American Express. No disclosure may be made without the express written consent of American Express. The information contained in this Benchmarking Study is based on benchmarking conducted by American Express Global Corporate Payments Consulting in July–August 2011 and the results shown here are correct as at the time of publishing.

Expense Management Benchmarking Study

page 3

IntroductionAmerican Express is pleased to present this report based on the findings of a Study commissioned by the Global Corporate Payments Account Development team with the aim of obtaining insights into client practices in the areas of:

Travel & Expense Management Policy

Travel Management Companies (TMC)

Expense Management Systems (EMS)

Shared Services and Outsourcing

Payments

The Study was conducted across a sample of 45 local and multinational companies in Japan. This report covers these findings and includes comparative references to the full sample of 276 companies drawn from the JAPA Region (Australia, Singapore, Hong Kong, India and Japan).

The Study is based on data compiled by the American Express Global Client Group and Account Development team members in response to a set of questions based on their knowledge of client practices. Clarification and confirmation with client contacts were made when necessary.

The American Express Global Corporate Payments Consulting team has consolidated and analysed this data to provide insights into company Best Practices at a regional as well as country level. More detailed country-specific documents discuss findings for each country separately.

Throughout the document, ‘Best Practice’ tables call out the percentage of the sample in Japan that has implemented Best Practice within their organisations.

Yours sincerely

Melanie Cochrane Senior Vice President JAPA Global Corporate Payments American Express

Yours sincerely

M l i C h

Study Demographics

276 companies were covered in the Study with over 72% of the sample having a multinational presence.

The majority of companies covered in the Study have less than 500 Corporate Cards with T&E Expenditure up to $5M USD.

45 companies were covered in the Japan sample, of which 17 were local companies and 28 were multinationals.

Respondents by Market

Charge Volume

Number of Cards

Japan

Balance of JAPA Region

84%

16%

Japan JAPA Region

Local Companies 17 76

Multinational Companies

28 200

Total 45 276

2010 T&E Expenditure ($USD)

Japan Total Local Japanese Companies

Multinational Companies in Japan

JAPA Region

0–5,000,000 51% 70% 40% 48%

5,000,000–10,000,000 11% 6% 14% 18%

>10,000,000 38% 24% 46% 34%

2010 Number of Corporate Cards



JAPA Region

0–499 31% 24% 36% 53%

500–1000 18% 18% 18% 17%

>1000 51% 58% 46% 30%


Expenditure Analysis

Expenditure Analysis

On analysing annual spend by these companies at a T&E commodity level, we have identified the following benchmarks in Japan and the JAPA Region:

Travel & Entertainment (T&E) Expenditure Benchmarks

Japan’s relatively high Restaurant and Entertainment expenditure is attributable to the practices of client entertainment in that country. Airline spend at local

Expenditure Analysis – Japan and JAPA Region

50%

52%

22%

14%

14%

9%

4%

2%

15%

18%

Japan

JAPA Region

0 10 20 30 40 50 60

Other T&E Commodities

Ground Transport

Restaurant & Entertainment

Hotel

Airline

Category Japan Total Local Japanese Companies


JAPA Region

Airline 52% 83% 38% 50%

Hotel 14% 8% 17% 22%

Restaurant & Entertainment

14% 2% 19% 9%

Ground Transport 2% 0% 3% 4%

Other T&E Commodities

18% 7% 23% 15%

Japanese companies is 83% of total spend, which reflects the popularity of centrally billed Airline products in local Japanese companies.

Travel & Expense Management Policy

Introduction

There are many variables for companies to consider when developing a Travel & Expense Management policy. Well-informed decisions based on full information and complete data integrity can assist greatly in reducing costs and increasing business efficiency.

Key aspects of policy reviewed in the Study include:

Travel and Expenses Policy

Eligibility Criteria for Corporate Cards

Mandate of T&E Supplier Categories

Using Corporate Cards for Personal Expenses

Non-Employee Travel & Expense Management Policy

Mandating preferred suppliers

Measurement of Travel & Expense Management Policy Compliance

Findings

Travel and Expenses Policy

A Travel and Expense Management Policy is key to guiding employee behaviour and is a basic component of a Best Practice Corporate Card program. In the regional sample of large companies, 97% had a policy in place, and policy usage was consistent across all countries.

Japan met the regional average, with 100% of companies in the sample having a Travel and Expenses policy.

Eligibility Criteria for Corporate Cards

When considering eligibility criteria for Corporate Cards, providing for a broader coverage of employees who travel or entertain for business purposes ensures greater compliance, and increases spend visibility and employee satisfaction.

48% of companies in the JAPA sample provide Cards to all employees who incur T&E or business expenses. In other companies, criteria for Corporate Card eligibility is linked to management level, spend volume, or employee discretion.

In Japan, 40% of companies provide Corporate Cards to all employees who incur T&E or business expenses.

It is Best Practice to base the eligibility criteria for Corporate Cards on all employees who have T&E or business expenses as it ensures one expense process for all employees.



Mandating the use of a preferred TMC, Card Provider and Hotels is Best Practice and helps to control costs and drive better deals. In the case of Airlines, companies may choose to mandate ‘best fares’ rather than preferred Airlines.

The Study shows that in the JAPA Region:

98% of companies mandate a TMC

66% of companies mandate a Card Provider

59% mandate an Airline

56% mandate a Hotel

In terms of the results for Japan:

Multinational companies’ trends were similar to regional trends but local companies had a significantly lower mandate for Airline, Card Provider and Hotel.

There is an opportunity for local Japanese companies to review their sourcing arrangements in these areas as significant savings may be achieved.

Mandate of T&E Supplier Categories – Japan


98%

100%

66%

60%

44%

36%

59%

56%Japan

JAPA Region

0 20 40 60 80 100

Hotel

Airline

Card Provider

TMC

Mandate Category Japan Total Local Japanese Companies


JAPA Region

TMC 100% 100% 100% 98%

Card Provider 60% 47% 68% 66%

Airline 44% 18% 61% 59%

Hotel 36% 12% 50% 56%

A further finding is that most companies have preferred Airline and Hotel arrangements to take advantage of negotiated fares and rates.

However, a large proportion of companies still allow travellers to choose the best available options in these categories.

22%

33%

14%

26%

0 5 10 15 20 25 30 35

JAPA Region


Local Japanese Companies

Japan Total

Use of Corporate Cards for Personal Expenses

Using Corporate Cards for Personal Expenses

The results of the Study highlight differences in company Travel & Expense Management Policies, particularly regarding whether Cardmembers are allowed to incur personal expenses on their Corporate Cards.

On a regional basis, 26% of companies allow Corporate Cards to be used for employees’ personal expenses. However, despite enabling a measure of employee convenience, this is not Best Practice.

Allowing personal expenditure on Corporate Cards skews company reporting and may result in increased expense processing costs as corporate and personal expenses need to be separated.

Local Japanese companies are more likely to allow personal expenses on Corporate Cards than the regional average, with 33% allowing personal expenses.



Many companies engage significant numbers of non-employees, (including contractors and consultants), who incur travel costs on behalf of the company in the course of their business. While the majority of these companies choose not to provide them with a Corporate Card, Best Practice in this area is to ensure that all non-employee Airline and Hotel expenditure is booked using the company’s TMC and is paid for using a corporate payment solution. This allows the company to ensure their contracted rates are used and that expenditure on travel incurred for the company is reported in relevant Card and Travel reporting systems.

In terms of the JAPA Region, the Study found that:

46% of companies in the sample pay for Airline and Hotel charges centrally, and reimburse other expenses to contractors and consultants afterwards.

42% of companies require contractors and consultants to invoice the company for expenses, which are then reimbursed by Accounts Payable (AP). This process is used extensively in India and Japan.

12% of companies use a Corporate Card process to pay for non-employees’ expenses.

Companies based in Japan reveal some differences to the JAPA Region sample, including:

38% of multinational companies in Japan pay for Airline and Hotel charges centrally and reimburse other expenses to contractors and consultants afterwards.

100% of local Japanese companies in the sample require contractors and consultants to invoice the company for expenses, which are then reimbursed by AP.

Non-Employee Travel & Expense Management Policy – Japan


33%

53%

46%

42%

9%

14%

0%

3%

0 10 20 30 40 50 60

Provide Individual Liability Corporate Cards

Provide Standard Corporate Card

Invoiced for T&E expenses and paid by AP

Pay Air/Hotel, reimburseother expenses

Japan

JAPA Region

Japan Total



JAPA Region

Pay Air/Hotel, reimburse other expenses 33% 0% 38% 46%

Invoiced for T&E expenses and paid by AP 53% 100% 46% 42%

Provide Standard Corporate Card 14% 0% 16% 9%

Provide Individual Liability Corporate Cards 0% 0% 0% 3%

Measurement of Travel & Expense Management Policy Compliance

Implementing a Travel & Expense Management Policy is an important part of a Corporate Card program. The extent to which policy compliance is reviewed or measured increases the likelihood of policy adherence.

In the JAPA Region, companies use reporting, auditing and external consultants to measure compliance with policy, with many companies using more than one method. Best Practice is to use a combination of methods to measure compliance, including Card Reporting, TMC Reporting and Audit of Expense Reports.

The results reveal that of the companies studied in the JAPA Region:

23% use a combination of Card Reporting, TMC Reporting and Audit of Expense Reports, which is considered Best Practice.

61% use one or more tools but not all three preferred options

16% have no process to measure policy compliance.

The findings for Japan reveal that:

Companies are more likely (40%) to use no process to measure policy compliance but interestingly the percentage that uses the Best Practice combination (26%) is in line with the regional average.

This presents an opportunity for Japanese companies to become more rigorous in their compliance measurement, which will drive savings in their T&E procurement programs.

Best Practices – Travel & Expense Management Policy – Japan

Best Practice Benefits Japan Total



JAPA Region

Provide Corporate Cards to all employees who incur T&E or business expenses

Greater compliance, spend visibility and employee satisfaction

40% 18% 50% 48%

Mandate TMC, Card Provider and Hotel Suppliers

Keep costs in check and drive better deals

26% 7% 38% 44%

Don’t allow personal expenses on Corporate Cards

Reporting shows corporate spend only. Reduces risk of card delinquencies

78% 67% 86% 74%

Use corporate payment solutions for non-employees

Ensures correct reporting of corporate expenditure. Minimises process cost

47% 0% 54% 59%

Measure policy compliance using Card and TMC Reporting and Audit of Expense Reports

Ensures consequences for non compliance, and higher compliance rates

26% 25% 26% 23%


Number of TMCs

Consolidating TMC expenditure to a single mandated supplier will typically result in volume discounts and the highest value for money. In the JAPA Region, 80% of companies have a single, mandated TMC.


89% of companies have a single, mandated TMC.

The remaining 11% of Japanese companies have 2 or more TMCs.

Travel Management Companies (TMC)

Introduction

TMC relationships have a high impact on the value for money that companies receive for their travel-related spend. A vital part of the travel-procurement process is negotiating the best rates with suppliers in the industry. A fundamental requirement for negotiating the best deals is a clear understanding of current expenditure patterns.

The Study focused on 2 key questions:

The number of TMCs a company uses for travel bookings

The data used in the travel supplier negotiation process.

TMC Breakdown

80%

89%

2%

0%

0%

11%

5%

3%

3%

3%

3%

1%

Japan

JAPA Region

0 20 40 60 80 100

5 or more TMCs

4 TMCs

3 TMCs

2 TMCs

1 Single Mandated TMC

0 Managed Internally / via Internet

Number of TMC Providers – Japan

Best Practices – Travel Management Companies – Japan

Negotiation with Travel Suppliers

When negotiating with travel suppliers, Best Practice is the use of Card Reporting and TMC Reporting to establish an accurate picture of expenditure in major categories. There can be gaps in spend recognised using each reporting method.

For example, where a Hotel booking is made outside the TMC, but paid for using the Card, the Hotel spend would be recognised on the Card Reporting but not TMC Reporting. By comparing both reports a full picture of current expenditure is revealed, which enables maximum volume discounts to be obtained.

In Japan, benchmark information highlights that:

43% of multinational companies used both Card and TMC Reporting, in line with the JAPA Region average.

No local Japanese companies in the sample used these reports for travel supplier negotiations, indicating an opportunity for them to drive incremental savings in their T&E Procurement Programs.



JAPA Region

0 Managed Internally / via Internet

0% 0% 0% 2%

1 Single Mandated TMC 89% 92% 88% 80%

2 TMCs 5% 0% 8% 11%

3 TMCs 0% 0% 0% 3%

4 TMCs 3% 0% 4% 3%

5 or more TMCs 3% 8% 0% 1%




JAPA Region

Single mandated TMC Volume discounts and highest value for money

89% 92% 88% 80%

Use Card and TMC Reporting to manage travel supplier negotiations

Accurate picture of expenditure in major categories will enable more effective supplier negotiations and volume discounts

28% 0% 43% 41%


Use of Expense Management Systems – Japan

Expense Management Systems (EMS)

Introduction

The reconciliation of T&E expenses by travellers is widely considered to be a time-consuming and therefore expensive process, which can be significantly improved by using an automated EMS.

Our Study reviewed the types of EMS (packaged EMS purchased from a vendor, in-house developed EMS or manual process) used by companies and also established whether this was further automated for Cardmembers by using a data file from Card Provider systems to pre-code expense data.

Findings

Use of Expense Management Systems

Using a packaged EMS is good practice as it helps to minimise the time taken by travellers and back-office staff in the reconciliation process, as well as allowing ‘out of the box’ implementation of best-in-class expense processes.

Data files from a Card Provider allow the pre-coding of expenses when combined with an EMS. The combination of a packaged EMS with data files is regarded as Best Practice.

In the JAPA Region 88% of companies regionally use an automated process, either a packaged EMS from one of the leading vendors, or an in-house EMS built for internal requirements.


Local Japanese companies in the Study had not invested in packaged EMS. 75% of local companies preferred to use in-house EMS to meet their requirements. The remaining companies (25%) preferred to use a manual process.

Multinational companies in Japan were more likely to use a packaged EMS (68%) than an in-house EMS (24%). This may be due to global systems and processes in place in these companies.

62%

41%

44%

15%

26%

12%

Japan

JAPA Region

0 10 20 30 40 50 60 70 80

Manual Process

In-house EMS

Packaged EMS

Use of Data Files in the Expense Process

The Study reveals that in the JAPA Region:

51% of all companies use data files.

90% of companies with a packaged EMS used data files from their Card Provider to pre-code information for Cardmembers.

Of those without a packaged EMS, this use of data files was lower (47% for in-house EMS and only 13% for manual processes).


71% of companies with a packaged EMS used data files in the expense process.

Of companies with an in-house EMS or manual process, 36% were actively considering or open to the option of moving to a packaged EMS. This is possibly because packaged EMS systems enable lower maintenance costs, allowing best-in-class processes to be implemented without large time investment from internal IT resources required to maintain in-house systems.

Best Practices – Expense Management Systems – Japan

Use of Expense Management Systems – Japan



JAPA Region

Packaged EMS 41% 0% 68% 62%

In-house EMS 44% 75% 24% 26%

Manual Process 15% 25% 8% 12%




JAPA Region

Packaged EMS with Data Files

Process efficiency, reduction in paperwork, faster reconciliation and payments

29% 12% 46% 56%


Shared Services & Outsourcing

Introduction

The Study reviews the usage of two approaches to the management of T&E processes.

Shared Services Centres – a consolidation approach, where activities associated with a process are brought together in a single location. For example, a company may process all business units’ expense claims in a single location

Outsourcing – an extension of the Shared Services concept, where functions previously completed by the business or Shared Services Centre are completed by a third party.

Back-office financial functions – for example, Corporate Card administration – are a natural fit for Shared Services Centres as they touch the whole business and require ongoing administrative work. These functions can benefit from the economies of scale, automation and control that can be enabled by a Shared Services or Outsourcing model. Implementation of a packaged EMS system is often the first step taken by companies moving T&E functions to a Shared Services or Outsourcing model, as the packaged EMS provides process standardisation across the business.

The Study reviewed:

The usage of Shared Services and Outsourcing across the sample.

Use of Shared Services and Outsourcing to manage Card-related functions.

Differences in EMS usage across businesses with and without Shared Services Centres.

Findings

Internal or outsourced Finance Shared Services Centres are in place for more than half (52%) of companies in the JAPA Region.

In Japan:

42% of companies use Shared Services Centres.

There are opportunities for companies with Shared Services Centres to move Card-related functions, or move more Card-related functions, into the Shared Services Centre, which is Best Practice. Of companies in Japan with Shared Services only, 44% use the Centre for 1 or more Card-related functions such as Payments, Expense Reporting, Receipts and Auditing.

Companies with Outsourced Shared Services are much more likely to have a packaged EMS in place (80%) than those with no Shared Services at all (33%). This is due to the process standardisation that needs to occur for outsourced centres to be effective.

Best Practices – for Companies with Shared Services/Outsourced Centres – Japan




JAPA Region

Move Card related functions to Shared Services/Outsourcing centres

Reduce administrative work in business units

44% 33% 46% 50%

Packaged EMS is implemented when moving to Shared Services or Outsourcing

Ensure consistency and automation of process across the business

53% 0% 62% 70%

Payments

Introduction

When implementing or changing a corporate payment solution, many companies are interested in benchmarks regarding the type of payment process used.

The Study has reviewed company practices as they related to the following aspects of the payment process:

The party (Cardmember or Company) responsible for paying the Card Provider.

The payment transfer method used to make payment to the Card Provider.

The method used to send a remittance advice (if required) to the Card Provider.

These practices have been correlated with the average Client-Held Days (CHD), which measures the average time taken by companies to pay their Card Provider. Higher CHD adversely affects rebates and incentives and may also indicate a higher incidence of late payment fees or liquidated damages.

Findings

Party Responsible for Payment to Card Provider

An important policy decision regarding Card payments is deciding who will be responsible for paying the Card Provider.

The possible options are:

The company pays the Card Provider in full, and manages Expenses internally afterwards.

The company pays the Card Provider for Approved Business Expenses after the Expense Report process.

The company pays the employee for Approved Business Expenses after the Expense Report process, and the employee pays the Card Provider.

The Study found that in the JAPA Region:

73% of companies paid the Card Provider.

27% of companies paid Cardmembers

The fastest payment method is to pay charges in full, which takes on average 3.7 days less than paying Cardmembers on approved expenses.

The results for Japan reveal the following picture:

34% of companies paid the Card Provider.

66% paid Cardmembers for expenses, significantly higher then the JAPA Region average.

Local companies were most likely to have a process where the Cardmember was paid for approved expenses (88%), and the Cardmember paid the Card Provider.

Party Responsible for Payment – Japan

Company pays in full prior to Expenses Process

Pay Card Provider for approved business expenses

Pay Cardmember approved expenses, Cardmember pays Card Provider

Japan Total 7% 27% 66%


6% 6% 88%


8% 40% 52%

JAPA Region 14% 59% 27%


Remittance Method

Where payment needs to be made for multiple Cardmembers, and is not made in full, the electronic remittance method enables the automatic allocation of payments to Cards. Other methods such as email (with full Card numbers obscured) and fax are processed manually by the Card Provider.

The Study found that in the JAPA Region:

53% of companies pay using the electronic remittance method, with Australian and Japanese companies most likely to use this method.

Electronic remittance is the fastest payment method.

On average, companies using electronic remittance have Client-Held Days that are 3.5 days better than those using fax.

The Study results for Japan show:

78% use electronic remittance and 22% use a faxed remittance.

Payment Transfer Method – Japan

Payment Transfer Method

For companies that pay the Card Provider directly, there are three payment options:

Electronic Funds (Wire) Transfer (EFT)

Direct Debit

Cheque

Findings for the JAPA Region reveal that:

92% of companies use Electronic Transfer methods such as EFT or Direct Debit, with the remaining 8% using cheques.

Companies using Direct Debit pay on average 7.5 days faster than those paying by cheque.

The Study results for Japan highlight the following:

The usage of Direct Debit is much higher than the regional average (69% vs 23% regionally).

Companies that use Direct Debit have lower CHD on average compared to those that use EFT/Wire Transfer.

Local Japanese companies are more likely to use Direct Debit (88%) than multinational companies in Japan (56%).

EFT/Wire Transfer Direct Debit Cheque

Japan Total 31% 69% 0%


12% 88% 0%


44% 56% 0%

JAPA Region 69% 23% 8%

Best Practices – Payments – Japan




JAPA Region

Company makes the payment to Card Provider

Company controls payment process and can manage outstanding balances on Cards

34% 12% 48% 73%




JAPA Region

Send payment and remittance advice electronically

Payments are transmitted and allocated most efficiently. Lower Client-Held Days optimise rebates and incentives

78% 88% 71% 49%


About American Express Global Corporate Payments Consulting

Global Corporate Payments Consulting delivers value to Global Corporate Payments clients by identifying and leveraging cost-saving opportunities via Card, Purchasing and Expense Management programs. With more than 25 years consulting experience, Global Corporate Payments Consulting delivers

customised cost-management solutions that create positive economic value for our clients’ organisations. Our customised solutions are designed by a team of industry experts with in-depth experience in travel and entertainment management, corporate purchasing, research and senior-level management consulting.

Conclusion

We trust that the 2012 Expense Management Benchmarking Study has proved useful to you in terms of providing visibility and insights into Best Practices in Japan and the JAPA Region. We also hope that these Best Practices will assist you and your Company in making further improvements and enhancements to your own policy and practices.

If you would like to find out more about how to apply these Best Practices in your own Company, or if you are interested in any other aspect of the Benchmarking Study, please contact your American Express representative.

For the full Study on the 276 companies included in the JAPA Region, please visit www.americanexpress.com/ems2012

Scan the QR code with your smartphone to be taken directly to the web page.

Copyright® 2012 American Express Company. All rights reserved.

JAPAN: americanexpress.com/japan | American Express International, Inc. Incorporated with Limited Liability in Delaware, U.S.A. ® Registered Trademark of American Express.

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