The business traveler may be back in vogue, but the fat expense account is as yesterday as Pan Am and the three-martini lunch. Consider Covansys Corp. Among the Farmington Hills (Mich.) tech services company's 7,300 employees are many frequent-flyer all-stars, who rack up almost $15 million in travel and entertainment expenses a year. No surprise, India is a popular destination: Covansys' consultants go on some 100 trips every quarter. To make the 22-hour one-way trip less of "an unpleasant experience," Timothy Hughes, vice-president for financial planning, lets many of his consultants fly business class. "Trust me, you don't want to be in the back of the plane in coach for that long," he says.
The deluxe travel allowances, however, end there. Hughes watches the T&E budget like Ebenezer with an eyeshade. He has a small group of auditors, in India no less, who pore over both companywide expense reports and upcoming itineraries every night. So by the time Hughes is drinking his first cup of coffee in the morning, he can check for unusual or excessive spending. On Apr. 13, for example, the report picked up a $9,000 booking for a round-trip ticket from Chicago to Bangalore. "We intercepted and paid half that price," says Hughes, adding: And "don't try to book something in Hawaii -- that's another red flag. We don't do business there."
Across the country, numbers crunchers see a promising and largely untapped area for cost control: your T&E. Indeed, the tens of billions rung up on T&E cards represent the second- or third-largest category of corporate discretionary spending. That's why corporate auditors are seizing on new technology to scour for problems in ways they never could before, putting T&E under 24/7 scrutiny.
In the analog days, it was easy to game the system. Employees padded accounts by filing bogus charges, extending business trips for vacations, and springing for family members. One old standby: filing reimbursement requests for fictional expenses just under the amount for which receipts would be required. It could take six months or even more before the pile of paperwork landed on an accountant's desk for processing -- a nightmare for tracking.
Today, old-line credit-card companies and online upstarts have revolutionized the process with an array of Web-based tools and electronic filing systems. Companies can curb costs even before employees get on a plane or make that unauthorized stay at the Ritz Paris. "The key is to control the expenses at the front end and constantly monitor it, so you know what you are going to pay for," says Rajeev Singh, president of Concur Technologies Inc., an online corporate travel and T&E management service based in Redmond, Wash.
Paying a penalty
One line of defense is new information provided by credit-card companies. American Express Co. now spits out reports that highlight, for instance, the gap between company-approved compact car rentals (what the traveler reserved) and prohibited upgrades to luxury cars (what the traveler actually drove and paid for). It can also aggregate what items were paid for in cash and how often receipts fall under the company's daily cash threshold. MasterCard totals commercial transactions daily and shoots the data directly to companies. These systems also help companies negotiate bulk discounts with suppliers.
Not surprisingly, some employees need a taste of the stick. Most companies now make workers pay out of pocket for egregious and unapproved deviations, such as the difference between a first-class and discounted flight. E-mail alerts about overdue expense reports are copied to superiors if unheeded.
The ultimate control may be to base expenses on employee behavior. Last year, Morgan Stanley boosted its T&E budget to help its brokers schmooze wealthy clients. The catch? Brokers must qualify for the perk. When they bring in $250,000 to $400,000 in new business, they get $1,000 to help foot the bill. Welcome to the era of performance-based T&E.