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Purchasing and Travel Card Programs NSAA/NASC Joint Middle Management Conference Kurt Albertson Director of Advisory Services April16 th 2008.

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Presentation on theme: "Purchasing and Travel Card Programs NSAA/NASC Joint Middle Management Conference Kurt Albertson Director of Advisory Services April16 th 2008."— Presentation transcript:

1 Purchasing and Travel Card Programs NSAA/NASC Joint Middle Management Conference Kurt Albertson Director of Advisory Services April16 th 2008

2 Page 2 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Statement of Confidentiality and Usage Restrictions This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group. Copyright © 2008 The Hackett Group, World-Class Defined and Enabled. All rights reserved.

3 Agenda The Hackett Group Corporate Card Programs Purchasing Card Programs Travel Card Programs Summary of Key Points

4 Page 4 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group Defines and Enables World-Class Performance The use of our intellectual capital enables our clients to implement change to affect their ability to attain and sustain world-class performance –We provide strategic advice and implementation assistance based on 4,000 benchmarks with leading global companies –Our implementation tools allow our clients to achieve results from proven best practices of world-class companies Our recommendations address both efficiency and effectiveness of world-class performance Our efforts have delivered over $90 billion in sustainable cost savings and $25 billion of improved cash flow improvement through REL, our working capital group for clients across the globe Operating in the Americas, Europe and Asia, we have served clients in 66 countries Our unique intellectual capital is unparalleled in driving successful performance improvement

5 Page 5 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Members of Hacketts Advisory Programs Gain Access to Leading Practitioners, Best Practices, Metrics and Insights To enable client change initiatives, Hackett provides continuous Advisory Services which extends Hackett intellectual property and senior advisors directly to executives and project teams to speed adoption of proven practices, compress planning cycles and mitigate risk Hacketts Advisory Programs include the following components: Access to experienced Senior Business Advisors Annual onsite Executive Briefing Best Practice Research World-Class Performance Metrics Best Practice Knowledge and Online Repository Peer-to-peer Learning Opportunities Hackett Advisory Programs include If interested in learning more about The Hackett Groups Advisory Programs please contact us at 888-8HACKETT or visit www.thehackettgroup.com Procurement Executive & Operations (includes P2P) HR Executive Finance Executive Financial Operations (includes P2P) IT Executive

6 Page 6 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Hackett Group Identifies Leading Performers by Empirically Defining both World-Class and Top Performer Status World-Class Defines leading performers within a Function Top Performer Defines leading performers within a Process Hackett Value Grid Hackett Performance Continuum ProcurementHR ITFinance Accounts PayablePayroll Credit & CollectionsPlanning/Budgeting

7 Agenda The Hackett Group Corporate Card Programs Purchasing Card Programs Travel Card Programs Summary of Key Points

8 Page 8 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Corporate Card Programs Leverage by Organizations Can Have Varying Scopes Travel Card –Travel and Entertainment expenses Fleet Card –Vehicle-related expenses Purchasing Card –All other expenditures One Card –All spend categories covered by T&E, Purchasing, and sometimes Fleet cards

9 Page 9 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Combined Card Programs for Travel and Purchasing are Used by About a Quarter of Organizations The Hackett Group T&E Benchmark, 2008 Factors to consider regarding One Cards: Would administrative/IT costs be reduced? Do employees carry multiple cards? Can your company accept some level of reallocation? Is policy compliance a significant problem? Is your company comfortable w/ tax compliance issues? Is your company willing to withhold from an employees paycheck? Does your provider have the technology to support a One Card?

10 Agenda The Hackett Group Corporate Card Programs Purchasing Card Programs Travel Card Programs Summary of Key Points

11 Page 11 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Outsourcing some of the Purchase-to-Pay process: A third-party operated system to control and pay for lower risk purchases A consolidated central bill: automatically paid once each period A card used to buy operating supplies, office purchases, and lower-dollar, non- strategic goods & services A supercharged charge card, with enhanced controls and information not found with ordinary cards What are Purchasing Cards? It is Not: A credit card (no interest or borrowing), Like cards we as consumers have used, or Without significant control It is Not: A credit card (no interest or borrowing), Like cards we as consumers have used, or Without significant control

12 Page 12 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Business Case for Purchasing Cards and Why Organizations Use Them to Support Their Processes Costs Staff time to build and administer the program Sometimes out-of-pocket fees for costs may be incurred for MIS, consulting, etc. Cash flows is often altered dependent on typical payment terms Risks More than a 3-way match but less than check requests or non-PO transactions Benefits Reduced cycle time and effort for users to acquire goods Preauthorized limits automatically enforced Reduced purchase order / invoice volumes and related staff time process costs Information to manage the supply base Cash rebates from card issuer Primary objectives of purchasing card program (percent of all participants)

13 Page 13 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Top Performing Organizations Standardize on Commodity Directed Optimized Purchase-to-Pay Transaction Flow Paths to Optimize Process Performance Purchasing Cards are typically utilized for lower risk and lower control categories of spend PO + Invoice Highly Controlled Process PO + Receipt (ERS) or 3-Way Match Highly Controlled Process PO + Receipt (ERS) or 3-Way Match Simple Process Pcard Recurring Invoice Simple Process Pcard Recurring Invoice Contract Supported Invoice Only process Contract Supported Invoice Only process High Low High Commodity RISK FACTOR CONTROL

14 Page 14 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Top Performing Organizations Leverage Purchasing Cards More Replacing a Less Efficient PO Process and Less Controlling Non-PO Process The Hackett Group Procurement Benchmark 2007 Information from Hacketts 2007 AP, Procurement, and Pcard Benchmarks and includes labor and outsourcing cost. Analysis is based on an assumption that there are 2.57 line items per Transaction

15 Page 15 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Top Performers Leverage the Purchasing Card for Only about 5 Percent of their Total Indirect Spend Purchasing card transactions as a percent of total low-dollar transactions Purchasing card spend as a percent of total indirect spend

16 Page 16 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Higher Transactional Spend Limits Help Drive a Higher Level of Spend and Improve Overall Process Efficiency By Eliminating Transactions Average Purchasing card transaction amount Purchasing card spend limit per transaction

17 Page 17 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. There is Substantial Gap in How Much it Takes to Manage Purchasing Card Programs and Those with Lower Costs will Reap More Benefits Total Cost to Process a Purchasing Card Line Item (Labor, Outsourcing, Technology, Overhead) The Hackett Group Purchasing Card Benchmark, 2007 Efficiency Opportunity For an Organization Processing 500,000 line items a year there is an opportunity of over $2 million in cost reduction from moving from 3 rd quartile to 1 st quartile

18 Page 18 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. A Significant Contributor to This Efficiency Gap is a Difference in Productivity and Labor Costs Which Make up 79% of Total Cost Compensation per FTE (Fully Loaded) Transactions per Card Administration FTE

19 Page 19 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Categories Which Require a More Formal Purchasing Process are Not Normally Good Candidates for Purchasing Cards The Hackett Group 2007 Purchasing Card Benchmark: Percent of Companies

20 Page 20 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Sponsorship for Purchasing Card Programs Varies Significantly As Does the Targeted Cardholder

21 Page 21 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. There are a Number of Key Controls for a Purchasing Card Program and These are Supported by Policy, Visibility and Enforcement Assignment of cards Per transaction and statement limits Category/merchant blocking Manager review and approval of statement and receipts Verification of statement approval and receipt submission Audits based on flags and sampling Card retirement process Well Defined and Communicated Policy System Functionality to Provide Visibility Consistent Enforcement

22 Page 22 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. While Fraud Involving Purchasing Cards are Highly Publicized, Occurrences of Fraudulent Activity are Normally Low Percent of audited statement that contain errors or omissions Percent of purchasing card statement that are audited

23 Page 23 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Organizations Should Look at a Blend of Methods for Selecting Statements to Audits Based on Certain Flags Percent of transactions that require no adjustment to account code Method of selecting statements for audit

24 Agenda The Hackett Group Corporate Card Programs Purchasing Card Programs Travel Card Programs Summary of Key Points

25 Page 25 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. There are Multiple Types of Programs to Consider, But Best Practice is an Individual Bill/ Company Pay Based on Expense Report Benefits of Individual Bill/ Company Pay Based on Expense Report Encourages timely submission of expense reports Travel is not out of pocket for expenses Only charges that are claimed on expense report are reimbursed

26 Page 26 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Most Organization Recognize the Importance of a Well Defined Travel Policy and Expense Reimbursement Process to Controlling Expenses

27 Page 27 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Travel Spend per Air Mile and Travel Spend per $1000 Revenue are High Level Metrics Often Tracked by Organizations Travel spend per air mile Travel spend per $1000 revenue

28 Page 28 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. We See that First Quartile Organizations are Significantly More Efficient at Processing Expense Reports than Others $5.01 $8.34 $13.46 Cost to process an expense reportExpense reports per processing FTE 56% 28% 16%

29 Page 29 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. An Efficient Expense Reimbursement Process Should Not Require Significant Investment from Travelers Estimated number of minutes to create and submit an expense report (domestic trip) Receipt Requirement Threshold

30 Page 30 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Majority of Organizations have Migrated to an Electronic Reservation System although there is an Opportunity to better Leverage Web-based Applications Hackett T&E Process Benchmark, September 2007

31 Page 31 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Organizations are Rapidly Moving Towards a Paperless Process which Drives Down Cost and Increases Productivity Hackett T&E Process Benchmark, September 2007 Paper versus electronic processes

32 Page 32 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. The Travel Booking and Expense Report Creation Processes have Traditionally Been Managed as Two Distinct Processes Travel Booking Process Expense Report Process Travel Search and Booking Travel Authorization Fulfillment by Travel Agency Expense Report Creation/ Submission Expense Report Approval/ Audit Expense Reimbursement Reporting An Emerging Practice is to Manage as and End-to-End Process

33 Page 33 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Organizations are Leveraging Imaging and Workflow for Improving the Efficiency of the Process and Moving towards Electronic Receipts in Lieu of Paper Hackett T&E Process Benchmark, September 2007

34 Page 34 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Typically, Organizations Should Target Full Audits for Less than 10 Percent of Their Total Expense Reports Percentage expense reports audited

35 Page 35 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. A less than 10 Percent Audit Rate is Predicated on a Controlled Process with Minimal Errors Percent of audited expense reports that contain any type of error Percent of expense reports actually returned to originator

36 Agenda The Hackett Group Corporate Card Programs Purchasing Card Programs Travel Card Programs Summary of Key Points

37 Page 37 Document Name – Click on top-level Slide Master to change © 2007 The Hackett Group. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. Overall Observations One Card solutions can create efficiencies for some organizations Purchasing Card programs are normally aimed at streamlining the end-to-end purchasing and payables process and creating rebates A well defined audit program should aim at less than 10 percent of statements fully audited Integration of the travel booking and expense report creation process is an emerging practice Managing travel spend should be a key objective of the T&E process Automation of the T&E process is the norm today The use of electronic statements in lieu of paper receipts is an emerging practice


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