Corporate America seems to have let itself get out of hand in the omnichannel commerce and procurement space. At least, that’s what Conferma could argue, considering its most recent research on corporate expense management.
The virtual card FinTech company commissioned a study this month to explore how companies are managing their expense policies and procedures. The verdict wasn’t so good: Large corporations are losing more than $1 million every year — each.
Collectively, poorly organized and executed expense management processes yield $33 billion in losses for large organizations in the U.S., concluded Conferma.
“What we are seeing here is billions of dollars being lost thanks to a confused landscape of multiple employees using multiple ways in business to claim expenses,” said Conferma CEO Simon Barker in a statement announcing the research.
Barker elaborated on the study with PYMNTS, calling the current corporate expense management ecosystem “chaotic.”
“If you work in a large corporation, the expense processes are often fragmented,” the executive explained.
He added that, in all honesty, he assumed the losses would have been much higher. That’s because the research also uncovered just how confusing businesses’ expensing procedures are.
The vast majority (90 percent) of respondents said that their reconciliation process is challenged because corporate cards are used by more than one employee.
An average of 328 employees at an organization are allowed to make a purchase for their business, meaning expenses are coming in at a high volume, adding to the confusion.
These businesses know that they have a problem, too. According to Conferma, 66 percent of CFOs surveyed said they acknowledge their current way of doing things takes too much time; 58 percent said it costs too much money.
Corporate America’s expenses, Barker noted, are so vast and huge that, with omnichannel procurement and commerce, the complication of the expensing process gets compounded.
“As we move forward in this sort of Web-based digital age, the opportunities to procure on behalf of the company are getting bigger and bigger,” the executive stated. “It’s more difficult for corporations to control.”
Barker also pointed to today’s CFO becoming less able to ignore the problem.
“There is definitively a desire for CFOs to bring things under control,” Barker said, “where they can see what’s going on. More and more opportunities to buy the same thing in different ways is fundamentally a growing problem that corporate America is having to deal with.”
The Struggle To Change
It’s become almost a mantra for the corporate world that often struggles to adopt more sophisticated financial technologies. “The larger organization you are, the more difficult it is to adapt to change,” Barker noted in explaining why these businesses haven’t been able to improve their expense management procedures.
It’s not just the corporates that are struggling, either. Developers of ERP and accounting systems, said the executive, are also challenged to keep up with ways to support omnichannel procurement and employee spend. Plus, banks — perhaps the most important player in helping companies integrate more efficient payment methods — are themselves challenged to understand innovations.
Barker explained that, when Conferma first launched its virtual card services about a decade ago, he assumed the quality of the product would sell itself. Today, he looks at it from a different understanding.
“There’s no use having a great solution if no one understands it,” he said of the virtual card. Education largely started with the banks, he added.
“The big part that we have to educate in the first place is the banks,” said Barker. “There were small pockets of people within our large banking partners that understood card virtualization and what it could do, but the vast majority of the card-issuing world really didn’t get it. They didn’t understand the change from reliance on issuing plastic as the methodology to grow and drive efficiency from the bank, to virtualized, mobile and tokenized solutions.”
The good news, he said, is that Conferma’s experience — and its latest research — suggest education is spreading in the corporate and financial services spaces.
Analysis found that, of the respondents that are familiar with virtual cards, nearly half are already using them. More than 90 percent said mobile payments would likely help their company better track employee spend, and 40 percent agree that virtual card numbers would provide solutions to some of their existing expense management problems.
According to Barker, if Conferma were to have conducted this research years ago, these numbers probably wouldn’t have been so high.
“This technology is tested, and people are prepared to rely on it,” he said. “Banks are prepared to promote it to their customer. The pace of change is accelerating.”
Barker said that mobile payments in the corporate world are largely driven by consumer adoption of such technologies as mobile wallets. “These consumer-based apps have become more widespread,” he explained. “That’s definitely where the consumer experience is going to drive corporate behavior.”
When it comes to virtual cards, however, the more corporate-centric payment tool will depend on continuing education and building awareness to gain more traction in the enterprise, Barker claimed.
It’s only been in the last 18 months, he said, that banks have begun to promote virtual cards on a widespread level and that corporates have begun to pay attention to the solution.
As Conferma’s study revealed, however, there is still a far path to travel for corporations to get a grip on that “chaotic” employee spend and expense management.
“We live in a multichannel age now,” Barker stated, “and that really doesn’t help with control within the corporation.”