B2B Payments

What’s Wrong With Business Travel Expense Management

Traveling A Tech Road for Better T&E Management

Business travel is on the rise and has been for the last five years.  According to the Global Business Travel Association, by 2022, business travel spending is projected to reach $1.7 trillion.

That’s good news, PEX CEO Toffer Grant told Karen Webster, since it means that in a highly digital and virtual world, there is still an interest on the part of businesses of all sizes in putting someone on a flight to meet a client or a prospective client in person.

Provided the price is right and expenses can be kept in check.

That’s where things can get complicated.

Travel, Grant noted, is still filled with the frictions that cut into the best-laid travel plans and can blow the best-planned travel budgets out of the water. And with more frequency of travel among workers, Grant said, there is just more to manage overall, and more opportunities for things to go wrong.

Enterprise-level firms have well-developed processes, expense managers and card-based solutions to manage these issues. But most companies don’t have that level of process or scrutiny in place. What mostly happens is employees use their personal cards and are reimbursed later — an inefficient way to manage that workflow that is rife with ways to make the process opaque and expensive.

It's a process, Grant said, that needs to go.

“The business of the future is looking at this stuff and saying we don’t want this lack of visibility, we don’t want people taking the time they are taking to handle these bookings when we know there are more efficient way to complete that task from a budgeting standpoint.”

The challenge for PEX, Grant said, is finding a way to offer them that more efficient way to handle the problem.

Reorienting The Travel Workflow

The standard process, Grant noted, is that the employee pays expenses themselves and gets reimbursed later.  In the very best case scenario, he said, the employee is maybe getting to hack some extra credit card points that way. But, he noted, in a world where most people live paycheck to paycheck, asking workers to either eat up a portion of their credit line or put their own checking account funds on the line with a debit card is actually creating an imposition on the employee.

And, he noted, at the same time it is creating risk for the businesses, because it essentially makes them turn their employee loose as a travel booking free agent while being on the hook for reimbursing the cost later.  So if the employee books a flight, even though they could have booked the same flight later in the day for half the price, the employer is still on the hook for the overpriced ticket because the transaction is done.

The typical travel card route, however, wasn’t necessarily appealing for SMBs either — because that felt risky as well, by putting themselves directly on the hook for these expenses. Plus, getting access to those kinds of card products isn’t always a guarantee for SMBs.

PEX’s solution, Grant told Webster, is to offer a card product with a lot of built-in controls for travel managers and administrators all really focused on essentially changing the order of typical business travel payments.

In this model, he noted, the employee gets clearance to spend on a travel payment — and once that is cleared, a funds access is unlocked on the card. How those funds go on, he noted, is customizable — the employee might get access to a specific preordained amount past which that they need to directly message their supervisor or admin for more.  They might be given access to unlimited spending power during a certain duration of time.

“There is a risk management element — but instead of confronting reimbursement as something that now must be done on a payment that has already happened, the decision point is moved back to before the transaction,” Grant noted.

Moving The Field Forward

There is a hesitation among businesses to move forward and away from the older, reimbursement-based systems that often involved cutting and mailing checks to employees, Grant noted, because small business owners are busy.

“It’s a matter of making time and thinking about how to adopt a new system and what the impact is going to be when people come to start using it,” he said.

But, he said, life happens — things come up and those planning sessions get pushed to the wayside over and over again, until one day they can’t be.  Eventually, he notes, they hit that tipping point around payments and realize they are losing money, losing time and wasting employee efficiency on something that there is a better solution for.

“And what they realize, what we hear over and over again from clients is them asking why they didn’t do this sooner. They realize by touching on this one expense management issue they can touch all the other things that are part and parcel to it.”

Which means, Grant said, that the road map for PEX going forward is how can the company make it easier to hit more parts of the workflow and make it part of its platform. Payments, he noted, have shifted from being the end of particular process to being centralized — and small businesses have gone from being behind the pack to being really at the cutting edge of streamlining their process.

“I don’t think small business, and in particular the really small ones that have five, ten or one hundred employees, are the Luddites out there, they aren’t the slow adopters. They are moving as quickly as consumers when it comes to adopting.”




About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.