regardless of the particular end user making the purchase. The two most common examples of virtual accounts are ghost accounts and department cards. Ghost accounts are master accounts with no associated physical card; the account number is typically maintained with a single vendor. A department card is a physical card that is assigned to a specific group within a company. In both cases, purchases are charged to an individual commercial card account number, that can only be accessed by designated purchasers.
Best practice companies use virtual accounts as part of their overall T&E card strategy. For example, companies set-up ghost accounts with their contracted travel agents for T&E spend, most commonly airline spend, and they use department cards to cover T&E spend for infrequent travelers or non-employees, e.g., contractors or recruits.
The advantages of T&E virtual accounts include:
• Convenience for those who have not yet received a T&E card or do not meet the company’s guidelines to receive a T&E card, such as:
— New hires/recent college graduates — Potential hires
— Contractors
— Foreign employees/new immigrants
— Employees who are infrequent travelers based on annual T&E spend or number of trips per year
• Reduction of costs associated with individual employee reimbursement of travel spend
• Elimination of employee burden to cover travel expenditures during the period between when they are incurred and reimbursed
• Reduction of late payments to the vendor or Issuer
Best practice companies receive and pay virtual account bills centrally. They establish controls to validate purchases or reconcile card statements through department/employee verification of their expenses. These companies also mandate the use of virtual accounts and ensure that travelers and the travel agency understand the company’s travel and expense policies, preferred suppliers, and negotiated rates.
Best practice companies use and consolidate the virtual account card data with other T&E data (e.g. from the travel agency, hotels, car rental agencies, and other internal reporting systems) in order to get a complete view of spend for improved reporting and negotiating power with vendors.
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Card Program
Maximize use of T&E/Visa Commercial One card
virtual accounts
Benefit Obtained: User Satisfaction
Amount of Benefit:High
Rationale:Eases both the order placement and payment processes; increases vendor satisfaction through timeliness of payments; and decreases employee debt burden
Maximize use of T&E/Visa Commercial One card virtual accounts
continued
IMPLEMENTATION ACTION STEPS: Department Cards
1.Evaluate current T&E spend and T&E buyer profiles
2.Identify groups of T&E purchasers to which to assign department cards (e.g. by department, function, or related activities, etc.)
3.Use Issuer experience to implement and manage T&E department cards
4.Transition current purchasers/cardholders to T&E department cards
5.Determine data requirements and communicate to vendor(s)
6.Finalize requirements for reconciliation purposes and communicate to purchasers/cardholders
Ghost Accounts
1.Evaluate current T&E spend and identify categories to target for ghost accounts
2.Use Issuer experience to implement and manage T&E ghost accounts at vendor(s)
3.Set-up current purchasers/ cardholders on T&E ghost accounts at vendor(s)
4.Determine data requirements and communicate to vendor(s)
5.Finalize requirements for
Benefit Obtained: Cost Savings/ Process Efficiencies
Amount of Benefit:Medium
Rationale:Use of ghost accounts reduces time for reconciliation and settlement of transactions
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit:Medium
Rationale:Maintaining a single T&E expense on a ghost account allows for improved tracking of spend with the supplier
Benefit Obtained: Control
Amount of Benefit:High
Rationale:Use of back-end audit maintains the controls on these purchases; improved controls can be achieved through reporting on the card account (e.g., companies can review monthly charges for variance and month-to-month variance); enables greater management of departmental or travel spend
IMPLEMENTATION SUCCESSES and TRENDS
• In addition to issuing individual T&E cards for frequent travelers, one company has set up 85 virtual travel accounts with its contracted travel agent for each of its departments. These virtual travel accounts pay for the air travel of each department’s infrequent travelers, including employees with less than $500/year of T&E expenses. By setting up these virtual accounts, the company is able to control T&E expenses centrally and manage the T&E card program more effectively by concentrating on high-spend users.
• Two mid-market companies have issued T&E cards for non-air travel and require all air travel to be booked through the company’s virtual travel account with its contracted travel agent. These companies have benefited from central control, real-time access to travel data, and end-user satisfaction. End users are relieved of the debt burden of air travel expenses.
Best
Practice
7
Leading companies have a centrally administered corporate-wide travel and entertainment vendor management program to guide selection and ongoing
management of vendors. A vendor management program is often a cornerstone of a Strategic Sourcing initiative, which focuses on supplier, base rationalization, and discounted rate achievement.
Best practice travel vendor management programs consist of the following components:
• Establish travel vendor management program objectives:
— Strategic (e.g., improving services to traveling employees through advanced reporting and reconciliation tools)
— Financial (e.g., percent of spend under contract, annual spend savings per year)
• Develop contract term guidelines (e.g., contract length, volume guarantees, and how to optimize monitoring efforts — analyze current travel, city pairs, hotels — consider negotiating volume guarantees when switching from one provider to another)
• Establish preferred vendor criteria:
— Service level (e.g., 24/7 availability, emergency assistance, on-call consultation)
— Fully loaded cost of doing business with a vendor (e.g., freight, taxes) — Vendor automation (e.g., ticketing, invoicing, reporting)
— Collaboration expectations (e.g., fare evaluation, hotel service and compara- tive cost assessments, dining recommendations, corporate event planning) • Develop vendor scorecards and targets for travel suppliers — including travel
agency — and implement vendor performance monitoring
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Sourcing
Optimize number of suppliers by selecting
and monitoring vendors through a formal
vendor management program
Best
Practice
8
Travel and
Entertainment
Benefit Obtained: User Satisfaction
Amount of Benefit:Medium
Rationale:One objective of vendor management is to obtain feedback from end users on vendor service expectations and then monitor and report on user satisfaction with preferred vendors’ performance
and monitoring vendors through a formal
vendor management program
continued
IMPLEMENTATION ACTION STEPS: 1.Analyze traveler
preferences, company travel trends, common geographic destinations, company travel policies, and projected travel budgets to prepare baseline requirements
2.Develop and present travel vendor management program charter (company objectives, scope, expected benefits, and work plan) to senior executives to obtain program buy-in
3.Create cross-functional team of key stakeholders to develop travel vendor management program
4.Develop change management program that introduces and provides assistance to internal participants
5.Perform ongoing spend and supplier analysis
6.Continue to evaluate vendor management program objectives and monitor existing preferred vendors
Benefit Obtained: Cost Savings/ Process Efficiencies
Amount of Benefit:High
Rationale:Enables supplier rationalization that can increase supplier discounts and reduce cost of “last-minute” booking and reservations
MARKET APPLICABILITY: All Companies
Benefit Obtained: Vendor Management
Amount of Benefit:High
Rationale:Corporate-wide, centrally designed vendor management provides a structure for measuring and monitoring vendor performance
Benefit Obtained: Control
Amount of Benefit:Medium
Rationale:Optimizes travel costs and selection of preferred vendors and facilitates management of vendor performance
IMPLEMENTATION SUCCESSES and TRENDS
• Survey respondents were able to achieve an average airfare discount of 17 percent, with a reported range of 5 to 29 percent.
• Best practice companies track and maintain comprehensive data for travel vendor negotiations. Study participants reported the ability to achieve significant discounts by tracking nights stayed at hotels and city pairs for air travel. These companies used this data to guarantee volume and to monitor status of volume throughout the year.
Best
Practice
8
Travel and
Entertainment
Over the last few years, online procurement has increased significantly, especially with respect to travel-related purchases. In 2000, U.S. online consumers were believed to have purchased $12.2 billion of leisure travel over the Internet (68 percent of which was airline tickets). By 2004, Forrester Research predicts that $28.9 billion will be spent online for travel. As employees and companies have become more comfortable with using the Internet for booking travel, many companies are moving to online travel booking of business travel as a company policy.
Best practice companies are turning to Web-based travel booking tools, applications that companies implement on an intranet site or through a travel agency (e.g., GetThere/ Sabre, Apollo). Implementation of an in-house, Web-based travel reservation tool can improve a company’s ability to balance and manage business travel requirements with the traveler’s personal preferences. Web-based application selection criteria should include:
• Reporting capabilities • Ease of integration • Ease of use
The software can be modified based on company policy. Rules are built into the tool that can restrict users to specific vendors or allow users to evaluate vendor offerings that benefit budget and/or travel schedule. As reservations are completed, Web-based applications can require the completion of reason codes to explain an expenditure that is outside of company policy.
Benefits of implementing an in-house, Web-based booking tool include: • Provides better positioning to discontinue time-based contracts (e.g., annual
travel management service contracts) and transition to transaction-based contracts with travel agencies
• Enables user self-service/user empowerment • Improves use of preferred travel vendors • Reduces cost of service and maintenance
• Enables travel agents to provide high value-added services such as complex travel and travel modifications
• Improves access to travel and entertainment data
By 2004, Forrester Research predicts that $28.9 billion will be spent online for travel.11
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11Forrester Research.Travel Data Overview: On-Line Leisure Travel Soars Even Higher. August, 2001.
Order Placement