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Travel and expense trends point to uneven recovery

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If you want an early indicator of spending intentions, where better to look than at the patterns emerging from travel and expense management solutions?

26th Jan 2022
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SAP’s recent interim results hinted at increasing demand from larger organisations for cloud accounting solutions. Within the German ERP software developer’s portfolio sits SAP Concur, an expenses management solution that has been a weather vane for how the economic winds have blown in recent years.

On the spending side, SAP Concur European managing director for small business Ryan Demaray acknowledged the impact of Covid-19 in early 2020, when “the economy froze as people went home”. Sales within the Concur division dropped by 14% for the year.

As business travel shut down, spending on flights was highly impacted, Demaray explained. “It’s still very disrupted in today’s landscape, but we see it beginning to return and the customer base saying that they’d like to get back out there,” he said.

Travel and expense behaviours varied between sectors. For example, oil and gas have always relied on face to face meetings in boardrooms and out in the field. “Taking that industry and putting that traveller in an online meeting is not going to happen,” Demaray said.

“But do tech companies need to sit in front of clients to prospect the value of their solutions? Probably not.”

Business invoicing rebounds

As well as travel expenses, SAP Concur software also processes other expense claims and business-to-business invoice approvals. As infection levels fluctuated during 2021, people began to file more expense claims and pay more vendor invoices, according to Demaray.

“As people began to move about and conduct their jobs again, we saw vendor invoice payments recovering faster than other areas,” he noted.

Looking at the outlook for the first half of 2022, he commented: “Travel isn’t going to be the story. It’s going to be much slower there. Covid is still the focal point, but conversations are more focused on the disruptions that Covid brought: hybrid working, supply chain issues and inflation. Customers are evaluating these factors.”

Across many industries, supply chain problems are putting pressure on suppliers to meet customer demands, which can show up in outgoings. “If existing vendors are disrupted, employees are going outside the usual channels and creating new types of spend. [Finance managers] can’t see the money leaving the hands of employees because they’ve broken away from typical situations,” Demaray said.

Hybrid spending

Demaray expanded on the idea of “hybrid spend” management set out in SAP Concur’s predictions for 2022 – another area where software usage patterns are confirming broader industry trends.

“Hybrid work creates situations where employees are in the office on some days and not on others,” he said.

While creating the infrastructure to support these flexible work patterns, companies also needed to introduce new spending controls. “Hybrid means employees are spending money at home and the office, so you need solutions that avoid disruption, but with policies in place to help employees spend money the way you want,” he said.

For example, if a company wants employees to meet outside the office, it might allow a higher threshold for claims for meetings in coffee shops. But in some cases, the employer might want them to take advantage of its infrastructure and facilities and tighten the limits on entertainment spending.

As a purveyor of software that can produce highly detailed reports on spending, Demaray was nonetheless reluctant to cite concrete figures for his division and its customers for regulatory reasons. But he did offer an example drawn from experience within SAP.

“SAP has pledged to be flexible. We believe employees should be given the opportunity to choose remote or office work. We’re not going to force people back to the office. With that come policies: if you decide to become a remote worker and give up office space, you can no longer expense trips into the office and can’t stay in a hotel without approval. We’ll allocate expenses for internet and home/office fees instead,” he said.

“We put policies in place that allows our finance department to maintain tight margin management, while still retaining employees and providing the necessary resources that don’t disrupt the business.”

In terms of his own business model, Demaray said SAP Concur was seeing an upsurge in both software usage from existing customers and enquiries from new prospects.

To test SAP Concur’s hypothesis, AccountingWEB contacted other expense management software providers. At mileage app specialist Tripcatcher, co-founder Ken Whipday echoed the rollercoaster ride his sector had been on since early 2020. He too had begun to see signups increase significantly in the new year. While not tracking gross mileage figures through the app, “It would be an interesting proxy for recovery in business travel,” he said.

Signs of software growth

AccountingWEB’s own Insight research project shows positive indications for data and expense management software providers. During the second half of 2021, 25% of small, early adopter businesses were using such apps – slightly ahead of medium and larger firms. But 18% of larger business respondents said they were planning to invest in the technology – more than twice the level within smaller firms.

Our latest round of research looked more closely at which apps were helping accounting practices to deliver new services and revenue lines and found that data and expense management was one of the most profitable tools, with 12% of respondents citing new service lines and revenue from the use of these tools. The figure increased to 18% among larger firms.

Comments from Ryan Demaray about SAP Concur’s customer base echo the potential for growth in 2022: “We’ve been talking to businesses that have been planning, plotting and keeping the gunpowder dry for the recovery. We can see that in the way GDP was up in November. If you’re going to deploy new strategies or acquire a business, cash is a requirement. You need to be in a strong financial position to use debt instruments to make these big leaps.”

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