The Un-CFO

As if there were springs in his Edward Green black leather split toe shoes, the Armani Black Suit hurriedly positioned himself in the northern most head seat, the one with the invisible CEO/CFO initials inscribed on the back like a director's chair, in the Executive Boardroom on the 34^th floor in lower Manhattan.  His Blackberry, permanently attached to his right hand, provided instant updates and irritating interruptions. 

He declared, “Our T&E expenses are under control; our meetings have been cut so I don’t believe there is a need for consulting services.” 

The Wall Street Journal recently reported that the conglomerate’s credit rating was downgraded by S&P, invoices were in arrears, and leaders were indifferent to questionable ethical behaviors.  One executive allegedly accepted a family vacation from a major hotel chain in exchange for sourcing a large company meeting at their venue.  Further, complimentary golf, spa and other free amenities were allegedly requested by organizers and leaders. In hotel hearsay, the company recently held numerous lavish events at 5-star properties with budget thresholds ignored.  The company’s board of directors demanded an immediate investigative cost reduction initiative for all direct and indirect spend categories to uncover expense anomalies and unethical behaviors. 

“We monitor our T&E spend carefully,” the CFO announced, “there is no reason for us to presume that travel or meeting spend is excessive. Besides, we cut almost all travel and meetings in 2009.” 

Travel and Entertainment expenses (“T&E”) are the second or third largest indirect expense in most organizations, yet many leaders overlook this compilation of costs because it is partitioned in numerous general ledger codes and over forty standard industrial and merchant category codes.  Like a skilled hog searching for truffles, it takes tenured professionals to detect the assorted charges through accounts payable, credit cards and expense management systems.  Often, covert organizers conceal and divide the costs across multiple budget holders to avoid exposure. The leaders have a legal and moral financial responsibility to their shareholders to reduce these and other indirect costs through process improvement and supply chain management. Yet, many fail to manage T&E expenses because leaders are:

1. unaware of the T&E spend impact;
2. uneducated as to how to control T&E;
3. unauthorized as T&E may be out of their control; or
4. uninterested due to a sense of entitlement of travel, rewards and amenities.

”We have a moratorium on new IT initiatives and do not believe that an expense management or meeting management technology is necessary in this environment” the CFO admits.  

According to A.T. Kearney, non-automated expense claims cost $42.98, which is 50 percent more than the $21.86 for a fully automated expense claim.  With 1,000 travelers in a month, the savings could accumulate up to $21K in processing costs.  Moreover, a meeting management technology would provide visibility into the actual quantity and costs of large and small meetings while improving the overall process. 

Squirming in the mahogany executive chair and fidgeting with his perfectly straight tie, he continued “I’m confident that there is minimal fraud in our organization, therefore, it isn’t necessary to search or track something that really doesn’t exist.”  

Expense reimbursement fraud is one of the nine subcategories of asset misappropriation fraud.  In a study of 959 occupational fraud cases conducted by the Association of Fraud Examiners in 2008, 13.2% were expense related with an average loss of $25K. 

Interjecting his opinion over sound leading practices, the CFO regressed, “Our organization does not require T&E consulting. Thank you for your time today.” 

As a dichotomy between fact and the CFO’s perception, the most recent annual report highlights a higher than projected Selling, General and Administrative (“SG&A”) expense, of which T&E expenses are a part, compared to a lower than forecasted revenue on their income statement. 

 

Debi Scholar, GLP, CMM, CMP, CTE, CTT

Thank you for visiting the T&E Plus Blog on expense management, travel management, business meetings, events, incentives, strategic meetings management, entertainment, virtual meetings, tickets, hotels, airlines, ground transportation, T&E policy, plus more...

Debi has the following designations:

· Wharton Aresty Executive Education/National Business Travel Association (NBTA) Global Leadership Professional (GLP)

· Meeting Professionals International Certificate in Meetings Management (CMM)

· Convention Industry Council Certified Meeting Professional (CMP)

· NBTA Corporate Travel Expert (CTE)

· Six Sigma Green Belt

· Chauncey Certified Technical Trainer (CTT)

Follow me on Twitter ...http://www.twitter.com/debischolar  and on LinkedIN at http://www.linkedin.com/in/dscholar

The information contained in this Web site is provided for informational purposes only, and should not be construed as legal advice on any matter. This information does not represent the opinions of any other party other than the author.  The links to other publicly available Web sites are provided as a convenience; we make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information provided.