Financial Insights: Essential KPIs for Strategic Spend Analysis

In corporate travel management, balancing budgets while ensuring employee satisfaction is no small feat. With expenses like airfare, accommodations, and meals steadily increasing, the challenge to optimize costs grows ever more critical.

And on top of controlling costs, travel managers are tasked with keeping employees satisfied while ensuring they comply with company policies. This is where financial Key Performance Indicators (KPIs) come into play, empowering travel managers to make informed decisions and steer towards organizational objectives through data-driven insights.

What are Financial KPIs?

Financial KPIs are not just numbers; they are the pulse of your organization's financial health, serving as benchmarks to uncover spend patterns, process efficiency, compliance, and cost savings. While companies track many financial KPIs across the enterprise, we’re focusing on the best financial KPIs to track for effective spend analysis.

What Is a KPI in Business: Metrics vs. KPIs

There’s a difference between metrics and KPIs. Metrics measure performance. KPIs, on the other hand, track progress toward specific goals, focusing on the most important metrics that align with strategic priorities to optimize spend.

Benefits of Using KPIs Travel managers can use financial KPIs to see where, and how T&E dollars are being spent. With granular reporting, this data can be instrumental in achieving goals. Butr, this requires accurate expense tracking across the organizations. When your data accurately reflects reality, you can utilize KPIs for significant benefits, including:

• Increased visibility: KPIs provide a clear picture of where and how T&E dollars are being spent, enabling travel managers to identify top areas of spend and prioritize cost-saving initiatives.
• Cost control and savings: Monitoring spend categories, supplier performance, and traveler behavior can uncover opportunities for cost savings and help travel managers align T&E spending with organizational goals.
• Enhanced process efficiency: KPIs related to process cycle times and compliance rates help identify bottlenecks and areas for process optimization, driving operational efficiency.
• Informed decision-making: By analyzing KPI data, travel managers can make informed decisions about travel policies, preferred suppliers, and negotiating strategies for more effective spend management.
• Benchmarking and continuous improvement: Over time, travel managers can benchmark performance, measure the impact of initiatives, and routinely refine their T&E strategies.

Essential KPIs for Spend Analysis

While specific KPIs may vary depending on your needs and goals, the following are fundamental for comprehensive spend analysis:

• Total spend: Offering a bird's-eye view of overall T&E expenditure, facilitating budget tracking and trend identification.
• Category spend breakdown: Dissecting spending across key categories like airfare, lodging, and meals to identify areas of scrutiny.
• Supplier performance: Evaluating suppliers based on pricing, service quality, and compliance to inform future partnerships.
• Traveler behavior analysis: Optimizing policies and identifying efficiency opportunities through traveler booking patterns.
• Cost per trip/transaction: Benchmarking spending to pinpoint potential cost-saving measures.
• Compliance rate: Monitoring adherence to policies to mitigate maverick spending and fraud risks.
• Report cycle time: Streamlining processing for cost and time efficiency.
• Return on investment (ROI): Quantifying the impact of T&E initiatives to justify investments and ensure alignment with organizational goals.

Total Spend

Total spend is the overall T&E expenditure for the organization and provides a high-level view of the total financial commitment to travel and expenses. This helps track spending against budgets.

Monitoring total T&E spend over time can help identify trends and potential areas for cost control or optimization.

Category Spend Breakdown

Beyond the total spend, it’s important to breakdown spending by categories, such as:

• Airfare
• Lodging
• Ground transportation
• Meals

This helps uncover areas of high expenditure or rising costs that may require a closer look. For example, rising hotel prices can trigger an evaluation of contract rates to negotiate potential reductions. Increases in airfare totals justify reviewing policies on preferred airlines or advance booking.

Supplier Performance

Financial KPIs can also be used to track supplier performance based on factors including:

• Pricing
• Service quality
• Compliance with negotiated agreements

This information helps inform future contract negotiations and make decisions about preferred providers.

Traveler Behavior Analysis

By analyzing traveler behavior patterns, such as booking behavior, preferred suppliers, and travel frequency, travel managers can optimize travel policies and identify opportunities for efficiency improvements. For example, frequently used providers may allow for better contract rates. Consolidating travel with preferred providers may also reduce expenses.

Cost per Trip/Transaction

By calculating the average cost of trips or transactions, you can benchmark spending and identify areas for potential cost reduction. Comparing the cost per trip or transaction across

locations, departments, or employee groups may also uncover discrepancies, leading to targeted strategies to improve outcomes.

Compliance Rate

Out-of-compliance spending generally increases costs. Travel managers need to track this KPI to ensure employees are complying with policies to control costs and maintain consistency. Maverick spend — spending outside company policies and preferences — can add up quickly, bypassing lower negotiated rates.

Monitoring compliance rates also help identify areas where policies may need updating or employees need additional training. Noncompliant spending may also be an indicator of potential expense report fraud, such as:

• Mischaracterized expense fraud
• Falsified claim expense fraud
• Inflated claims expense fraud
• Multiple claim expense fraud

Looking for compliance patterns can help uncover fraud or wasted spending. For example, despite policies on booking travel in advance to get better rates, employees may wait to book travel after economy seats are gone, achieving an upgrade to premium or business class and costing the company more than necessary.

Exception Rates

How many expense reports were submitted with complete and accurate documentation? Making sure that documentation requirements are met makes for more efficient processing, minimal errors, and improved audit readiness.

High exception rates can indicate that more training is needed, or policies need adjustment.

Report Cycle Time

The sooner you can process T&E reports, the more efficient you are. When you optimize your cycle times, you can reduce administrative costs, minimize financial exposure, and improve employee satisfaction.

Return on Investment (ROI)

Tracking the ROI of T&E initiatives shows progress. For example, quantifying the cost savings achieved by using preferred suppliers or negotiated deals helps justify investments. ROI also helps ensure that T&E strategies align with organizational goals and deliver real results.

Many organizations track ROI in various categories, such as:

• Cost savings to identify how effective your cost management strategies are in general
• Cost reduction to track the impact of specific cost control initiatives
• Cost avoidance through proactive measures

Automating Your Spend Management

Managing these KPIs efficiently requires robust spend management automation. The Analysis Mason 2022, Travel, Expense, and Vendor Invoice Management Study found that solutions like SAP Concur empower organizations with:

• 28% reduction in excess mileage claims
• 26% decrease in budget overspending
• 26% increase in tax reclaim

Embracing end-to-end digital expense processes, such as mobile receipt capture and automated reporting, not only streamlines processes but also ensures compliance and flags anomalies effectively. SAP Concur offers a comprehensive T&E spend management solution that not only curtails costs but also future-proofs businesses by enhancing visibility and operational efficiency. Learn how SAP Concur solutions can revolutionize your spend management and elevate your organization's financial agility. By aligning your strategy with these key KPIs and leveraging cutting-edge automation, you can navigate the complex landscape of spend analysis with confidence and precision.