travel and expense management for law firms

Introduction

Creating an effective travel and expense policy for your law firm means looking beyond your own practices and exploring how other law firms manage their spending. Whether you're just starting out or have years of experience, adopting this approach enables you to refine your policy, implementing industry best practices to improve control and efficiency.

However, you can't simply hope to copy other firms' T&E programmes—regardless of their success. Imitation may be the sincerest form of flattery, but to have a strong travel and expense management process, you must clearly define, implement, and customize the best practices to meet your firm's unique needs.

Emburse is trusted by more than 400 law firms and legal teams around the globe, including ArentFox Schiff, Stinson, Downs Rachlin Martin, and FordHarrison. We have a deep understanding of the challenges and issues specific to the legal sector and work with our customers to develop and implement expense-management programmes tailored to their specific travel needs.

This guide is based on more than a decade of direct experience. Here, we will explore 11 of the most effective travel and expense management best practices collected first-hand from a wide range of legal organisations around the world—all of which can strengthen any firm's T&E programme.

01. Implement a per-diem system

Law firms commonly use per diems as they offer a simple way for finance teams to pay and account for employee T&E spend. Rates are set by location based on HMRC-specified calculations for both domestic and international locations. This ensures that employees have a sufficient allowance to cover their costs. They take a variety of factors into account, from lodging and meals to transportation costs. This is especially important for international legal teams, which may see employees travel to high-cost locations like New York, Dubai, or Tokyo.

Putting per diems to work

Per diems are typically secured through a pre-approval process (see below). They can be offered either as a direct cash advance or by (re-)loading a payment card.

In addition to offering an efficient way for legal professionals to make purchases, per diems also offer an effective cost-control safeguard for the firm. This ensures that employees can't abuse the expense process by making out-of-policy purchases. As an extreme example (but one we've seen), should a solicitor choose to purchase a £500 bottle of champagne while travelling, they will be responsible for any costs over the per diem allocation, with no mechanism for them to reclaim the excess spend.

02. Require pre-approvals

Requiring pre-approval before travelling or making big purchases can help prevent overspending—whether by accident or on purpose. Such oversight is particularly important for law firms where client billable expenses need to be carefully tracked and managed. This approach works particularly well when combined with per diems, providing a full audit and approval trail for travellers' spending.

Pre-approvals often work with a purchasing card programme or a "ghost" card (a single, centralised card number used across a department or organisation) for travel booking. Although employees can browse and select their items/tickets, they can't complete purchases until a supervisor has approved them. These systems work by alerting approvers (who may differ, depending on the size of the purchase, per the firm's policies) of pre-approval requests. The approver (or approvers) must then give their approval before the purchase or the travel booked.

Pre-approval improves efficiency

Another example of leveraging pre-approvals to streamline the overall process is using them as the starting point for expense reports. Legal professionals can submit pre-approval requests through their firm's system for specific purchases or an entire trip. Once the trip is complete, the approved pre-approval can be "flipped" to an expense report, and transactions related to the trip are automatically allocated to the report within the expense solution. This eliminates duplicate entries of trip information and further streamlines the accounting and reconciliation/reimbursement process.

03. Initiate a credit card programme

Firm-provided corporate cards (or purchasing card, travel card, meeting card, and/or virtual card) programmes are plentiful and highly competitive—and offer numerous financial and operational benefits. Here are just a few of the many benefits a good card programme can offer law firms:

• Financial incentives and rebates for all purchases: Corporate cards offer a cashback rebate for all spend, which can deliver significant benefits—in fact, many firms receive substantial annual rebates on their card purchases.
• Corporate cards reduce the cost of expense-report handling: By integrating card data into T&E systems and automatically reconciling receipts with card data, the need for fee earners to re-key their expenses is eliminated, and the accuracy of the captured data is improved. This reduces the time legal professionals spend creating expense reports and approvers spend ensuring compliance.
• Using corporate cards reduces the number of falsified receipts: For instance, a dinner bill includes a 10 percent tip, but the employee submits a claim for a 20 percent tip. Using a firm-provided card eliminates the incentive and means to do so.
• Carrying a corporate card eliminates the need for cash advances: This not only streamlines processes for the firm but also eases the process for the travellers themselves.

Addressing common credit card programme concerns

Some believe that employees may incur miscellaneous charges for which the firm could be liable. This risk can be mitigated by reminding them, through your expense policy, that only legitimate expenses will be paid, provided they submit timely expense claims for those charges. Reinforcing a policy that denies reimbursement of expenses for late submissions—regardless of whether it's an employee liability card charge or a firm liability card charge—is plenty of motivation for most users.

Finance teams can also eliminate concerns about illegitimate card use by providing pre-loaded physical or virtual cards based on per diems or pre-approvals. This enables them to offer the convenience of a firm-provided card without the liability of excess spending.

04. Automate policy enforcement

Enforcing policy in a spreadsheet-based environment typically requires expense verification from several employees—all of whom could add more value to the firm in other ways. A travel and expense management system applies expense-policy compliance rules through a rules engine. This ensures that all expenses are validated upfront against the firm's expense policy.

For example, an employee travelling internationally had a pre-approved budget for lodging and meal spend. Relying on spreadsheet-based policy enforcement would not only require tedious manual approval for each expense but also open the door to potential fraudulent spending (as the result of inevitable human error and oversight).

Let the machines do the thinking

With an automated process, the expense item is immediately flagged when a traveller attempts to enter an expense that is not compliant with policy. Depending on the type of infraction, the employee may be asked to explain. Approvers determine the outcome or may remove the item from the expense report altogether. Suppose personal items are charged to a firm-paid corporate card. In that case, expense owners can mark the item as personal, in which case the expense is automatically deducted from their out-of-pocket reimbursement.

05. Clearly document the approval process

Many firm expense approval processes aren't codified or communicated effectively, leading to reimbursement delays and other inefficiencies. Taking a step back and examining roles, responsibilities, and delegation of authority makes it easy to build an approval matrix that can be automated within travel and expense management software, especially when the solution employs a sophisticated business rules engine that can handle virtually any combination of criteria.

Approval routes can be built based on hierarchy, transaction-value thresholds, expense allocation coding, attributes of the expense owner, and many additional criteria. Typical approval routing should have two to four levels of approval. Too few approval levels and organisations may lead to inadequate expense review. Too many approval levels, on the other hand, become complex to execute and maintain. Most firms prefer to have accounts payable staff serve as the final step in the approval process before the approved voucher is exported to the financial system for payment.

06. End penny-wise and pound-foolish audit practices

Auditing 100 percent of expense reports is a poor use of time and resources and gives finance teams a false sense of security. To ensure effective auditing, accounts payable groups should take a more methodical approach.

Elevate your audit approach

It is critical to decide who performs the audit--is it the accounts payable or the audit staff? Organisations must determine a statistically valid sample size for auditing, and then have auditors—not accounts-payable staff—meticulously examine expense reports and receipts. This analysis should cover the details of the current report and a three- to six-month range of expenses for a specific expense owner.

Expense owners who fail the audit should be assigned to a risk category—for example, rated from one to five. Those assigned risk category five would have all their reports audited, whereas expense owners assigned risk category one would only have every tenth report sampled for an audit. Firms need to determine the appropriate statistical sampling.

When an audit is completed, audited expense owners should receive an email informing them of any issues that need to be reviewed or congratulating them for complying with the firm's policies and guidelines. Conducting independent audits and discussing the results with employees has the power to change behaviour across the entire firm.

07. Help employees make good decisions

Why do people cheat on their travel expense reports? While some admit to inflating or falsifying expenses intentionally, few people who submit illegitimate expenses do so because they have an agenda of defrauding their employer. Instead, they may be opportunistic and do so because their expense processes make it easy.

Getting your firm ahead of fraudulent submissions

There are several straightforward fixes that firms can implement to help reduce the reimbursement of fraudulent expenses:

• Require one expense report per trip to make expenses easier to track. Issue corporate cards to frequent travellers: This reduces the risk of firms never receiving credit for cancelled flights and other potentially fraudulent transactions.
• Implement a travel and expense management solution that automatically identifies many attempted expense fraud types.
• Do not allow future-dated travel that is not charged to a corporate charge card.
• Establish an anti-collusion policy. For example, require that the most senior employee always pay for a meal.

08. Take care of your travellers

Top law firms require a slew of employees to travel to countries worldwide. Ensuring the physical safety of these travellers is of paramount importance. Furthermore, travel risk management and duty of care are becoming more important than ever in a world that is becoming increasingly volatile due to geopolitical tensions and an ever-changing climate.

Duty of care

An effective duty-of-care plan requires both pre-travel planning and on-trip monitoring. A number of solutions collect crime/public safety, health, terror, and other weather/climate-related risk data for locations worldwide and provide this to firms on a subscription basis. This information can then be integrated with a travel-booking tool or an expense system's pre-approval module, helping to alert approvers of potential risks and providing an overall risk score. Approvers can then weigh the benefit/need for travel versus the risks that it may present when making their decisions.

Once a traveller is on their trip, the travel risk-management solution, combined with flight and hotel data from the travel-booking solution, can forewarn and quickly alert travellers of potential issues that could impact their travel.

09. Centralise the travel-expense process

Many of the processes described in this guide can only be put into place with the implementation of a robust travel and expense management software solution. Without automated travel and expense management solutions, firms must rely on significant manual intervention to properly validate expenses against their T&E policy and ensure these expenses are routed to the appropriate approvers before payment. For larger organisations, this can add up to considerable numbers of people spread across departments and locations.

Centralising saves time and effort

By implementing an automated travel and expense management platform, a consistent, programmatic approach replaces a substantial amount of human intervention:

• Expenses are validated against the firm's policy at the time of expense entry: Employees can either be prevented from submitting non-compliant expenses ('hard stop') or be required to provide an explanation that will allow the approver to decide if full, partial, or zero reimbursements should be provided ('soft stop').
• Approval-routing rules are applied based on attributes of the expense items or the entire report itself (e.g., allocation department, cost centre, project, funding). By employing a rules engine, the combinations of standard routing and exception routes are almost unlimited, yet easy to create and maintain.
• Possible duplicate expenses can be flagged at the time of expense entry or audited as part of analytics reporting.
• Approvers can now focus on ensuring that proper allocations were provided for the expense and that spend is appropriate, rather than being forced to worry about compliance with the firm's policy.
• Accounting and/or Accounts Payable (AP) can be inserted as the last approver and have complete visibility into any policy violations, explanations, management approvals, notes, and threaded dialogue included, along with copies of all receipts.
• Approved expenses are automatically transferred to the firm's financial system and no longer have to be re-keyed into the financial system for payment.

10. Stop cutting cheques

In addition to requiring an unnecessary use of natural resources, creating and mailing hard-copy cheques also has the potential to undo some of the benefits derived from automating everything up to that point. Firms engaged in best-practice travel and expense management behaviours are moving toward an automated BACS or EFT payment of all expenses. Here's why:

• Reduced duplicate payments and fraud: Paying expenses by cheque increases the potential for duplicate payments and fraud.
• Reduced processing time: The processing time for purchase, payment, and reconciliation is reduced significantly as the overall AP process becomes more efficient.
• More timely payments: An important benefit of reduced processing time is more timely payments, resulting in more satisfied employees.
• Streamlined reporting: Electronic payment data reporting improves information flow by reducing the need for manual inputs, increasing reporting accuracy, and improving process efficiency.
• Improved spend analysis: More comprehensive electronic data reporting on the firm's payables improves spend analysis and fosters better travel and expense management.
• Enhanced compliance: The automation generated by electronic payments increases the transparency of the AP process and fosters greater compliance with the firm's policies, procedures, and HMRC regulations.

11. Leverage your leverage

After implementing an automated travel and expense management solution that includes some (or all) of the above best practices, it is time to 'leverage your leverage' through analytics and business intelligence reporting. The fact that thousands or millions of pounds flow through this highly visible environment provides an outstanding opportunity for financial and operational improvements, including:

• Analysing spend by expense category to uncover opportunities for strategic sourcing. Evaluating total spending on certain types of expenses (e.g., flights, hotels, car rentals) may benefit a firm in developing a preferred relationship with one or more key suppliers.
• Analysing and visualising spend patterns through a straightforward, consistent platform. Spot trends easily without having to pore through countless rows on spreadsheets. These insights can include hotspots in areas such as out-of-policy or inefficient spend, which can then be used to eliminate pockets of non-compliance, address policy gaps, or be fed back into future expense policies.
• Providing tremendous insight into accruals and assisting with month-end close by utilising reports that pull together an in-process card and out-of-pocket spend.
• Using key performance indicators, such as open approvals aging, to help spot and remedy bottlenecks in processes that are causing delays in reimbursement cycle times. Compliance reporting can help spot individuals and groups at higher risk for policy violations and provide meaningful insights into which of the firm's policies may require further education and training.

The bottom line

Many organisations are still dealing with manual travel and expense management processes. These outdated processes make it time-consuming and challenging to handle employee (and non-employee) reimbursements, cash advances, card-programme reconciliation, and traveller safety. Increasingly, however, forward-thinking firms are prioritising travel and expense management automation projects. This allows their employees to get back to their main mission: taking care of their clients and cases. The benefits of understanding best practices for travel and expense management allow firms to focus on the more important tasks at hand—all while increasing employee satisfaction.

It is important to choose a travel and expense management automation platform that allows your firm to continue to evolve and grow into new ways of handling travel and expense management. A flexible, modern platform built on current technology standards is the best way to ensure that.

Emburse can help

As finance departments transition to a modern finance department with more hands-off processes, Emburse offers innovative end-to-end travel and expense management solutions that solve for what's next for forward-thinking organisations. Our suite of award-winning products is trusted by more than 12 million finance and travel leaders, and business professionals around the world. More than 20,000 organisations in 120 countries, from Global 2000 corporations and small-medium businesses to public sector agencies and non-profits, count on us to manage business travel and employee expenses with ease.

Our highly automated, mobile-first solutions streamline business travel planning, booking and management, and eliminate manual, time-consuming expense submissions, approval and reconciliation. We deliver efficiency and time savings, increase financial visibility, enhance spend control and compliance, and improve the entire business travel experience. This empowers our customers and their teams to deliver meaningful value for their organisations.

For more information visit emburse.com, or follow our social channels at @emburse.