acheiving compliance and cost controls with expense report & credit card management
By Gregory Llinas
Gl Solutions was contacted by a medium sized consulting firm with 420 employees and $55 million in revenues to help them with their expense management. Our client had multiple government projects across the country and found that it was too hard to get a project's financial status in a timely fashion. After an initial assesment, we analyzed their current state and introduced them to leading practices in expense and credit card management. The client was pleased that in less than three months we were able to take our assessment, replace their legacy system with the Deltek Time and Expense system, revamp their business processes, and substantially improve their operations.
A critical element of our client's Project Managers responsibility was to manage the project's budget and therefore profitability. Our client needed an efficient means to manage project expenses, typically travel and other expense items to support the project. Nearly 90% of the project purchases were requested via purchase orders (PO) plus travel associated expenses were all paid using corporate credit cards (CC). The average time from when a PO was issued to the time that it was billed to the customer was four months. The challenge for GL Solutions was to reduce this four month period to less than a day.
In this case we used our standard methodological approach. First we assessed the situation by looking at their current accounting system and business processes. We confirmed that the current process was painfully slow due to the massive manual interventions. It was making it difficult for the Project Managers, Program Managers, and the CFO to understand the project's financial status and firm's overall financial status. After evaluating the situation, we recommended and when approved we then implemented the Deltek Time and Expense system. This system is fully compatible with credit cards vendors and we easily configured the Deltek system to accept downloads from our client's credit card vendors, American Express and Visa.
In this assignment we were able to make a significant impact on our client's operation efficiency in expense reporting. First, by implementing the Deltek Time and Expense system our clients was now able to track and control expenses based on well defined rules and a heirarchical approval process that brought our client into compliance with the FAR and GAAP.
The Deltek Time and Expense system enabled us to implement credit card integration functionality so that employees could easily expense their corporate credit card expenditures. With this the employee could quickly classify the expenses, add clarifying comments, assign an appropriate project accounting code, attach receipts and submit for approval and payment.
Improved Cash Flow
Cash flow is the lifeblood of any firm, so our client was very pleased when we were able to increase their cash flow with this project. Processing time was reduced from an average 90 days to less than three days, thus improving cash flow as our client's customers were billed faster. The gap between when the firm paid the employee to when it collected the funds from its customer was within the normal cycle for invoiced for 30 days. Lastly, the firm realized the reduced cost by the ability to eliminate one head count in the accounting department.
Compliance and Accountability Improvement
Compliance is a constant struggle for every firm, large and small. Implementing a state-of-the-art expense system enabled our clients to increase its level compliance in several important ways. First, the new system made compliance with the government per diem travel regulations easy as they were loaded on the system based on location and portion of day that the employee traveled. Amounts over per diem, were sent for authorization to the appropriate approval chain and then were allocated to a non allowable expense account. Secondly, the system increased The level of accountability at the firm by allowing us to configure three levels of approval to include the project manager, accounting and vice-president (programs) to achieve full accountability for expenditures. Receipts are electronically loaded and marked with specific references for tracking and billing the customer thereby making audits easier and efficient.
Accountability is a critical issue for government contractors and we were able to configure the Deltek Time & Expense system in accordance with leading practices to have the appropriate approval chain approve the expense. For project related expenses, the Project Manager would approve and the Direct Manager would be able to view it. If the expense passed certain thresholds, be configured to process to take the approvals to a higher level in the hierarchy to approve.
Users were able to easily link expenses with the charge codes on their time sheets, thus facilitating the proper allocation of expenses. Finally, the expense system was designed with the company travel expense rules and regulation in place, including compliance with the Joint Travel Regulations (JTR) and the Federal Travel Regulations (FTR).
Credit card reconciliation became an easier and information-rich process. First, since approvals were no longer manual, they would take place faster. Secondly, the CFO and Controller now had daily reports detailing transaction status, and entries pending, approvals pending and length in the queue, which in turn helps the CFO and Controller better manage the company cash flow.
The expense reporting system had to accommodate the needs of the various roles within our client organization. Most of the volume of expense reports came from our clients consultants out in the field who submitted weekly travel expense reports. The firm's executives also had to travel however their expense reports were subject to different rules and regulations. Executive travel was not billable, so they did not have to follow the project, client, or government rules of a government contract. However, they were still subject to the gaap and internal controls. Additionally, when an executive would take a project team out for dinner and the team was subject to the per diem rules of a government contract, the system was configured in such a way that their per diem was adjusted to reflect a dinner that the executive paid for from the company's accounts. Another example the configuration needed to address the executive needs was notably business class travel. If the executives airfare was paid by a government contract, they would only be able to expense coach airfare. If the company decided that business class travel was appropriate, the airfare expense would be allocated between the company and the government contract for Federal Travel Regulations (FTR). Other features:
1. Other types of expense reports were issued to conform to special task orders that included payment to vendors from the expense report based on the vendor information in the GCS Premier system.
2. The same system also allows for an easy form for pre approved expenses based on the information loaded in the system such as per diem by location and place.
Our client was able to quickly reap the benefits of implementing the Deltek Time & Expense system and changing its business process thereby reducing its internal cost and increasing its compliance with GAAP and government regulations (i.e., the FTR and FAR). As regulations change and systems are continually approved with new features, we recommend that all firms make an annual assessment of its operations to either find ways to improve efficiency, compliance and accountability or to confirm that the practices are the best they could be for the time.
If you would like to discuss the items on this article or to know how we can help you improve your processes and cost with real savings, please contact us at any of the numbers listed below or by email at email@example.com