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Transforming Travel, Sourcing, and Procure-to-Payment

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Like many institutions, Rensselaer Polytechnic Institute (Rensselaer), Troy, N.Y., had introduced a campuswide credit card program in the 1990s. The nearly 900 credit cards issued to faculty and staff enabled them to easily book travel and make small-dollar purchases (under $2,500).

In 2010, however, Rensselaer decided to end its credit card program in an effort to control spending. This decision ultimately led the institution to streamline how it approached travel, strategic sourcing, and the procure-to-payment process, producing significant savings along the way.

After retiring the credit card program, Rensselaer contacted the Virginia Commonwealth University Performance Management Group (PMG), Richmond, Va., for assistance. PMG’s consultants, who review best practices in small-dollar purchases and travel at higher education institutions, provided several recommendations. Based on both this external input and several internal objectives—and with an emphasis on collaboration between the procurement and finance offices—we obtained executive leadership support for maximizing the university’s buying power and crafted a three-pronged approach. Beginning in 2011, Rensselaer concurrently implemented changes in the areas of travel, strategic sourcing, and procure-to-payment.

Centralizing Travel

Traditionally, Rensselaer faculty and staff booked airfare and hotels through the travel agency of their choice. All these transactions were not only decentralized but also paper-based, which meant Rensselaer could not quickly determine who might be affected if a natural disaster or other type of crisis occurred.

Now, the institution has a mandated travel program that requires faculty, staff, and students book all travel through Rensselaer’s designated travel agency. Alternately, they can make online bookings themselves using Concur, the institution’s travel management system. Usually, an individual’s business credit card transactions feed into Concur, but that wasn’t an option for Rensselaer, with no credit card program. So, the institution partnered with a provider to use a virtual card that’s embedded in the Concur system; when an individual books airline travel, the institution’s virtual card is charged and the individual traveler’s identification number is attached to the transaction. When the traveler checks in at a hotel, the virtual card has already been authorized for use as payment.

After canceling its credit card program, Rensselaer Polytechnic Institute, Troy, N.Y., revamped several administrative processes to generate significant savings.

Everything is now done electronically. The virtual card payments for airfare, hotels, and car rentals automatically flow into the traveler’s expense report. Travelers pay only for meals out of pocket, then upload pictures of their meal receipts to Concur. Once submitted, the electronic expense reports follow an automated approval process, and Rensselaer’s business office does a monthly reconciliation with the virtual card charges.

By mandating the use of Concur, over the last six years Rensselaer has saved about $3.5 million in travel alone. In addition, from a duty and care perspective, Rensselaer now knows where faculty, staff, and students are traveling and is better positioned to provide assistance if needed.

Streamlining Payment

When Rensselaer discontinued its campuswide credit card program, the number of invoices for small-dollar purchases skyrocketed. In 2011, we went from processing approximately 11,000 invoices annually to handling 46,000—and 100 percent of those invoices were manual and needed to be entered into our enterprise resource planning system.

Today, fewer than 1 percent of the university’s invoices are handled manually. Rensselaer achieved this by partnering with Jaggaer (formerly known as SciQuest), a procurement software company that matches each invoice to the appropriate purchase order and automatically sends the invoice to a digital mailroom to be processed for payment. In the absence of a purchase order, an approval process is built into the system.

Since 2014, Rensselaer has partnered with American Express, benefitting from its buyer-initiated payment (BIP) program. Rather than paying a supplier with a paper check or through ACH, we send the payment data to American Express. After receiving an e-mail notice that a payment is waiting, the supplier downloads the data from a dedicated portal. Although suppliers pay a small fee to participate in BIP, they appreciate receiving payment within 15 days of invoicing. Anytime a sourcing contract comes due, we include those payment terms and BIP participation as part of the contract negotiations.

Together with the e-payment system VPay, the BIP program provides the rebates that Rensselaer once received from its credit card program. In fact, since entering the BIP and VPay partnerships, Rensselaer is substantially exceeding the rebates it used to receive from the credit card program annually.

Strategic Sourcing

With a Rensselaer credit card in hand, it was easy for faculty and staff to make purchases from any supplier rather than take advantage of negotiated discounts. The institution’s preferred suppliers often missed out on our business and, as a result, couldn’t justify providing larger discounts.

We did a lot of data mining to determine by commodity code what people were purchasing and where they were making their purchases. For commodity codes that included the most significant purchases—such as office supplies and research supplies—we designated preferred vendors, which are all listed in an online marketplace. At the same time, we set up electronic invoicing and payment through BIP for those vendors. Some vendors have duplicate or similar enough products that faculty and staff can do some comparison shopping before placing an order.

Of course, people on campus can make purchases from different vendors, but before doing so they must obtain approval on a personal reimbursement request. Without that prior approval, they run the risk of not being reimbursed after making a purchase. Occasionally, the business office will make an exception, but reinforcing the preapproval policy really drives savings.

Even after automating travel, invoicing, and procurement processes, Rensselaer did not eliminate any staff positions. No one lost a job, although many are doing much different jobs today when compared to six years ago. Former purchasing agents in the procurement department, for example, are now strategic sourcing managers. We created an e-business department that is responsible for the e-procurement system, travel system, onboarding new suppliers, and data analytics.

Internal auditors run monthly tests on travel, procurement, and invoice data, in addition to annual tests, to ensure that the systems are functioning correctly. On the procurement side, we analyze the data to determine which commodities represent the largest purchases and whether to add new suppliers to Rensselaer’s online marketplace. The data proved especially helpful in supporting a request for additional funding. Three years into process implementation, the business office could point to savings that were much higher than expected. The institution received another $400,000, on top of the initial $700,000 investment, to assist with sourcing and analysis. To date, Rensselaer has achieved savings of more than $18 million as a result of canceling its credit card program and embracing these new initiatives.

SUBMITTED BY Kelli Hudson Perry, assistant vice president for finance and controller, Rensselaer Polytechnic Institute, Troy, N.Y.