Cost Management: When the Digital Disruptor Is Also the CFO’s Best Friend

At the five CFO Innovation forums so far this year, one topic that garnered heightened attention was the challenge posed to incumbent businesses by digital disruptors like Uber and Airbnb. The retail, transport and hotel sectors are among the first to be hit, but companies in financial services and even manufacturing are (or should be) bracing themselves, too. 

At the same time, however, there was also recognition that the services offered by the disruptors can help CFOs with cost management initiatives, including travel and expenses.

Of course, whatever gains finance makes from leveraging the services and products of the digital disruptors will be for naught if their company’s very existence is under threat. But that’s another story.

For now, there is no reason why the CFO’s left hand should not be taking advantage of cost savings and efficiencies, while the right is busy helping tweak and even changing corporate strategies and the business model to respond to potential and actual disruptors.

Like the corporate products of its competitors, the Uber for Business service provides the finance function with an online central dashboard that monitors trips and fares. Trips can be on demand or scheduled up to 30 days prior

No More Company Cars

In Manila, the CEO of a non-government organization said the NGO is getting rid of staff cars and using the Uber for Business service instead. Why make instalment payments and interest on car plans, not to say maintenance, petrol and drivers? He is happy with Uber, at least in Manila, and the convenience and transparency in terms of T&E reporting – the service is linked to the organization’s corporate credit card.

Ride-hailing apps are popping up across the world, with leader Uber joined by the likes of Grab in Southeast Asia, UK-based Hailo available in Singapore and Japan, Ola Cabs in India, Didi Chuxing in China, and goCatch and Ingogo in Australia.

The global leader in terms of geographical reach (active in 76 countries and 473 cities), Uber offers transport solutions for business. Like the corporate products of its competitors, the Uber for Business service provides the finance function with an online central dashboard that monitors trips and fares. Trips can be on demand or scheduled up to 30 days prior.

“Help employees get home safely when they put in long hours,” Uber urges. “Make it easy for your guests to attend your events and get home safely.”

In many cities, Uber makes available a “Black Car” – in Manila, late model SUVs like Toyota Fortuner (Uber vehicles in the Philippines must be less than three years old to protect taxi operators) – and “uberX” – sedans like the Honda Amaze in Thailand. There’s also “uberHOP”, which allows people heading in the same direction to share a ride during rush hour for a flat fare.

Uber for Business permits finance to customize a ride policy for each employee, allowing executives to use a black car, for example, while others are limited to uberX and uberHOP. Policies can also be set for when the service can be used (for example, avoiding ‘surge’ rush hours, when the fare doubles or triples) and where (for example, within city limits only).

Each trip can be tagged with an expense code and notes and is linked to the company’s corporate card. In addition to tracking expenses on the dashboard, finance can generate customizable trip reports individually and in aggregate, and also conduct analytics on the data. 

Outside of Uber for Business, individuals can opt to use their personal Uber accounts and arrange with Uber to have e-receipts routed to the company’s automated T&E system for reimbursement. This works if your company uses a solution from Concur, Expensify, Certify and Chrome River, which have partnered with Uber on this functionality. Otherwise, the receipt can be printed out and submitted to Finance for reimbursement.

One CFO in the Philippines Forum in June wondered whether tax authorities would recognize e-receipts from Uber and Grab as legitimate proof of business expenses. And what would happen if the start-ups fold? Uber has said it is losing US$1 billion a year in China

A car-hailing app deployed for T&E is designed not only to help with cost management (Uber claims companies can save up to US$1,000 per employee a year), but equally importantly, with accounting, policy compliance, governance and duty of care. Companies will know where an employee is when in a car-hailing vehicle abroad, for example, as well as which driver he or she is with – information that can help ensure employee security.

What’s the Downside?

That’s the theory, anyway. CFOs should be aware of the disturbing case of an Uber driver convicted last year of raping a woman passenger in Delhi. Uber claims to have tightened its due-diligence screening, but the Indian case highlights the risks associated with start-ups that are expanding so rapidly that systems and procedures could not quite catch up.

And some jurisdictions are still coming to grips with the start-ups’ unfamiliar business models and their impact on incumbent players. Legal issues have forced Uber to stop its uberX service in South Korea, for example, while some Uber drivers have been arrested or fined in Hong Kong over licensing disputes. In Jakarta, taxi drivers protesting against Uber and Grab Taxi effectively paralyzed the Indonesian capital in March.

One CFO in the Philippines Forum in June wondered whether tax authorities would recognize e-receipts from Uber and Grab as legitimate proof of business expenses. And what would happen if the start-ups fold? Uber has said it is losing US$1 billion a year in China, although it claims to be already profitable in the US. Or if there is a shortage in available Uber cars because more and more companies use the service?

In the Indonesia Forum in March, there were questions about access to the dashboards, given Indonesia’s spotty broadband and other communications infrastructure. Users also need to use smart phones to access the app, which means the company would be on the hook for additional costs. Then there are the security aspects of having company information in the hands of third parties that are on the cloud.

Friend and Foe

Most of these concerns should settle over time. Already, regulators in the Philippines and Singapore, among other places in Asia, have come to terms with car-hailing companies, issuing new rules that bring them into the legal framework for transport firms. Regulators are also expanding legal frameworks to cover innovations in other areas such as accommodations, financial services and procurement.

It’s not just car-hailing apps. Other sector digital disruptors are also able to package services for business. They include online marketplaces that link travelers with private homes. Airbnb for Business, for example, provides travel managers with an online dashboard, customized reporting and payments via corporate cards – another way to optimize T&E, improve governance and help with duty of care. 

In telecommunications, Skype for Business allows corporate users to use wifi instead of the more expensive mobile networks to make business-quality calls to any phone at home and abroad at cut-rate fees. Messaging services Viber, wechat and their ilk allow businesses to market and sell to their millions of users.

In financial services, startups offering online payment systems, Know-Your-Client databases and e-funding are working to circumvent cumbersome banking processes. In procurement, business networks like Ariba offer to automate, optimize and enhance the governance of the entire procure-to-pay process.  

It’s a new world out there. Digital disruptors can be a friend of incumbent companies, even as their success could eventually come at the expense of those same incumbents. But that’s the reality of today’s technology-enabled business environment, where competition and collaboration go hand in hand. Companies today are keen rivals for market share, but close collaborators in other areas.

The key is to know how and when to collaborate, and how and when to compete – as well as how and when to deal with the disruptors by acquiring them, partnering with them, empowering innovators within the organizations to take them on, or cashing in and moving on to  a completely different business model.

About the Author

Cesar Bacani is Editor-in-Chief of CFO Innovation.

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