Did you know that Travel & Expense Management is the second largest operational cost to a business after employee payroll? Expense management is an unavoidable task for finance teams and employees, alike.
But, what if we told you, we have the secret formula to help solve all your expense management challenges while also streamlining and adding a layer of visibility and accountability to it?
This blog post will help you understand the nuances of expense management and how automation by an intuitive expense management software can help fix your expense management and accounting challenges, forever.
Introduction to expense management:
Up until recent times, expense management involved hoards of paper receipts, multiple excel sheets. What followed was a tedious validation processes. This is often the most common problem areas for both employees and finance teams.
The traditional means of expense management often left employees wasting their productive time. Doing things that clearly weren't a part of their job description.
Are you still using traditional means such as spreadsheets to go about your expense management? This could prove detrimental to the health of your business.
Old is gold, but the same does not hold good at all times. Keeping up with the trends is crucial for growth and scale. If you are currently using an archaic mode to managing your expenses, this article is for you. It will help you understand why you should keep up with the trends and the benefits of doing so.
Process of traditional expense management:
Disadvantages of using traditional modes of expense management:
Using a traditional means of managing your expenses may seem viable for smaller organizations. With only a handful of employees, validating and managing their spends may not comes across as a huge ordeal.
The problem arises when businesses are in the growth stage. Be it networking, marketing or sales purposes, your employees invest their time and money into the process. Here, your employees may sometimes use their own money for business purposes. Hence, it becomes crucial for you to adopt a new age system. A system that helps you achieve a seamless expense management experience.
To help you understand how using traditional means could prove detrimental to your business, we have compiled a list of plausible disadvantages to using conventional methods of managing your expenses:
- Time-consuming process: Traditional means to expense management require manual data entry and manual verification for claimed expenses. This could cost your finance team and employees crucial productive hours.
- Higher chances of human error and bias: Human error and human bias could occur either while inputting data or while validating data for an expense claim. This could result in businesses losing large sums of money, over a period of time.
- Increase chances of fraudulent claims: With stringent deadlines, missing receipts and a tad bit of greed, employees may opt for ways of making a few quick bucks. This is done through incorrect claims and duplicate bills.
- No visibility into spending trends: Not having sufficient insight into what the data is trying to convey to you, may result in employers or admins making ill-informed decisions, which could have adverse effects on the company. Additionally, insight into spending trends could help employers create effective expense policies, associate with vendors for greater discounts and more.
- A decrease in productivity and efficiency: With your employees and finance teams wasting manpower and effort doing something that could merely be automated, businesses run the risk of employees and finance teams spending too much time in reporting, claiming and validating expenses.
Hidden costs of manual expense management:
As per a study conducted by GBTA, India is the world’s fastest growing business travel market. Yet, most Indian MSMEs still use traditional means to handling their expense management. What seems to be like an easy-save, costs businesses in many ways.
Here are some hidden costs you can avoid by automating your expense management software:
- Loss in productivity and efficiency:
Often traditional means of managing expenses make the entire process cumbersome for both employees and finance teams. Employees are required to collect and compile their expenses manually. Once organized into long sheets, these sheets are submitted to managers or admins for approval. Add to this, variables such as multi-state or multi-country expenses, different currencies, and expense policies ~ and you know this spells trouble.
Once submitted the onus of approval lies on the managers and admins. The process requires them to check and validate expense claims manually. Deadlines, late submissions, policy violations and back and forths with employees take most of their valuable time, doing things that could have been merely automated in the first place.
This process takes hours of productive time, thereby directly affecting the growth and scale of the company, in the long run.
- Loss of money over claimed expenses:
Deadlines, get to the best of us. Most employees just want to be done with the entire process, even if it means losing their valuable money. But, this only makes up for less than half of your employees.
Due to deadlines, one of the most common things noticed is that the employees are more prone to making errors while manually entering spend claims. Another common phenomenon seen is that some employees use it as an ideal opportunity to make a few quick bucks.
This only increases the amount of work for your finance and accounting teams. They now also need to creative measures to overcome such behavior. Fraudulent behavior and manual errors in expense claims may seem like a small problem to tackle now, but can be one of the critical roadblocks to growth.
- Encourage fraudulent behavior:
As per a report by ACFE, occupational fraud cases can be broken down into three categories in governmental organizations:
- 88% - Asset misappropriation; accounting for a median loss of around $ 100,000
- 47% - Corruption schemes; accounting for a median loss of around $ 400,000
- 6% - Statement fraud schemes; accounting for a median loss of around $ 315,000
These statistics give us an indication of the potential losses incurred by public sector organizations, which have far lesser stringent rules while managing expense claims.
Some of the most common ways employees indulge in fraudulent behavior are:
- Submission of duplicate bills
- Intentional manual errors while filing an expense claim
- Submission of overinflated/ exaggerated expense claims
- Submission of forged and non-existent bills
This shows the dire need for well-defined expense policies, to help curb unnecessary spends at the source. When using traditional methods, finance and accounting teams are required to manually validate these spends, leaving room for approving multiple fraudulent claims.
Traditional vs. automated means to expense management:
4 uses to automating your expense management software:
- Save oodles of money:
As per a study conducted by PayStream Advisors, companies approximately spend $20.18 to process an expense report. Multiply this with the number of traveling employees you have and the number of reports filed every month. You know this means big money. Big money which is utilized on unnecessary spends which could have been curbed at the source.
Did you know businesses that use automated expense management software use less than half the money to generate and process expense reports?
Having an automated software which does the reporting, validating, and documenting for you, at less than half the price seems like a viable route to take. Let’s not forget the manpower and hours it saves as well!
- Increase compliance and accountability:
Businesses using traditional means of handling expense management almost always have little to no insight into the expenses claimed. Automation as the name suggests, automates all these processes for you, with virtually no human intervention.
How would automation help increase compliance?
- Eliminates the chances of human error: With features like automated data extraction, real-time policy checks and more, it leaves no scope for human error. Be it manual data entry of spends, or manual verification of claimed expenses, all of this can be done with a few clicks, with zero human intervention.
- Eliminates the chances of human bias: There is always a probability of human bias when it comes to validating or approving spends. This can happen in cases of fraudulent expense claims. With automation, you can completely eliminate these chances; allowing for a transparent system to manage your expenses.
- Well-documented transcripts: Keeping track of every detail when it comes to every employee who has submitted an expense report can be difficult. With automation and its associated features which are built to ease your expense management challenges, the software can also document every single communication that has been made during the filing of an expense report. Everything will be recorded under one dashboard for admins and employers to review. Thereby, seamlessly providing you with a complete digital audit trail, that keeps you audit-ready, always.
- Real-time visibility and transparency: It is crucial for businesses to keep track of when and where their money is being utilized. Most companies have no insight into how their money is being managed when it comes to expense management. An automated system allows you to look at real-time insights into recorded spend claims, approved or flagged expenses, and more. This adds a layer of visibility and transparency which aids the smooth functioning of a business.
- Save productive hours:
Managing your expense management, shuffling through hoards of physical documentation and receipts, hovering over multiple dashboards, dealing with policy violations and more are some of the ways businesses waste their productive time.
Manual work, be it data entry or verification of claimed spends, can be a daunting task. This requires tons of patience, manpower, effort and hours of huddling around. Looking through multiple expense submissions, comparing and validating expense claims, and having various back and forths when there are policy violations are just some of the things admins and finance teams deal with on a regular basis.
But what if we told you, automation can solve this entire challenge?
With an automated expense management software, admins and finance teams would spend less than half the time they spend while using traditional methods. Employees can directly upload images of receipts, where the expense management software can automatically extract specifics from it. Additionally, once all the receipts have been submitted, employees can directly generate an expense report within minutes. What generally would have taken hours to compile and submit can now be dealt with, within a few clicks.
If any inconsistency or policy violation is recorded, both the employers and the employees will be notified about the same. Once this is done, employees can provide detailed explanations for the violations, and the admins now have the right to either approve or reject the particular spend.
Employers don’t need to shuffle through hoards of emails for these explanations. They are all documented and can be accessed whenever need be. This further cuts another time-consuming step while managing expenses.
- Increase employee satisfaction and morale:
It is vital to keep employee satisfaction as one of the critical attributes to gauging the health of a business. Happy employees would mean improved productivity and efficiency. While on business trips, employees are required to use their personal money for the company. Hence, reimbursing them on time via seamless processes is crucial. Automation of your expense management process aims at reducing work for your employees, thereby showing, you value their time and effort in the betterment of your business.
Benefits of using an automated expense management software:
- A decrease in processing costs: When you have an automated system that does the thinking for you, admins and approvers would only need to access and approve reports via one centralized dashboard.
- A decrease in manpower and effort: Expense management was never a part of one’s job description. Hence, it is vital to not invest time, money or effort into it. With one software doing the business, finance teams can utilize their time in more productive ways.
- An increase policy compliance: By simplifying the entire expense management process, businesses can expect a higher compliance rate.
- An increase in visibility and transparency: With everything transparent, it is close to impossible to go about fraudulence.
- Insight into spending trends: Admins and finance teams can use the power of analytics to gain an understanding of variables such as frequent high category spends, vendors, spending trends, and more.
- Real-time insight into policy violations: Admins and employees will be notified immediately, in case of a policy violation. This allows for real-time analysis, documentation and course correction.
- Always stay audit-ready: In case of a policy violation, employees can account for the possible reasons for the violation. The onus of accepting or rejecting the expense claim then falls under the supervision of the employer or admin. Additionally, documented proof of all these aspects, help businesses stay audit ready, at all times.
- Faster, verified reimbursements: With an automated expense management software, doing the thinking for you, you can be assured that the turnaround time (TAT) for reimbursements is cut down by more than half. Additionally, all expense claims are verified and flagged if violating an expense policy, assuring you all reimbursements are validated before being processed.
With this mind, we hope we have provided you with enough insight into measuring the health of your expense management system.
Word of advice, when it comes to picking the right expense management software for your business:
- Jot down all the challenges you are facing with your current expense management system.
- Allocate a budget depending on the number of employees you have, the stage of your business and more.
- Make use of the “Free Trials” and always request demos to gain a better understanding of the expense management software you wish to proceed with.
- Look for an expense management system which best suits your requirements.
- Step in into the new-age system of seamlessly managing your expense management woes.
We wish for you to get on the bandwagon for change, and step into the digital era of effortlessly managing your expenses.