Did you know that the business expense report your employee submits has an unlimited amount of data for analysis? Are you listening to what the numbers are trying to say?
Your employee can incur expenses during business trips, client meetings, conferences, or on office supplies. Whatever the business expense, it is essential that you keep tabs on the expenses.
According to the Aberdeen Group report,
“52% of the leading organizations automate key components of their expense management.”
Additionally, leveraging this data from the expense reports can provide you with valuable knowledge about employee expenses, vendors, top spending categories, and more. This article details the nuances of a business expense report. It also sheds light on the hidden costs incurred in manual expense reporting and how automation helps solve the problem.
What is a business expense report?
A business expense report is a form detailing all the business expenses incurred by an employee on a business trip. Once back from a business trip, an employee is expected to submit these details in the form of a business expense report to the finance teams. On verification and approval, employees get reimbursements for their expenses incurred on a business trip.
Employees are expected to file their reports within a specific time-frame for reimbursements.
If a report violates a policy or requires clarifications, it may get withheld, causing delays in reimbursements.
What is considered as a business expense?
Simply put, any purchase made by the company or an employee on behalf of the company is a business expense.
A business expense is the money an organization spends to run a business or to carry out its operations. These payments can include transportation, payment to suppliers, accommodations, gas, etc.
Small Business Tips: An Expense report template to manage business expenses
The hidden costs of manual expense reports
Companies spend money on business travel and other expenses for business growth and expansion. While this may deliver returns, manually reporting and processing of business expense reports can cut the returns short. It may also limit profit, growth, and revenue.
While money is an attribute that helps add a quantitative value to this equation, variables like time, resources, workforce, employee morale, and productivity are often ignored. Here's how traditional expense management qualitatively affects your stakeholders:
Challenges employees face with a business expense report
- Manually collect bills for expenses incurred on a business trip. Lost bills translate to lost money.
- Manually collate all the receipts and itineraries for business expenses. Your employees need to take out extra time from their work schedules to get back their own money.
- Enter information (such as date, expense category, vendor, etc.) into a spreadsheet or expense report. Manual errors could translate to delays in the reimbursement process.
- Ensure expense reports abide by the policy guidelines and are submitted as per deadlines. Late submissions would mean employees will get their reimbursements only after the next cycle.
All these factors put together over prolonged periods of time can result in a drop in employee morale. This could further translate to decreased employee productivity as they would no longer want to travel and lose money on business trips.
Challenges managers face with a business expense report
- Manually review and match a particular business expense report to its corresponding receipts. With hundreds of receipts and expense reports, it is close to impossible to ensure accurate and timely reimbursements.
- Manually check for policy violations and out-of-policy expenses. This is an extremely tedious process that requires multiple back and forths between stakeholders.
- Identify potential expense fraud and curb it at the source. If not done with the utmost care and consideration, this could prove detrimental to the health of your business.
- In case of errors, the report needs to be sent back to the employee for correction or clarification. This causes delays in the reimbursement.
Managing business expenses are no easy ordeal. It requires you to not only ensure you always stay IRS compliant but also fair to your stakeholders. These expense reporting tasks could easily be automated to spare your employees time that they could utilize otherwise.
Challenges finance teams face with a business expense report
The finance teams and accountants get the worst end of the straw. Here are some ways your finance teams may be wasting their time and productivity:
- Verify receipts and make sure it complies with the expense policies. Fraudulent or duplicate claims can not only burn a hole in your pocket but also put you in trouble with the regulatory bodies.
- Matching receipts with line-items to check merchants and the dates of expenses.
- Manually entering data into the company’s accounting software and the company’s payroll system for reimbursement.
- Manually reviewing and approving business expenses.
- Locating missing receipts or finding errors in reports.
All these factors put together, translate to increased workload for all stakeholders involved. Additionally, even after all of this, you still seem to lose the battle against expense management.
The hidden costs of manual expense report can add up quickly:
- Massive working hours put into the process by all parties
- Hard costs for printing, paper, and office supplies
- Huge investment of time on mundane routines
Moreover, there is a high risk of fraud in a manual expense reporting process. It is also challenging to ensure compliance with company travel and expense policies.
How to leverage data from a business expense report?
Business expense reports may be a tedious chore, but it is a necessary process. Regularly generating expense reports can ensure your company is financially secure. It can also help you understand where the majority of your money is spent. It also helps to check if the expenses are within the defined budget and if you’ve incurred any losses.
Let’s look at how your business can benefit via insights through numbers:
- Enables you to make data-driven decisions
The inputs from expense reports can be used to make positive changes for the business. Expense reports give your team insights into what, where, and how the company’s expenses are made.
By accumulating expense reports, you can identify which strategy or activity of your employees are bringing in profits and costing less. Be it lunches with clients, business conferences, telephonic conversations, or in-person service, optimizing costs is always possible. Additionally, utilizing this internal resource aids, you to handle various strategic issues, project management methods, and help implement strategies and improvements.
- Helps measure profit and loss
An expense report is an excellent source to measure if certain expenses are bringing in profits or costing you more than it should. Expense details filled in by your employees, such as subtotal, grand total, and amount spend on a specific category, are all numbers you need to pay heed to. By identifying how much money is poured into a project or department, tweaks and improvisation can be made for maximum profit.
- Useful insights from data analytics
The expense report submitted by employees is a bundle of information. By assessing it carefully, you can identify which suppliers, airlines, or hotels your employees prefer. You can calculate, on average, how much your employees would spend on office supplies, gas, meals, etc. It can also help you identify which department is the top spender and on average, how much an employee of a certain level spends. This gathered data from the report to help your finance team budget and plan better.
How can automation help with a business expense report?
An automated expense management software helps streamline every aspect of the expense reporting process. It also helps curb expense fraud and maintain internal policy compliance. Here are ways an automated expense management software can help:
How can an automated expense management software help with expense reporting?
- Automating this process can decrease time spent reporting expenses, while also avoiding all hidden costs and achieving profitable growth.
- With features like receipt scanners and receipt management, employees can scan, report, and manage receipts on-the-go.
- Employees no longer need to worry about collecting and collating receipts.
- The time taken to do manually collect and collate receipts can now be used for sales productivity, addressing client needs, etc. The productive hours can now be spent in bringing more customers to your business and keeping existing customers satisfied.
How can an automated expense management software help with corporate card reconciliations?
- Time is saved for an employee, as any purchases made through a corporate credit card gets automatically recorded and matched with details of vendors, date, and amount.
- The employee can skip manually entering all these details into a spreadsheet.
- The employee can also easily classify personal from the business expense, reducing the chance of unknowingly submitting a personal expense as a report.
- By using a corporate credit card for expenses and having the ease of quickly reporting through expense management software, employees can make full use of the card.
- By utilizing cards for business expenses, your business can qualify for rewards and perks, which can reduce expenditures and increase benefits.
How can an automated expense management software help with policy compliance?
- Equipped with automated policy checks, expense management software also decreases the chance of fraud and duplicate claims.
- In case of policy violations in an expense report, it is automatically flagged and notified.
- This dramatically reduces any potential loss your business may incur.
How can an automated expense management software help with data analytics?
- The data extracted from employee expense reports contain valuable information which can provide insights.
- With the feature of expense analytics, the finance team can get foresight into financial risks and avoid losses.
- With the help of analytics, you can identify employees spend trends and patterns, preferences, and make sure there is no overspending.
- The finance team can plan better on how to increase revenue by cutting down costs on certain expenditures potentially.
Should you pick an expense management software to manage your business expenses?
Companies carefully calculate business expenses for growth and profitability. For this, effective measures to manage resources, overhead, and visibility into spending are essential. Automating expense management is an opportunity for businesses to accomplish these objectives.
Business travel and expenses are essential for the growth of companies. But the return on business travel investments and opportunities for growth can be limited by manual expense reporting processes. The main goal for any business should always be to maximize profits and boost revenue while also keeping its expenses in check.