Expense management software evaluation

Expense management automation - How to win your CFO’s approval?

September 30, 2019
|
5
Min Read
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Employee expense management is one of the most overlooked finance operations tasks. Such negligence leads to poor employee experience and leakages in cash flow. Expense software can help reduce bottlenecks in such cases. 

Though we have seen widespread adoption of expense management software in recent years, there are still companies relying solely on manual methods. Also, there are finance managers and accountants who have never procured software and are unsure of how to go about it. 

In this article, we outline how to create a case for investing in expense management software. This guide helps you answer the tough questions to your CFO or Finance controller when it comes to expense reimbursement automation.

Outline the current challenges in your employee reimbursement process

Before you head on to your CFO's cabin or ask him for a time slot on his calendar, you would want to make sure that you have done your homework. It means that you should be aware of all the challenges that you are currently facing from your current process. You could be using a manual excel-based method or a software-based one, regardless, outlining the challenges provides clarity.

Key points to consider in outlining the challenges 

The dollar value of money lost due to policy violations is an important metric. Your CFO and controller would be more than happy if you could quote this number. This number is usually an educated guess which you can make based on the number of expense reports, the average number of line items in each expense report, average % violating expenses in a report, and the claim amount of violating expenses.

An alternative and simpler way of calculating this number would be to take a percentage of the total employee reimbursement claims. 

For example, if you have 100 expense reports a month with average reimbursement claims of $800 per expense report. The total monthly reimbursement claims are around $100,000. 

Based on your experience while auditing expense reports, make an educated guess on the minimum dollar value lost due to duplicate receipts, manual errors while auditing, etc. Say, it is 2% of the entire amount, this amounts to $2000 or a loss of $24,000 annually. 

  • Turnaround time for reimbursements

 Another aspect of challenges to employee reimbursements is the turnaround time in the process. It becomes difficult for accountants and finance managers to meet deadlines with multiple stakeholders in the process.

It helps if you could identify the total time taken for the process - from the submission of an expense report to payouts to employees. Diving further, get details on the time taken to move from one stage to the next. It includes items like how much time does it take to approve all reports, time taken to verify all reports, and the time taken after verifications to payouts. 

What do you need to have before you seek approval from your CFO? 

Once you have outlined the challenges of your process, you should have a fair idea of the expected outcomes of the evaluation process. To make things easier for your CFO or controller to understand, it would be useful if you could prepare the following items as well. 

Identify functional requirements from the software

Technical specifications involve the basic functions expected of expense management software. These are dependent on the reimbursement procedure and expense policies your company follows. For example, you might want to consider things like whether you need a corporate credit card reconciliation module in the software. 

Some of the basic functional requirements are - 

  • Receipt capture and automatic data extraction - For faster and accurate reporting expenses
  • Ability to define user-roles and set up expense approval workflows - For well-defined approvals and streamlined processes
  • Ability to reconcile credit card statements with reported expenses - Helps in accurate reconciliation with controls for policy violations; facilitates faster settlements
  • Ability to handle expenses from multiple business units - Helps manage expenses centrally and gives you a consolidated view of all employee expenses
  • Ability to flag expense policy violations - Helps reduce the loss of money due to expense fraud 

Specify the requirements of the software depending on the nature of the reimbursement process. This step helps the CFO get a clear view of expectations from an automation project. 

Hosting ( Cloud vs. On-premise ) 

Depending on the needs of your organization, you might need an on-premise solution or a cloud expense management software. Organizations own licenses in the case of on-premise solutions.

It is the step where you outline the associated costs with both kinds of solutions. For example, the costs associated with on-premise solutions are license purchasing fees, implementation fees, and annual support fees. While cloud solutions have monthly or yearly subscription fees. Weigh the associated costs with the expected features and the outline in your document. 

Number of active users

If you opt for a cloud-based expense management software, you might want to consider the number of employees who would actively use the software. 

Many subscription software charge customers based on the number of active users. Fyle defines an active user report as an employee who submits at least one expense report per month. The advantage of using active users for charging is that it reduces the cost of ownership of the software. 

Required integrations

You might need integrations with your accounting software or travel booking tool for accurate accounting. Integrations become very important when you want a consolidated view of all your expenses. For this, you need to list down all systems which handle expenses or travel. This step later helps you shortlist possible vendors based on available integrations. 

Business units and geography 

If your company has multiple business units, you need to consider that early on in your evaluation process. It is essential because there are various challenges involved in handling approvals and reimbursements when operating across business units. Listing down requirements of distinct business units is crucial and helps you weed out problems early on even before you begin your search process. 

Identify data migration costs and requirements

If you are already using software to manage expenses, then you might want to consider the migration costs. Whether you are using an ERP or a dedicated expense management software, there are always risks and costs associated with the migration of data. These costs vary depending on the amount of data and the difference between the two systems. 

How to justify the costs associated with implementation and maintenance? 

The final step is to calculate ranges for annual total ownership costs for expense management software. Along with the estimate, you need to calculate the dollar value of the time lost due to ineffective management. Add to this the money lost due to errors in checking for expense policy violations.

A - Money lost due to expense violations

B - The dollar value of time lost in processing expense reports 

C - Total ownership costs of the software 

If (A+B)-C>0 then you have proved that the current process is more expensive than automation. You need to note that both A and B are estimates. This is the main reason why you need to prepare multiple estimates for the CFO or controller to evaluate accurately. 

What to do once you get the budget for automation? 

Congrats! You got the approval to explore solutions for automated expense management software. This step is where all your pre-evaluation hard work will repay. Here are the next steps which you might want to consider. 

Start accepting requests for proposals

Hopefully, you were able to list down prospective solutions that fulfill your requirements. To zero down into one or two solutions, it is a good idea to send RFPs to vendors. It helps you further differentiate between solutions based on implementation pricing, implementation period, etc. 

Schedule a demo and bring in other stakeholders

Once you have shortlisted vendors based on their proposals, you can schedule a demo with them. Demos generally happen over a conference call for cloud-based software. While for on-premise solutions, the solutions specialists might give a live demo. 

Post the demo, share your notes with the team, and bring in other stakeholders in the process. These stakeholders can be the IT team, legal team, procurement team, etc. It is always advisable to intimate other stakeholders early on in the process to avoid any conflicts. 

With the above tasks completed, you should be able to proceed with minimal friction and hassles. We hope you save money and time by automating expense management. We would suggest that you begin with a demo of Fyle to set your expectations from other software.

Expense management software evaluation

Expense management automation - How to win your CFO’s approval?

September 30, 2019
|
5
Min Read

Employee expense management is one of the most overlooked finance operations tasks. Such negligence leads to poor employee experience and leakages in cash flow. Expense software can help reduce bottlenecks in such cases. 

Though we have seen widespread adoption of expense management software in recent years, there are still companies relying solely on manual methods. Also, there are finance managers and accountants who have never procured software and are unsure of how to go about it. 

In this article, we outline how to create a case for investing in expense management software. This guide helps you answer the tough questions to your CFO or Finance controller when it comes to expense reimbursement automation.

Outline the current challenges in your employee reimbursement process

Before you head on to your CFO's cabin or ask him for a time slot on his calendar, you would want to make sure that you have done your homework. It means that you should be aware of all the challenges that you are currently facing from your current process. You could be using a manual excel-based method or a software-based one, regardless, outlining the challenges provides clarity.

Key points to consider in outlining the challenges 

The dollar value of money lost due to policy violations is an important metric. Your CFO and controller would be more than happy if you could quote this number. This number is usually an educated guess which you can make based on the number of expense reports, the average number of line items in each expense report, average % violating expenses in a report, and the claim amount of violating expenses.

An alternative and simpler way of calculating this number would be to take a percentage of the total employee reimbursement claims. 

For example, if you have 100 expense reports a month with average reimbursement claims of $800 per expense report. The total monthly reimbursement claims are around $100,000. 

Based on your experience while auditing expense reports, make an educated guess on the minimum dollar value lost due to duplicate receipts, manual errors while auditing, etc. Say, it is 2% of the entire amount, this amounts to $2000 or a loss of $24,000 annually. 

  • Turnaround time for reimbursements

 Another aspect of challenges to employee reimbursements is the turnaround time in the process. It becomes difficult for accountants and finance managers to meet deadlines with multiple stakeholders in the process.

It helps if you could identify the total time taken for the process - from the submission of an expense report to payouts to employees. Diving further, get details on the time taken to move from one stage to the next. It includes items like how much time does it take to approve all reports, time taken to verify all reports, and the time taken after verifications to payouts. 

What do you need to have before you seek approval from your CFO? 

Once you have outlined the challenges of your process, you should have a fair idea of the expected outcomes of the evaluation process. To make things easier for your CFO or controller to understand, it would be useful if you could prepare the following items as well. 

Identify functional requirements from the software

Technical specifications involve the basic functions expected of expense management software. These are dependent on the reimbursement procedure and expense policies your company follows. For example, you might want to consider things like whether you need a corporate credit card reconciliation module in the software. 

Some of the basic functional requirements are - 

  • Receipt capture and automatic data extraction - For faster and accurate reporting expenses
  • Ability to define user-roles and set up expense approval workflows - For well-defined approvals and streamlined processes
  • Ability to reconcile credit card statements with reported expenses - Helps in accurate reconciliation with controls for policy violations; facilitates faster settlements
  • Ability to handle expenses from multiple business units - Helps manage expenses centrally and gives you a consolidated view of all employee expenses
  • Ability to flag expense policy violations - Helps reduce the loss of money due to expense fraud 

Specify the requirements of the software depending on the nature of the reimbursement process. This step helps the CFO get a clear view of expectations from an automation project. 

Hosting ( Cloud vs. On-premise ) 

Depending on the needs of your organization, you might need an on-premise solution or a cloud expense management software. Organizations own licenses in the case of on-premise solutions.

It is the step where you outline the associated costs with both kinds of solutions. For example, the costs associated with on-premise solutions are license purchasing fees, implementation fees, and annual support fees. While cloud solutions have monthly or yearly subscription fees. Weigh the associated costs with the expected features and the outline in your document. 

Number of active users

If you opt for a cloud-based expense management software, you might want to consider the number of employees who would actively use the software. 

Many subscription software charge customers based on the number of active users. Fyle defines an active user report as an employee who submits at least one expense report per month. The advantage of using active users for charging is that it reduces the cost of ownership of the software. 

Required integrations

You might need integrations with your accounting software or travel booking tool for accurate accounting. Integrations become very important when you want a consolidated view of all your expenses. For this, you need to list down all systems which handle expenses or travel. This step later helps you shortlist possible vendors based on available integrations. 

Business units and geography 

If your company has multiple business units, you need to consider that early on in your evaluation process. It is essential because there are various challenges involved in handling approvals and reimbursements when operating across business units. Listing down requirements of distinct business units is crucial and helps you weed out problems early on even before you begin your search process. 

Identify data migration costs and requirements

If you are already using software to manage expenses, then you might want to consider the migration costs. Whether you are using an ERP or a dedicated expense management software, there are always risks and costs associated with the migration of data. These costs vary depending on the amount of data and the difference between the two systems. 

How to justify the costs associated with implementation and maintenance? 

The final step is to calculate ranges for annual total ownership costs for expense management software. Along with the estimate, you need to calculate the dollar value of the time lost due to ineffective management. Add to this the money lost due to errors in checking for expense policy violations.

A - Money lost due to expense violations

B - The dollar value of time lost in processing expense reports 

C - Total ownership costs of the software 

If (A+B)-C>0 then you have proved that the current process is more expensive than automation. You need to note that both A and B are estimates. This is the main reason why you need to prepare multiple estimates for the CFO or controller to evaluate accurately. 

What to do once you get the budget for automation? 

Congrats! You got the approval to explore solutions for automated expense management software. This step is where all your pre-evaluation hard work will repay. Here are the next steps which you might want to consider. 

Start accepting requests for proposals

Hopefully, you were able to list down prospective solutions that fulfill your requirements. To zero down into one or two solutions, it is a good idea to send RFPs to vendors. It helps you further differentiate between solutions based on implementation pricing, implementation period, etc. 

Schedule a demo and bring in other stakeholders

Once you have shortlisted vendors based on their proposals, you can schedule a demo with them. Demos generally happen over a conference call for cloud-based software. While for on-premise solutions, the solutions specialists might give a live demo. 

Post the demo, share your notes with the team, and bring in other stakeholders in the process. These stakeholders can be the IT team, legal team, procurement team, etc. It is always advisable to intimate other stakeholders early on in the process to avoid any conflicts. 

With the above tasks completed, you should be able to proceed with minimal friction and hassles. We hope you save money and time by automating expense management. We would suggest that you begin with a demo of Fyle to set your expectations from other software.

Effortless expense management for all business spends. Earned time, saved costs, improved productivity, happy employees - achieve it all with a single software.

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