The world economy is on the decline. The current debt crisis which plagues most developing countries can attribute to this loss in momentum. It is imperative that in such times of looming despair, businesses take proactive steps in generating wealth.
A key indicator of economic growth is revenue generation. In times of economic uncertainty, growth comes from optimizing spend channels. This is true for almost all industries that face nerve-wracking competition today.
Though there is a clear mandate for controlling business spends, finance leaders still find themselves at the crossroads. While some say, “we don’t have enough data,” others lament at the inability to enforce regulations. This being, even though they possess insightful data into spending trends.
One of the most overlooked aspects of business expenditure is employee expense management. Employee reimbursements often get deprioritized over other routine payables, as they fall under the "in-house payment" category.
Most enterprising CFOs and controllers believe that effective expense management software can help organizations streamline their business processes. In this article, we try to identify a few key trends that will shape employee expense management.
An age where data extraction is considered a norm
Traditionally, expense reporting depended on an employee’s efforts to submit accurate expense reports. Relying on manual entry of expense data exposes the firm to several risks such as manual errors, deliberate fraud, and loss of receipts. Manual and ERP based expense reporting suffers from all the above issues. Even most of the expense management software solutions struggle with making reporting expenses easier for employees.
While some travel and expense management software solutions still seem outdated, the outliers use machine learning models to combat these pain points. This allows for a once "time-consuming" process to evolve into a “one-click activity” for employees and finance teams, alike.
With accurate data extraction, finance executives can seamlessly review expenses. This reduces any chances of reporting errors and fraudulent claims. We expect more solutions to introduce data extraction capabilities. The only question is - How accurately can they extract data from expense receipts?
Businesses curb expense fraud and build a compliant culture
With all traditional solutions, there is an implied delay, between the stages of data collection and the review process. This delay leads to finance executives rushing through the reimbursement process. This results in wrongful approvals and an increase in expense fraud. Real-time policy checks, help address this very challenge.
When policy checks happen on data extracted in real-time, there is an added layer of security. By using logical rules for complex travel and expense policies, expense management software can flag out-of-policy or fraudulent expenses at the source. This saves money for the firm and time for the accountants. It also provides real-time context to employees as to why their expenses are expense violations.
Most times, employees have negligible insight into expense policies. As a by-product, they fall prey to multiple expense policy violations. Traditionally, when expenses get flagged, the onus is on the accountant and the employee to do the back and forths. These back and forths, usually comprise of the employee explaining why the expense fell under the category. Most of this communication happens via calls, emails, and word of mouth. This provides for inadequate documentation.
To combat this challenge, certain expense management software provides a digital audit trail. Here, every conversation concerning the flagging gets documented in real-time. This allows you to stay audit-ready, at all times. Additionally, real-time policy checks and a completely digital audit trail come as a consequence of accurate data extraction. We foresee that businesses using such solutions will reduce instances of expense fraud and expense policy violations.
Expense analytics takes center stage
We don’t know about the impending recession, but finance leaders will have something to cheer about. With expense data of hundreds or maybe thousands of employees every day, expense analytics will become a routine activity. With the data that expense analytics provides, executives can run reports on risk exposure from policy violations. They can also drill down to the expenses reported by a specific individual or department. This will allow firms to take appropriate action and control expenses as and when they happen.
Other insights into the numbers, can be used to optimize operations and accurately allocate expenses to deals. This, in turn, will help determine the actual profitability of deals and provide insights into sales performance. Analytics helps you understand the spending trends, category-wise spend patterns, frequently associated vendors, and more. These insights can help companies negotiate for bulk discounts with their employees’ most preferred vendors, and more.
With a significant emphasis on optimizing spends, we believe expense analytics will become indispensable to expense management.
Expense software trumps manual management
According to a 2019 Paystream Advisors report, 35% of companies still use a manual based expense reporting system. Another 23% of companies use ERP solutions with in-built expense reporting. Co-incidentally, businesses that use these solutions, still face reimbursement delays. Moreover, companies that rely on manual and ERP based expense management have no visibility into employee expenses. They also lack control to mitigate risks from these expenses.
Firms are actively seeking to ramp up efficiency and financial productivity in their operations. With the mandate clear, it might not be surprising if we see massive adoption of expense management software in 2019.
Do you want to try out this latest trends in expense management? Then schedule a demo with us! Fyle is an expense management software built to take care of manual data entry, provide real-time policy checks, and empower your finance team with accurate data analytics.