Unclear travel and expense procedures, lack of expense visibility, error-prone spreadsheets, and loose policies are some of the mistakes made in corporate expense management.
Do any of these sound familiar?
If yes, this article is for you!
Being aware of your financial process and its challenges can help you design and implement an effective corporate expense management process. Therefore, in this article, we will help you identify some of the common mistakes businesses commit while managing expenses. We will also look into how to address and curb these challenges by implementing an expense management software.
Common accounting errors in travel and corporate expense management
Most accounting errors occur due to simple human errors such as data entry, lost receipts, or forgotten expenses. Errors can also be due to faulty hardware or an inefficient software solution. These errors can often be overlooked as they seem minor to you as a business owner. However, if you ask your accountants, they can tell you just quickly these minor errors can add up to cause big trouble for your business.
Therefore, the next time something doesn't add up while updating numbers, check for one of these frequently overlooked errors:
Data entry errors
Whether you have input the same number twice or forgotten to add a zero, simple human error may be the reason why the numbers don't make sense. Errors in data entry are bound to happen after a long day at work or numerous other distractions.
Losing record of expenses
Documenting of receipts above a specific limit is a mandate to stay compliant with the IRS. Unreported expenses, misplacing or losing receipts, old records, and number guessing - all these factors contribute to an inaccurate view of the business cash flow and invite unpleasant audits from tax authorities.
Forgetting to cross-check expenses and transactions with bank statements
Having an updated and accurate view of cash flow by routinely checking business transactions against your bank’s record is important. It is important to keep a track of spending/statements in real-time to avoid unnecessary trouble at the time of reconciliation.
Losing data due to irregular back-ups
Forgetting to back-up data can be big trouble if your computer crashes or in case of other such unfortunate events. Calculating taxes or auditing can prove to be impossible if critical data is lost. Additionally, without the numbers, it becomes impossible to make data-driven business decisions at the right time.
Let’s take a more detailed look at some mistakes that can create a shaky foundation for your corporate travel and expense management process.
The role of effective policy enforcement in corporate T&E management
Are you sure that expenses incurred fall within your corporate guidelines? Does your company have a process for detecting duplicate expense claims? What is your company’s process to identify and capture fraudulent behavior?
Business mandates travel and expense policies, but in reality, weak enforcement of policy guidelines may leave employees to act poorly by it. Non-compliance in an organization may also happen due to confusion in understanding the policies.
Contributing factors for poor employee compliance:
- Loosely framed expense and travel policy
Employees may be tempted to conjure up false expenses if there is a loose policy framework. Lack of a strong enforceable T&E policy leaves room for fraudulent, duplicate claims, fictitious expenses, and overstated expenses.
- Complicated policy documents
Unclear or confusing policies can lead employees to often assume what something means or just casually skim through policies without paying much heed to them. Employees thus may have trouble understanding what categories fall under reimbursable expenses. This might result in them reporting out-of-policy expenses, translating into them losing out on their money. This can take a massive hit on both employee morale and productivity.
- Ineffective procedure guide
An employee can cause delays in the auditing and reimbursing process if he/she is unaware of the procedure to follow. For example, when a policy is violated in an expense claim, an employee may need to provide clarifications.
Not knowing where to turn and being tossed from one desk to another can leave the employee frustrated. This will not only consume a lot of time and delay the reimbursement process, but it can also lead to unreported expenses and trysts with tax authorities.
Importance of corporate expense management data visibility and analytics
Do you know the top-spending categories in your organization? Or the average amount your employees spend on meals or business lunches?
Lacking visibility into these data points can prove to be a hurdle in optimizing spending and maintaining a healthy cash flow.
If you are unaware of the specifics, there is a substantial risk of making poor financial decisions. For example, allocating and splitting budgets between different departments of your business will prove to be a task. Failing to do this effectively will most definitely result in confusion, tens of clarification email threads, and suffering budget compliance! Nobody wants that!
Contributing factors for inadequate financial data:
- Overlooking employee spending trends and patterns
Lacking visibility into your employee's spending trend can become a hurdle while auditing or optimizing business processes. You have no way to tell if your employees are making unexpected expenditures or it’s atypical of their usual pattern. This can limit you from tweaking and adjusting periodic budgets.
- No real-time monitoring and reporting
A manager may approve an expense claim made by employees without knowing whether the claim made is fake or real. Further, a delay in submitting expense reports or incorrect expense reports can lead to lost receipts and errors needing special approvals or handling. Lack of prompt monitoring can birth more inefficiencies in your travel and expense reporting and management.
Results of poor corporate expense management processes
- Inaccurate representation of company expenses due to unreported expenses, manual error, and limited visibility
- Time-consuming process due to untimely reporting, unclear procedures and guidelines, and manual entries of transactions
- Loopholes for employees to make fraudulent and multiple claims due to inadequate monitoring and loose policies
- Poor financial decisions that cost the business dearly due to the absence of a bird’s eye view on the entire process and outdated records
- Loss of crucial expense data such as receipts and forms due to untimely reporting and lack of centralization
- Increase in processing costs due to multiple errors in accounting, poor reporting, fraud, and delays
How to avoid common mistakes in corporate expense management
For decades, the entire process of corporate expense management has been tedious and cumbersome. For employees, they had to save receipts of expenses, tape them to sheets of paper, photocopy them, and then submit them just in time. For the finance team, this meant going through every physical receipt and making sure that every receipt and expense tied to the corresponding bank transaction.
The next ‘advanced” model was recording everything on an Excel Spreadsheet, but this proved to be inefficient as well.
The coming of automated expense management solutions has enabled companies to remove paper and spreadsheets from their corporate expense management system. While some still run on the traditional manual method, many have recognized the benefits of digitizing and automating their expense management.
Benefits of using a corporate expense management software
Missing documentation or proof of expenses can lead to the Finance team chasing down employees to provide missing details. This further translates to your employees scrambling through their belongings to find proof of business expenses. All these attributes lead to a delay in expense reporting, processing, and consequently, reimbursement of expenses, and financial reporting. This is one of the driving forces behind businesses rapidly adopting automated expense management.
Here are some other benefits:
Effective receipt management
Receipt management is made easy with an expense management software. An employee can scan physical receipts or upload them directly via a mobile app or web. They also have the option of reporting expenses from their mailbox. All this makes tracking, organizing, reporting, and saving of expense reports by both parties convenient. Additionally, having proper documentation also means staying audit-ready and complying with tax laws.
Automatically track corporate credit card expenses
A corporate expense management software extracts data from receipts, emails, and corporate credit cards. Once done it directly feeds it into the expense tool. This data is automatically organized and stored in an integrated centralized storage the software comes with. Expense data is also matched automatically to the corresponding transaction. This eliminates the chances of duplicate or multiple claims. This also makes auditing and reconciling corporate credit cards faster and less challenging for your finance and accounting team.
Know spending patterns with data analytics
All expense reports, pending approvals, approved expense reports, and reimbursement can be viewed all under one standardized system. This creates visibility into your employee spending and transparency across your organization. With the power of data analytics, finance teams can gain insight into spending trends, frequent spend categories and employees, and more. This can further help understand your employee preferences while on business travel. This can help finance teams contact frequently associated vendors for discounts. This helps you optimize business expenses for your traveling employees.
Configure and enforce policies within the software
A corporate expense management software enables finance teams to customize and enforce policies as per the business needs. Automated synchronous policy-checks ensure claims abide by the policy guidelines. This means employees don’t have to remember all the policies and your finance team won’t have to go looking for reasons behind violations. This plays a crucial role in increasing employee compliance and reducing expense fraud.
SUGGESTED READ: Expense management automation – How to win your CFO’s approval?
Does your business need a corporate expense management software?
Businesses lose billions of dollars in the form of expense fraud. This happens because most companies still use traditional means for managing business expenses. This not only burns a hole in your pocket but can also take a significant hit on your company's financial and productive health.
Investing in a feature-packed corporate expense management software is imperative for running your business smoothly. Automating error-prone manual tasks also means less misreporting, reduce accounting errors, and staying in a state of constant compliance. Additionally, it helps completely streamline all processes that revolve around expense management and stay audit-ready at all times.
Sounds like something you need? Schedule a demo with Fyle today and put an end to all your expense management woes!