Even though digitization has eased business functions, businesses still face problems when it comes to handling their expense management. This leads to the simple question of why corporate expense management systems keep failing?
Expense management involves numerous stakeholders working in sync to get the work done. There are too many moving parts when it comes to streamlining the entire process of expense management. Additionally, idly waiting to see what ROI you have on your current system is inadvisable.
To help you through your expense reporting journey, we have compiled an article that covers everything you need to know about corporate expense management systems. Further, we include the pain points that result in expense management systems failing. Lastly, we discuss possible solutions to help fix your business processes. Let’s dive in!
Major reasons for failure in corporate expense management systems
According to a U.S. Bank study,
A whopping 82% of small businesses that failed to effectively manage their expense management cited cash flow problems as a factor for their failure.
Businesses that use a system which does not fundamentally enforce and change how the entire expense management process takes place, often see minimal to no ROI on their investments. This is regardless of what software or process optimizations they make.
Top 5 reasons for corporate expense management systems failing
- Reimbursement delays
Companies that experience failure or lapse with their expense management processes generally enforce manual methods of expense reporting or have a dysfunctional expense management software. Reimbursement delays may mainly be due to:
- Delays due to approval issues, where approvers take too long to take action on requests.
- Inefficient systems that fail to notify both ends of the approval flow.
- The lack of documentation from employees also causes reimbursement delays.
- Missing information prevent requests from moving forward, and without proper communication, the whole process comes to a stop.
- Process obstructions
An over-reliance on people to be actively engaged with their duties of expense reporting and management causes a choke-hold in the process. When companies use offline tools for things like approvals, the entire process is at a standstill because they need the manager's approval, and he might be unavailable or unwilling to comply immediately.
Let's say a travel manager needs to book a flight for an employee. His current travel booking method or tool has no connection in any way to the company accounts. He now has to go through multiple tools, softwares, and possibly agents before he finally completes the task. At the same time, he has to keep going back and forth between the approvers and the travelers so that everything is under the company guidelines.
This decentralization is another cause for creating a bottle-neck in travel booking. The dependencies on these outdated approval processes can cause substantial damage to your cash flow and also your employee's morale.
- Outdated methods
A business that incorporates old and manual methods in their expense workflows cause damage to both the company and the employees. Spreadsheet and Excel-based reporting is not ideal in today's businesses. Additionally, businesses that do not adopt an online expense management solution will be quickly overwhelmed when dealing with employee expenses. Here’s why:
- Excel-based expense reporting is prone to errors and easy to manipulate and provides no way of obtaining insight into spends.
- Audits are a pain as finance teams have to go back and forth between the company accounting software and the elaborate Excel reports.
- Paper-based expense reporting is tedious, prone to errors, and a highly inefficient approach.
- Paper receipts deteriorate and become a hassle to maintain.
- Undefined policies
Unclear policies on the filing of expenses can have an impact on business spending later on. Without a clear understanding of travel expense policies, employees may keep wondering if their travel expenses can be reimbursed or not.
Here’s how unclear policies affect the stakeholders:
- The employees may get discouraged from taking business trips since they have no idea which expenses are reimbursable. This prevents reimbursements from happening in a timely manner.
- The employees may be filing unauthorized claims, that may get reimbursed most of the time. That happens because there's no actual process for approval based expense reporting. All requests go through the managers for approval.
- Managers generally may not have enough time or don't pay much attention to the approval requests. This makes them spend less time reviewing the requests, resulting in an inflated rate of approved expense claims.
- When policies are undefined, it is difficult to enforce them. Simply writing out a 20-page policy that is usually not read entirely by employees isn't solving anything. This makes it even worse when employees feel that they are constricted with their spending habits.
- No Insight into expense metrics
A common issue amongst organizations is figuring out what their company is spending on. These insights prove helpful to make well-informed business decisions. Using manual-based and outdated forms of expense management cause companies to miss out on these essential metrics.
Simple spreadsheets don't provide enough, as they are singular data points that have a hard time showing the connection they have with everything else. A solution is needed where an individual can view how all types of expenses interact and affect each other. This is one of the critical areas an automated expense management software can help out with. Automated TEMs come equipped with advanced capabilities to track all expenses and allow users to view detailed reports and statistics.
How does Fyle reinvent corporate expense management?
Fyle's approach to corporate expense management helps elevate businesses to new heights with a holistic approach. We revolutionize the future of expense reporting with an advanced solution that utilizes modern innovations to bring a user-friendly product to companies of all sizes. Some of the features our customers adore are:
- Receipt scanner and mileage tracker
- Approval workflow automation
- Accounting and travel software integration
- Automated policy enforcement
- Expense analytics
If you wish to enhance your expense reporting experience, join us by scheduling a demo today!