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Expense Reimbursements Are Hurting Your Employees and Your Business

According to the Association of Certified Fraud Examiners, expense reimbursements  are responsible for 21% of fraud at small businesses and 11% at large businesses. But that’s not the least of the worries a company faces when reimbursing employees for travel and expenses (T&E). Approving expense reports is a manual and tedious process that ties up the finance team and managers for hours. 

Add to it the inconvenience caused to employees who have to wait for weeks or months for their expense reports to get approved, and you have a good idea why the conventional expense reimbursement process is a mess.

If you are not yet convinced, read on to know all the reasons why your company needs to make a radical change in the way it reimburses employees.  

How reimbursements are a pain for the company

Policy violation

In a shocking study, it was found that nearly two-thirds of employees haven’t read their company’s spending policy. Even more worryingly, 85% of employees admit to lying on their expense reports. 

The present method of employees submitting old paper receipts or filling up spreadsheets with virtually no supervision is in no way equipped to handle the dual challenges of fraud and policy violations borne out of ignorance. This weakness of conventional reimbursement methods is prevalent because finance teams must manually process hundreds or even thousands of expense reports from different employees who may have entirely different spending policies. 

Also, since paper receipts are involved, there is no way to check them for authenticity or ensure the same receipts aren’t submitted multiple times or by different people. 

Processing costs and time

Studies indicate that an average expense claim takes about 20 minutes to process. Considering that hundreds of expense reports go through the system every year, wasting the time of everyone involved, it is sensible to assume that the process drains valuable time from the company. 

Due to all the waste of time and resources, it is estimated that an expense claim costs $58 to process, which is a hefty sum.

As per the same report, there is a worrying trend of errors in the expense claims processing stage. Notably, the same report claims that 19% of expense reports contain errors and that correcting an expense report takes about 18 mins and costs about $52. 

How reimbursements are a pain for your employees

Delays in reimbursements

Because of complications in the process and unclear rules, 48% or so of employees are still using their own money for company expenses without being reimbursed. Given how on-field employees spend a lot of money (10 to 15% of their salary) for travel and other related expenses, failure to reimburse or delays in the process can be quite demoralizing.  

When employees have to wait for long to get reimbursed, it creates an atmosphere of distrust and resentment, which only worsens if they repeatedly need to confront the management or finance department to process their reimbursements. 

Hassles in the reporting process

For the most part, employees have to carry around crumbling paper receipts or fill-out extensive spreadsheets if they want to file an expense. While filling out the form or submitting their receipts, they have no way of knowing whether their submission followed company policy. 

Consequently, when the reimbursement doesn’t come or is delayed, employees are left wondering why they had to go through all that trouble. Add to this inconvenience the wasted hours of the employee, and you have the recipe for a crisis in the form of high levels of employee dissatisfaction and turnover.  

Conclusion

Expense management is undoubtedly a painful process for both the company and the employee. For the company, it is wasted hours and money down the drain. For the employee, manual expense reporting represents a financial burden, lost productivity, and delays in getting their money back. 

As a result, automated expense management is the way to go. Apart from bringing much-needed efficiency to the process, it also substantially boosts visibility and improves policy compliance.

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How Automated Expense Management Benefits Your Finance Team?

Imagine a situation where your finance team is spending excessive amounts of money processing simple reports, letting fraudulent expense claims go unnoticed, and unnecessarily wasting countless hours. 

Sounds scary, right? 

Companies that are still reliant on manual expense management processes don’t have to imagine. The nightmarish scenario that we described is a reality for them because finance teams can’t do with old-fashioned spreadsheets and still expect to be productive. 

Study after study has confirmed this fact. For instance, the Global Business Travel Association estimates that 19% of expense reports contain errors. 

More shockingly, the study found that processing a single expense report can cost as much as 58$! Another 52$ goes down the drain if the finance team has to make corrections to an expense report. 

Add to this the trouble a company can get into during audit time if the expense reports are faulty, and you end up with a grim picture of how toothless your finance team is without a proper expense management system.

But how exactly does an automated expense management solution help? Here, we uncover the tangible benefits that an automated expense management system brings to a finance team. 

  • Highly streamlined and accurate expense processing and reimbursement

Since expense management software eliminates the need for receipts, finance teams no longer have to spend hours poring over old pieces of paper that are about to fall apart. The system automatically tells them whether an expense is policy compliant, meaning reimbursements will only take seconds. 

Further, it lets finance teams to allow for reasonable policy violations, such as taking a big client out to a fancy dinner. 

What’s more, the automation does away with the errors that often creep in when a long and tedious manual process is involved. 

  • Fraud prevention and policy compliance 

When reimbursement is made on the merit of old receipts, there is a high chance of fraudulent claims. In the US alone, expense fraud costs companies a whopping $3 billion a year. If companies automate policy compliance, they can ensure that finance teams get expense reports free of fake, duplicated, or inflated receipts. 

For instance, an automated system can detect within seconds if an employee is trying to pass off dinner with a family member as an outing with a prospect. Automated expense management will also come in handy for the finance team when it comes to rejecting expenses that have already been reimbursed. 

Besides, expense management solutions allow you to set customized spending rules to the level of a single user, which makes the finance team’s job easier because they do not have to rifle through the employee handbook every single time before approving an expense. 

  • Superior regulatory compliance

Small financial irregularities can often lead to companies losing tons of money due to legal issues with regulators. An automated expense management system helps the finance team ensure that every instance of company spending follows national and international regulations and company policy without the need for complex and error-prone manual audits.  

  • Unparalleled visibility of company expenses

For the finance team, one of the key benefits of an expense management solution is that it allows them to generate comprehensive reports of company spending. With these reports and the visibility that comes with them, finance teams can identify the area where wasteful spending has occurred. 

For instance, if the data shows a department purchasing flight tickets too late and incurring high prices, they can be informed to book tickets earlier, leading to massive savings for the company. 

  • Powerful third-party integrations

Expense management software can integrate well with third-party applications, such as corporate travel agencies, online booking tools, accounting software, and ERP solutions. Due to this capability, finance teams no longer have to spend countless hours loading data from one platform to another. Consequently, each platform ends up with updated and accurate information that enables the finance team to save time, reduce instances of fraud, and speed up reimbursements. 

Conclusion

As you can see, an automated expense management system helps your finance team stay hyper-productive and effective when it comes to ensuring policy compliance in employee expenses. Moreover, they can quickly reimburse employees while maintaining high levels of spending visibility and data security.   ExpenseOut is guaranteed to delight your finance team. Try it free now/ book a demo.