The downfall of FTX, the now-defunct cryptocurrency exchange founded by Sam Bankman-Fried in 2019, has dominated the recent news cycle.
Everyone, including regular citizens, businessmen, investors, and crypto enthusiasts are following the story as it unfolds.
However, we at ExpenseOut felt that there was one striking aspect of the story that CFOs, HR & finance teams, and company management had to learn from—handling expenses in a chaotic way.
According to the new CEO John Ray, who was installed to help FTX restructure, the company was using a messaging app to track and approve expenses.
Does this method of managing expenses seem familiar to you?
If yes, it is time to take corrective action.
The pitfalls of not having a centralized expense management solution
The FTX saga is deeply complicated, and the story is still unraveling. But if you are a company that has people traveling for business, then there are plenty of lessons you can take away from it.
One of the biggest mistakes a company can make about its business travel expense management efforts is not having a proper expense approval workflow.
Without a proper expense approval process in place, employees may end up overspending, underreporting their expenses, or even using company funds for personal expenses.
Not having a centralized system in place where all employees can seek approval for their expenses also creates the risk of a lack of transparency. If employees are constantly seeking approvals for spending on messaging applications, emails, or group chats, there will be no way to track and verify the spending that has happened for company accounting purposes or tax audits.
Because there is no established chain of command for seeking approvals for business travel expenses, there is a very real possibility that money will be spent without any accountability. Even if the finance team later catches wind of any discrepancy, they will not be able to track down the problematic spenders or the people who authorized it since messages can be deleted, and email threads will take hours to go through.
Making matters worse, the issues in utilizing company funds could get out of hand and cause huge problems for the company with investors and even seriously damage their credibility.
Another major issue that plagues companies nowadays is the lack of a proper solution for employees, especially the ones working remotely, to submit their expenses. They end up sending invoices/ receipts via messaging apps, email, or through spreadsheets, leaving the finance team with enough manual work for days that are spent exclusively on verifying and approving every individual expense for the sake of reimbursement. The process of verifying expenses further gets complicated when the finance team must manually verify each expense for policy compliance.
How a comprehensive expense management solution can bring in heightened accountability and transparency
Having expense reporting take place over multiple channels is usually the root of many companies’ travel expense management woes.
To resolve the issue, the best thing a firm can do is require all employees to report their expenses via a single platform. Ensure that you implement a mobile-friendly expense management solution, so that wherever the employee travels, he/she can quickly report their expenses with a receipt or invoice.
If you employ an expense reporting system with OCR functionality, your employees will have the convenience of taking a picture of the receipt and uploading it into a secure e-vault rather than carrying around old receipts for reimbursement. The OCR can read the receipts, extract valuable information, and prepare a report in real time for the manager or finance team to approve for the sake of reimbursement.
Nowadays, AI-based expense management systems can even flag out of policy expenses and make the employee enter a reason for the violation or even outright reject the entry. If the employee gives a valid reason, such as a quickly thrown-together dinner meeting with a high-value client, last-minute flight bookings for emergencies, etc., the manager or the admin who oversees approving the expenses can give it due consideration.
Besides, the management and finance team can view all the expense reports of the employees at any time. This functionality will go a long way in helping companies avoid serious violations during tax season. Further, having all the employee expense reports in one location can help the finance team make reimbursements easily along with the employee’s salary.
Most importantly, the company will have full visibility into who is spending what, who is approving various expenses, and whether everyone is adhering to the company spending policy.
CFO, managers, and HR professionals all have a lot on their plate, so they can’t be expected to check every business travel expense manually to see if it follows the company policy. There is also no way that the finance team can spend hours documenting every single expense manually by filing receipts from every single employee who has traveled on company business. This process becomes infinitely more chaotic when employees use multiple unreliable sources, such as messages, email exchanges, and spreadsheet entries for expense tracking and approval.
If you want to avoid all this and bring order to the chaos that is your business travel management process, reach out to us. The ExpenseOut team can help you implement a solution that will bring 100% transparency and policy compliance to your business travel spending.