Old-fashioned expense reports bring with them a host of pain points. Labour-intensive, time-consuming, and stressful they were efficient several decades ago. In today’s digital ecosystem, manually managing expenses with paper reports is stressful and cumbersome for employees and finance teams alike with a high potential for fraud risk for the company.
With technology streamlining operations, it is now possible for expenses to be managed without paper reports.
Expense reports are never limited to just the person filing them. From managers to finance teams, they require time that could have been spent on strategies and mission-critical core business needs.
Listed below are some reasons as to why expense reports are a drain on time and money.
- Time taken to process an expense report
It takes 20 minutes on an average to process an expense report. While paper-based reporting has been around for a long time, it requires incredible effort and concentration to be processed.
The typical claim goes through the following lifecycle:
- Employee filing the initial claim – 5 minutes
- Managerial review and approval – 5 minutes
- Finance team reviews, reimburses, and reconciles numbers – 10 minutes
Extrapolate this to cover all the employees in a company with the number of travels, and you will be surprised at the number of hours spent on filing and processing expense reports.
- Data entry errors
19% of all expense reports contain errors according to the Global Business Travel Association. That roughly translates to 1 in 5 expense reports being filed incorrectly. The same study demonstrates that it takes an additional 18 minutes to correct an expense report.
Bringing in more numbers, this means it takes a total of 38 minutes to process a claim of which 28 minutes are borne by the finance team. This leads to finance teams being inundated by paper-work and dreading month-end account reconciliations.
- Lack of awareness about company policies
It should hardly be surprising that company personnel do not read internal policy documents. However, this means employees are spending company money without being aware of regulations.
With international travel becoming increasingly prevalent, it is necessary to follow governmental regulations and stay compliant. Lack of compliance leads to a high risk of losing credibility or incurring a steep fine.
The best way to combat this is to deploy software with expense management capabilities built-in to enforce policy rules and ensure compliance.
- Disparate processes
Only 32% of companies have automated links between expense reports and other processes. It is essential to use a platform that makes for an integrated experience. The system needs to compile expenses, subscriptions, procurement, and invoices.
Intuitive platforms help employees spend smarter and save better. A streamlined software would directly connect expense reports to accounting tools. It is essential to have a single process for documenting company spend and accounting instead of several isolated protocols running parallelly.
- Inaccurate reports
In a poll conducted, over 3/4th of employees (85%) admit to lying on expense reports. Studies show that 5% of employees who lie fabricate some part of every claim. A study by the Global Payroll Association (GPA) found that
- 10% of employees admit to submitting erroneous claims all the time
- 20% of employees admit to submitting inaccurate claims irregularly
This demonstrates the attitude most employees have regarding the expense management process.
- Expense fraud is expensive
Expense fraud costs U.S. businesses over $2.8 billion per year. According to the Global Payroll Association, the most common types of fraud includes
- Exaggerating mileage (27%)
- Buying office supplies for personal use (20%)
- Taxi receipt modification to claim higher fares (16%)
The above three alone is estimated to cost UK businesses around £2 billion a year.
- Employees covering business cost out of their pocket
With delayed reimbursements and a general lack of knowledge around company policies, several employees resort to paying for business expenses from their own pockets.
This is highly unfair as the company has made provisions to cover these expenses and are expected to do so by law.
Beyond the cost, this leads to reduced morale and dissatisfied employees, ultimately affecting productivity and performance.
- Unclaimed Expenses
Several times employees simply do not file a report. The average value of unclaimed expenses was £123 per person.
While some in the management might say this is the employees’ fault, this highlights a larger issue. According to the study, the top reasons given for filing expense reports included
- Loss of physical copies of receipts
- The amount to be reimbursed was too low to be worth the trouble
The study further states that 37% of Barclaycard respondents experienced cash flow problems and one in ten had missed a payment on a personal credit card while waiting for their company to pay them back.
This means that companies regularly require complex, delayed processes from employees to simply break even. This often leads to employees’ personal credit being at risk due to company travel and other expenses.
- Financial Stability
Studies reveal that employees have postponed or cancelled meetings because they couldn’t cover the costs themselves.
Additionally, the study revealed that a third of workers feel financially unstable as they have had to deal with large or unexpected expenses. Such a position directly reflects on the company standing, leading to a loss of credibility. Company costs must never infringe on an employee’s financial freedom.
- Gender Bias
Studies demonstrate that the average amount claimed in expense reports is £199 per month for men as against £76 per month for women. The above could be due to any of the following reasons:
- Women are more frugal than men
- Women are absorbing more of the costs themselves
- There is a distinct lack of access to the same opportunities
However, the fact remains that expense reports simply aren’t the same for all employees.
The Final Word
While the facts might have made you disappointed, the good news is that there is now a streamlined way to manage expense reports. The Zaggle Save expense management system is configured to streamline business payments helping employees be at their productive best. Zaggle Save provides automated expense management with the flexibility of smart expense cards.
Zaggle Save provides the option of customising these cards with differential limits based on the project, employee, and use. Zaggle Save further helps navigate the different checkpoints such as who can spend, what the limit on each purchase is, and most importantly, who needs to approve each payment?
The highlight is the lack of manual paperwork for expense management leading to simplified financial reconciliation.
At Zaggle Save, we understand the strategic imperative to detect duplicate expenses and prevent frauds. We help automate and enforce company policies. Our all-in-one business spends management platform allows you to spend smarter while saving time, money, and effort. Sign up today to start saving.