Expense management, in most organizations, brings to mind spreadsheets or email-based reporting. While this seems streamlined from the outside the work, it remains complex and tedious. Multiple steps, cross-checking at every level, authority sanctions, and cross-department forwarding are only some processes eating into the company’s person-hours.
Manual expense management is very costly in terms of the sheer labor and time required, eventually adding to the price of processing an expense report.
With the volume of expenses exponentially increasing, it becomes imperative to maintain control. This begins by streamlining operations starting from the tools used.
The Hidden Costs – Collateral Damage
1) Reduced Productivity
Companies often have several steps in place making it very tedious for employees to file expense reports. So, the person filing the report needs to collect and organize his expenses, manually fill in the expense reports, scan all the receipts, send it in, and wait for the approval.
The manager then takes the time to go over the receipts, checks for inconsistencies, and in the best case scenario forwards it to the accounts department. If any inaccuracies are noticed, these reports go back to the employee filing them. The accounting department goes over the report manually, checks if all proofs of payment have been included, and saves the expense report. Hence, only if all these steps are followed, will the reimbursement be processed.
Following this process for once or twice is nothing to complain about, but when employees go on extended business trips or multi-city trips they often incur a multitude of expenses. If every expense needs to be reported by following this protocol, it will prove to be very time-consuming. The average cost to process an expense report for a single night hotel stay is $58 and takes 20 minutes to complete.
Most employees, in fact, have to take substantial time off their work just to report expenses. This loss of productivity has a profound effect on the company.
2) Faulty Reporting
The labor-intensive processes followed for expense management allow errors to creep up quite often in the reporting process. For instance, the same report may be submitted twice, unintentionally or intentionally, for reimbursement. One in five expense reports contains errors or missing information costing an additional $52 and 18 minutes to correct each expense report
Due to the large volume and high frequency of expense reports that get submitted, manually verifying each report for duplicates is tedious and downright impossible in several cases. Such errors often slip through the cracks and end up costing the company. According to the Association of Certified Fraud Examiners’ 2018 Report to the Nations, expense reimbursement fraud accounts for 21% of fraud in small businesses and 11% in large businesses.
3) Finance Team Overworked
With the responsibility of checking business expenses and disbursing reimbursements, finance teams are overloaded with expense reports. During this time they are unable to set time aside to perform their day-to-day tasks.
While hiring more members seems like a viable solution, apart from the bloating wage bill, it would also result in several of them sitting idle except for when there is a high volume of expense reports to process and verify.
4) Maintaining Compliance
With manual expense management, it is very cumbersome for the finance team to completely eliminate fraud. Duplicating expenses, overinflating costs, submitting forged bills, or even nonexistent expenses are all highly common and have been used to trick the system.
Enforcing expense policy compliance with manual expense management is not practical as it would necessitate finance teams to verify each expense with the expense policy of that individual employee. With international travel becoming increasingly common, regulatory compliance with the Foreign Corrupt Practices Act (FCPA) is necessary.
Lack of compliance results in loss of credibility and severe fines. Expense policies at best can only act as instructions for manual expense management.
5) Delayed Visibility
With the number of steps involved and the time taken to complete each of them, manual expense management by default displays a delay in the visibility of progress. Personnel might be inclined to report expenses in their own time-frame.
Manager’s approval may or may not be delayed, as they could be busy with work or could be travelling themselves. The time taken by finance teams to do their own due diligence on these reports adds to the delayed processing lifecycle.
The company can measure their operational expenses only after the numbers have been reconciled, approval granted, and expenses reimbursed. Thus, this lack of visibility has a direct impact on efficiency. Businesses are unable to implement real-time actionable insights to gain productivity or reduce expenses.
What can you do?
Decide on an expense management software that works optimally based on your organization’s current needs and future plans.
To reduce unnecessary spending, it is essential to know where money is being spent. With simplified reporting, a centralized dashboard, data analytics, and end-to-end visibility Zaggle Save is capable of providing real-time actionable insight into the numbers, spending trends, patterns, frequently associated vendors, and more.
ZaggleSave is an all-in-one business spend management platform that empowers your businesses to significantly reduce employee effort and human error for improved productivity. Start simplifying expense management with Zaggle Save today.