There is one principle that's the same no matter where you are: You have to spend money to make money. Regardless of how big or small your company is, there’s no getting away from expenses. We’re not talking about the rent on your office or wages, but the incidental expenses that your workforce will rack up while making the business money – travel, lunches, coffees, and all sorts of minor purchases.
Ready to revamp your expense process? Download our eight top tips to get started
Managing those expenses can be painful for both employees and the finance team. It’s a highly emotive issue for the employee because the initial expense often comes from their own pocket. They also tend to put it off as long as possible because it is such a tedious, admin-heavy task.
But what are the business implications of having a sluggish, manual expense process in place?
The Hidden Costs to Your Business
Managing expenses can require a lot of back and forth communication between the finance team, the employee submitting a claim, and that employee’s manager. Every submission requires validation and approval – a process that can feel never-ending.
Lack of automated and defined processes are often to blame. When companies still use a mixture of paper and spreadsheets to process expenses, mistakes are likely to creep in. Paper receipts can get lost, and it’s not hard to imagine the manual errors that can crop up when copying data into a form. Plus, manual checking eats up valuable time. Every claim needs to be validated to make sure that receipts match the figures submitted by the employee, and each item needs to be checked against company policy to make sure it’s justified. However, companies should see 36% fewer complications and errors with expense submissions once an automated system is put into place.
Employees get frustrated
You would think that your employees are highly motivated to submit expenses, but the process can be so tedious that individuals choose to let their claims stack up. Chances are they have to deal with the paperwork in their own time, which can be a cause for serious resentment. But, delays are costly. The manager who needs to approve all those claims has a real headache getting through the backlog, as does the finance team. And, delays can result in an unwelcome hit on company cash flow.
But the frustration doesn’t end with submitting expenses. Employees often wait a long time to be reimbursed too. The average time is nine days from approval to reimbursement, but it can be longer. That’s a lot of time spent shouldering an out-of-pocket expense.
You miss out on valuable reporting and insight
It’s not just the obvious costs of wasted time and potential processing errors that you need to consider. By not managing your expenses in a smart way, you also miss the opportunity to analyze spend patterns. Accurate expense reporting allows you to spot trends in employee expenses, highlight anomalies, and identify ways to make savings in the business. Without real-time visibility, it’s difficult to provide this additional value.
If you need to make improvements to your expense process but are unsure where to start, download our "Eight Tips to a Best Practice Expense Process" to learn more.