7 Reasons to Automate Expense Management
Many businesses feel trapped in their current expense management system because they worry about the cost to change: the cost of new software, the cost of implementation, or the cost of deploying resources to manage the project. But when you automate expense management, the benefit far outweighs the cost. Why? Because you’re losing more from your current expense management system than you realize.
What is expense management automation?
Simply put, expense management automation means tracking how employees are spending, determining how to categorize their spending, and quickly reimbursing employees for any costs they expense. Finding the right expense management automation solution can be a major benefit for companies and often helps ensure they don’t go over budget.
The traditional expense management process
Traditional expense management has typically been done by manually entering expenses codes and bank information into a spreadsheet system. These expenses usually come from circumstances that an employee can claim as a “business expense,” like travel, accommodation, meals, mileage, etc. These get trickier now that a lot of employees are taking advantage of flex work, expensing work-from-home costs like wifi, software, cell phones, and more.
Sure, the spreadsheet way of expense management gets the job done, but it’s outdated, time consuming, and opens up room for error. Using expense management automation can simplify monthly reporting, reduce the risk of expense fraud, and give you more control over the spending habits of your employees.
Why automate expense management?
On average, about 10% of a company’s budget goes to travel and entertainment expenses. If that 10% sifts through poorly managed expense management processes, it can negatively impact a company’s financial performance in a big way. According to a GBTA survey of 533 travel managers who use manual expense management and reimbursement surveyed, on average:
It takes 20 mins to complete one expense report
It costs $58 to process one expense report
19% of reports contain errors
Correcting one expense report takes 18 minutes and costs an additional $52
In other words, the return of investing in a more efficient spend management system can add up to saved money, time, and effort. If you multiply the cost of human error and manual reporting per year, the numbers equal a staggering amount of revenue that could go towards other company improvements, and wasted time that employees can put towards working on tasks actually found in their job description.
Fortunately, deploying an automated solution to manage and report expenses easily simplifies the process while eliminating error. Let’s break down the benefits of automating expense management.
7 benefits to automating expenses
Cost efficiency
Visibility into spend
Manage risk & fraud
Ensure compliance
Maintain flexible & scalable processes
Easier business travel
Reinforce company policies to manage behavior
1. Cost efficiency
Worrying about the cost of change is natural, but it’s costing you more to stick with your outdated expense management system. Switching to automated expense management can cost you for users or subscription access, or like Divvy it can be completely free, but will instantly begin saving you time, effort, money, and errors.
An online wizard makes implementation quick and simple, with the option of some phone support as needed. Since the time to implement will not place a huge burden on your IT or Operations team, they can get back to their job responsibilities.
Link your expense reporting software to your credit card and import data automatically into your expenses, and most of the data is pre-populated in the claim. This helps to reduce the cost of processing expense claims by as much as 78% per transaction. It also stores the created data in one location, making generating reports that much simpler. Ease of reporting translates to increased insight on spend and far less time wasted on information-gathering.
2. Visibility into spend
Expense management is so much more than budget accounting—it provides insight for intelligent business decisions. Having expense information centralized makes it simpler to report on a multitude of performance indicators. Ease of use contributes to greater employee adoption, and raised perception of where spend actually goes in real time.
Clear insight is critical to the ongoing refinement of travel and expense policies, as well as identifying areas where a company could negotiate better deals with suppliers, where the business may be a victim of fraud, or indicating possible breaches in statutory compliance. It also helps to identify spending trends by mode of transport, by client, by country, or by employee, which help when managing spend going forward. Greater transparency gives managers the ability to recognize and eliminate areas of inefficiency, improving the overall budgeting and spending process.
3. Manage risk & fraud
“Fraud and deceit are anxious for your money. Be informed and prudent.” – John A. Widtsoe
One of the most pressing reasons to adopt expense management software is to prevent expense fraud. Automated expense reporting removes the messy part of the process that is prone to error and temptation. Employees don’t have to save receipts and budget managers don’t have to worry about falsified or misinterpreted information. Additionally, good expense management systems can identify when vendors try to overcharge you or if your data is compromised.
4. Ensure compliance
Compliance often ranks high on the agenda for many companies—after all, the risks of noncompliance could result in fines and damage to both your bottom line and your reputation. Being aware of new regulations and managing all the related changes can be costly and time-consuming. When your business operates in multiple countries, that challenge becomes even bigger and more complicated. An audit could be devastating and impossible.
Automated expense management systems virtually eliminate the risks around regulatory compliance. They can apply complex tax rules and provide built-in auditing capabilities. Some go even further by capturing the data required for reporting corporation and income tax purposes.
5. Maintain flexible & scalable expense processes
Nowadays, business moves quickly, companies buy other companies, merge, expand into new regions or territories, or bring in new employees. Legacy systems may not be flexible enough to follow any rapid changes. That may mean additional licensing or further infrastructure investment.
Flexibility and mobility equates to fewer major adjustments over time. Immediately scalable, cloud-based software will support and inform business growth. Easily add new employees (no additional new user licenses). Roll out the platform when required, supporting external regulations, VAT, and per diem rates.
6. Easier business travel
Mobile applications extend travel and expenses software to your smartphone or mobile device. This enables employees to create and submit expenses quickly and easily while on the road – including photographing receipts and attaching them to the expense item. Mobile applications give managers the ability to approve claims from their smartphones, meaning they can approve on the move. As a result, efficiency improves as people focus on doing business, not managing expenses.
Automated systems don’t sleep—they work nights, weekends, business trips and holidays, processing reports in the background while you perform business critical tasks in the foreground.
7. Reinforce company policies to manage behavior
As your company grows, each new employee comes with expectations and habits when it comes to booking travel and claiming expenses. Acceptable practices in their previous company may not comply with policies for your company—and with more people on the team, you could easily lose the overview.
The challenge for companies when implementing an expense process, whether manual or automated, is addressing this existing culture within the company. In theory, you can mitigate the issue with written policies to manage travel and expenses. However, employees must comply, and supervisors must enforce the policies. Integration allows companies to enforce their budget policies automatically across the board. The best systems flag any out of policy spending for further investigation. By integrating policies directly into the expense management system, compliance becomes mandatory.
Besides all of the employer benefits, as expense approval efficiency improves employees also benefit from speedier approval and quicker reimbursement through the improved workflow of automating expenses. Prompt payback builds trust between employer and employee.
Conclusion
Whether you look for cost savings, time saving, or compliance risk reduction, an integrated cloud-based expense management platform can help. An effective cloud-based solution is scalable, flexible, and easy to implement. In just a few clicks you can start saving with automated expense management.