Learn about the challenges and the benefits of automating expense management for growing businesses.
Sending staff overseas can be expensive.
But many of us do it anyway, as these trips can potentially boost the bottom line. Whether it’s just across the city or to another continent, we invest money for executives to attend conventions, hold meetings, conduct demos, undergo training, and represent the company.
However, it can be hard to know exactly how much you’ve spent on travel—and consequently, whether your business travel efforts are paying off.
If that sounds like you, chances are you need help with staying on top of costs in other aspects of your business, too.
The challenges of expense management
When a sales manager travels to a convention, he gets on a plane, checks in at a hotel, takes his meal, rides a train or taxi to the event, buys dinner for a newly closed client. Once he gets back, he presents receipts for these expenses and receives reimbursement.
If only it were that straightforward.
The reality is that—especially among SMEs—there tends to be a lot of confusion on how to report and track employee expenses.
Even if you have a comprehensive expense policy, your staff may still sometimes wonder what is considered a reimbursable purchase and what is not. After all, one of the biggest lies of the 21st century is that we’ve read and agree to an app’s terms and conditions. Company policies tend to be written in a similar language, and are thus rarely read entirely.
And even when employees keep all their receipts, there’s still the tediousness—not to mention the amount of time spent—on manually recording every transaction. As with all manual entry, this process opens up room for error. You’ll also have to include rules on currency conversion in your corporate travel policy.
As a result, some expenses are left unrecorded, while a few reports are riddled with errors.
This hurts the business because it’s never ideal to rely on incomplete and inaccurate data when analysing your company’s financial health.
The manual way of tracking expenses also results in more time between reporting and reimbursement. Such delays can leave employees dissatisfied.
The good news? It’s easy to fix such problems. By employing a digital tool or two, you can automate your expense management system.
The benefits of automating expense management
There’s a reason why “digitisation” has become a buzzword for business. The world’s most innovative companies have embraced digital tools and systems, and digital adoption has been known to boost revenue.
That means SMEs have a lot to lose by not digitising and automating their expense management process.
On the flipside, here’s what you stand to gain:
Reduced expense reporting costs
Processing expense reports is costly and time-consuming. In 2015, the GBTA reported that companies around the world spent around “half a million dollars and nearly 3,000 hours correcting errors in expense reports”.
PayStream Advisors, a consultancy firm, found that the actual cost to process an expense report is $26.63 on average if done manually. This drops to $17.31 when some automation is involved and $6.85 when the process is fully automated.
Improved data entry accuracy
Manually recording and reporting expenses only create more room for error. A person entering numbers manually into a spreadsheet can easily skip or even change details.
An expense management tool can prevent such situations with the use of automation rules and data parameters. For instance, amounts that go beyond preset or expected prices for certain items can be flagged by the system.
Some tools can also integrate with financial platforms to provide real-time updates of expenses. They can also parse information from pictures of receipts that users upload.
This process helps detect expenses that are either unusual or non-compliant with your expense or travel policy. It also promotes greater transparency between the business and the staff.
Faster expense recording and reporting
Automating expense management also helps save you time.
It eliminates the manual entry, reporting, and auditing of expense data. While larger companies have dedicated staff to do such work, in SMEs, this often becomes an added task for admins who already have plenty on their hands.
By letting a digital tool do the job, you can save a great deal of time that can be used for high-value work like improving asset and manpower management.
Automation also encourages employees to report expenses more diligently, given the ease of doing so with a digital system.
When employees are confused about your expense policy, they may inadvertently violate it. While a tool shouldn’t be used as a Band-Aid for miscommunication, it can help educate staff in a personal way using technology and systems that they’re comfortable with.
With an automated system, you can customise the expense management tool to be compliant with your policy. This helps you avoid violations that would otherwise drain your financial resources.
Data gathered by automated expense management gives companies a clearer picture of your business’ spending.
You can spot trends and outliers, helping you predict costs for the next year and identify areas when you can reduce spending. You can also compare expenses per month, quarter, or year, and track them against your KPIs, revenue, and industry benchmarks.
You can use all this information to gauge the effectiveness and practicality of your expense policy and to understand your business’ financial position.
Implementing new systems
When introducing a new tool and system to your business, communicate the benefits to your team.
Support the effort from the top down, but get employee buy-in by showing them how the new system can make their work easier. In the case of expense management automation, there are tangible benefits for different aspects of the business.
In the long run, such tools will also help you grow the business and achieve your vision.