Slow, inconvenient, fiddly, and compliance-heavy: traditional paper expense reports manage to combine an amazing number of annoying features. They’re so irritating, it’s almost impressive - almost.
You'd have a hard time finding anyone who's genuinely a fan. The process is stressful for employees, tedious for finance teams, and even a fraud risk for the company.
Fortunately for you, clever people have been hard at work on new ways for your company to manage expenses without the agony of expense reports.
But hey, if you find yourself still longing for the classic expense report experience, you could always arrange to have you and your team periodically stung by wasps.
More on the expense process:
Expense reports: why do we do this to ourselves?
You know it as well as we do: expense reports are horrible for everyone, everywhere.
The employees hoarding receipts for coffee and sandwiches; the finance team working their way through teetering stacks of paper; the accountants making sure everything squares up at the end of the month: no one comes away from expense reports unscathed.
Every step in the process feels like a Kafka novel wrapped up in a Munch painting living inside a Beckett play: bureaucratic, vague, and inevitably resulting in existential dread.
Worst of all? The managers taking time out from their busy schedules to approve everything. Think about it - instead of providing approval for Brian’s skim latte, Head of Marketing Rachel could instead be working on the next run of digital ads, or meeting with market leaders to strategise on potential partnerships.
Nobody wins with paper expense reports, ever. So, why do they still exist?
Because old habits die hard. People are so used to this way of doing things, they continue asking their staff to shell out their own money for company expenses and stuff their wallets with fistfuls of receipts, only to be reimbursed many weeks later.
It shouldn’t be so tough. Fortunately, with an integrated expense management tool, it no longer has to be. But more on this soon.
Painful for everyone (this means you)
Dealing with expense reports is one of the most common employee complaints. And not just for the poor soul in the finance team tasked with reviewing and checking everyone’s meal and travel reimbursements. Everyone hates them.
Not only are paper expense reports a common bugbear; they’re also an expensive one. Companies often ignore the hidden costs of traditional expense management processes, which can be significant and distract from core business.
Estimates suggest the life cycle of a single expense report is 30 days from submission to payment, with a total of nearly 50 minutes of company time spent dealing with each form. Multiply this across each member of your team, and the amount of time sunk on this pointless labyrinth of paper starts to get truly scary...
A headache for employees
Even if you have a comprehensive and informative expense policy and the best finance team in the universe, traditional paper expense reports are still a massive pain.
Not only that, but they can have a significant negative financial impact on your employees, particularly when handling significant expenses like travel or accommodation. In one study, a third of workers felt "financially unstable" because of expenses they were forced to incur.
Asking your employees to go into their own pockets for major expenses is a surefire way to end up with a grumpy team. What’s more, it can - in some cases - lead to a higher likelihood of expense fraud.
And even though this remains the "classic" way that companies manage cost, it won't be for long. More on that below...
Painful for your finance team
If you think the process is a hassle for your employees, consider the dire situation your finance team is in. They’re the ones having to process your employees’ expense reports, including reviewing reports and chasing staff for missing information.
A study released by the GBTA Foundation has shown that one in every five expense reports needs to be reviewed. It's not just a matter of ticking boxes.
This means even more time and effort sunk into meaningless details.
There are much, much better things your finance team could be doing to help grow your business. No matter how much they enjoy their work, they didn’t go to business school just to end up taking care of Brian’s tuna mayo reimbursements!
Not only are expense reports inefficient - they’re a security risk
In addition to being a time-consuming hassle, traditional expense reports are an insecure method for managing company expenses.
By having employees pay for expenses and claim them back, there is a lack of clear oversight of company expenditure until the end of a billing period. This means a greater chance of nasty surprises at the end of the month.
Handling company expenses through a company credit card, while a popular alternative, is an even worse idea in terms of security, for the following reasons:
- Company credit cards are easily misplaced, meaning they can end up in the wrong hands either inside the company, or worse, elsewhere.
- Credit card expenditure is hard to track until after the billing period, when it’s too late to query a particular expense.
- Credit card fraud is a very real risk, and recovery from credit card fraud can be time-consuming and disruptive to core business.
But what's the alternative?
Fortunately, expense management tools have changed everything.
With an integrated expense management platform, every step of the company expense process is simplified and streamlined. What’s more, most steps in the process are instantaneous, meaning there’s no waiting around for others.
Expense management tools - such as Spendesk - achieve this via the following features:
- Real-time expense validation: With expense reports or company credit cards, expenses are charged without the pre-approval of management or finance. A dedicated expense management system enables your team to request same-time validation from management for specific charges, meaning quick and easy transactions, and no surprises at the end of the month.
- Pre-loaded expense cards: A clever alternative, debit cards allow staff to spend pre-authorised funds on approved classes of expense (for example, travel, accommodation, or catering). This reduces the potential for the misuse of funds, giving you and your team clarity and consistency regarding expenses.
- Single use virtual credit cards: An expense management system can allow staff to generate virtual credit cards, producing a single-issue credit card number for use only in paying a pre-approved expense. This effectively reduces the risk of credit card fraud to zero, as the credit card number cannot be used for any other purchase.
- Detailed oversight of company expenses: The same-time processing of expenses gives a comprehensive picture of company expenses at any point in the month, including total balances per staff member and per expense category. This level of detail can help with the early detection of potential expense fraud.
- Automated recurring payments: A dedicated expense management platform allows you to automate recurring expense payments, meaning less time soaked up with handling predictable, low-risk payments.
- Integration with accounting software: A good expense management tool will also interface seamlessly with your accounting software, meaning compliance and taxation requirements are handled quickly, conveniently, and accurately.
All of these features work together to boost the security of your company’s funds and remove the need for paper expense reports. This means less hassle for you and your team, and more time for you to spend on the important things. Rejoice!
Keys to effective expense management
If you're ready to upgrade your ancient expense processes, here are a few aspects you ought to prioritise, shared by other expert companies.
Penta - Go paperless
The days of paper expense claims should be long behind. Today, it's far more efficient and safer to go digital.
"These days, just about everything can be digitized and made accessible on a mobile phone or laptop. Going paperless can also make your travel expense reports a lot more organized and easy to handle in the first place."
30SecondsToFly - Use centralised technology
When every employee handles their own expenses, company spending is naturally spread out. To overcome this, handle all spending through one central platform.
"To deal with poor visibility into spending and concerns about missing or incorrect information, travel managers might explore emerging technologies that streamline these processes. End-to-end technologies generally allow travelers to book all travel through the software, and travel managers receive detailed analytics about employees’ spending."
BusinessTravelDirect - Capture expenses early
Expenses are usually recorded at the end of the process when the employee seeks reimbursement. Which means you have no idea what's spent until it's too late to have an impact on it.
"A fundamental problem with manual, paper-based processes is that visibility of spend comes too late to inform intelligent decision making. Company spend needs to be visible as early as possible to give you meaningful insight."
And when expenses are recorded earlier you have a better chance of catching errors and storing every important document.
AppZen - Use smarter tools, including AI
You and your team can't personally review every single expense report. But machines can - instantly.
"Many companies only audit between two and 10 percent of invoices and expense reports a month. [This] leaves a whopping 90 to 98 percent of invoices and expense reports completely unscrutinized.
AI is a game-changer, allowing finance teams to audit 100 percent without any additional manpower. AI checks every invoice and expense report and assigns a risk score based on a number of factors, flagging high-risk expense reports and invoices for manual review. This helps your finance team spend their time much more productively and makes it possible to pay back low-risk invoices and reports much faster."
Be ready for audit
With an integrated expense management platform, you and your team will find it simpler and more straightforward to manage your business expenses. What’s more, an expense management platform will also make it easier for your company to be audit ready.
For example, the quick and painless expense receipt recovery and retrieval offered by Spendesk means your expense receipts and invoices are automatically captured, and can be retrieved quickly and accurately. Combine this with Spendesk’s high degree of integration with leading accounting software, and you’ll be ready for audit in no time.
Conclusion: You’ve got better things to do with your time
With a dedicated expense management tool such as Spendesk, you can wave goodbye to the daily torture of the traditional expense report process.
With prepaid expense cards, same-time payment validation, and virtual credit cards, nobody will have to go into their own pocket for business expenses. Even better - nobody will have to waste precious time and effort on stacks of pointless paperwork.
An integrated expense management platform like Spendesk can free you up to focus on the things that really matter, like building your customer base, developing a strategic business plan, or building your team’s capability.
Get ready to say au revoir to the special hell of expense reports.