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Expense management 2 min read

The hidden costs of manual expense management

Faustine Rohr-Lacoste

From expense tracking to employee reimbursement, a manual expense management process is pricey in terms of both direct and hidden costs. In fact, companies often underestimate just how expensive it can be.

So how much does it cost to manually process an expense report?

The direct costs of expense management

Managing expense reports is expensive because the reality is that the entire company is involved in processing them, which means time is wasted, which costs the company money:

  • The employee: fills out the expense form, gathers proofs of payment and submits them to their manager
  • The manager: takes – or indeed wastes – time validating and checking each expense claim
  • The accountant checks the information supplied, that all proofs of payment have been included, and saves the expense report
  • The finance team sees after reimbursing the employee

Processing a single expense report from start to finish is a 30-day operation and takes 50 minutes on average. If the slightest error is made during the process (the wrong date, inaccurate amounts etc.), this will add another 18 minutes.

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According to a study released by the GBTA it is estimated that one in five expense reports need to be reviewed.

So how much does expense claim processing actually cost?

In terms of time spent, processing an expense report costs the company €27, based on an average salary in France (€2,225 net) and average number of work hours in a year (1,646). On another scale, the process can cost almost €500 a month for a company of a hundred or so employees.

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Aside from indirect costs, there are also hidden costs, which are equally significant.

Hidden costs related to expense claims

Is it really necessary for a sales representative to spend time filling in an expense report? Of course not, and yet this is what happens. Employees have much better things to be doing than wasting time on an unproductive task that prevents them from attending to other responsibilities that are of far greater benefit to the company.

Employee dissatisfaction represents another hidden cost. Having to pay out of their own pocket and then wait to be reimbursed can be a source of dissatisfaction, or sometimes frustration. It can even put them in financial difficulty when the expenses in question count for between 25% and 30% of their salary. Subject employees to a process that engenders dissatisfaction or even annoyance and you run the risk of expense fraud.

Expense fraud costs up to €730 per employee each year. How can you reduce these costs?

Normally, companies only tackle the tip of the iceberg by trying to reduce direct costs such as train tickets, hotel stays, meals etc. But it would actually be far more effective to:

  • Work towards going paper-free: doing away with paper proofs of purchase means no more mistakes and a quicker process, minimising the time spent on expense claim processing
  • Opt for purpose made tools to validate expenses, make payments and gather proofs of purchase. Spendesk offers the optimal solution by the way ;)

Since expense claims can prove terribly expensive in terms of direct and hidden costs, it's vital not only to set up a well thought-out expense policy and monitoring system but also to arm yourself with expense claim management tools.

By doing so, you free up your employees who can then dedicate their time to high added value tasks.

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Faustine Rohr-Lacoste

Faustine is Head of Community at Spendesk. She is in charge of CFO Connect, a community of modern finance leaders.