Spruce up Your Expense Management Process with Automation

The travel and expense management process is considered one of the most complex business functions. Most businesses fail to recognize the complexity of this function and end up spending way too much money, effort, and time on it. A recent survey by Tallie on 585 survey respondents, revealed that not many companies realize the complexity of travel and expense management.

A majority of companies continue to use manual expense management systems as the losses without a professional travel and expense system are not obvious. The seemingly simple manual expense management process actually eats up productive work hours and leads to extraneous costs. Is there a cost-effective way to expense management? Read on to know more.

Expense Management at a Glance

All expenses incurred in a business from the purchase of raw materials to marketing initiatives to business travel are to be filled in proper forms and approved by appropriate authorities. Any delay or error in expense management may cost a business dearly, both financially and otherwise. Expense management encompasses all the processes that help streamline business expenditures.

The expense management process follows a sequence of employees making claims for reimbursement and accounting for expenses they have incurred. When executed efficiently, the expense management process offers key business insights into business spending and helps keep a tab on the expenses incurred. The data captured by the expense management system in a business helps in budgeting for managers and planning for future expenses.

The key functions in expense management are filling in expense requests, reviewing and approval requests, employee reimbursement, and gathering and validating data for auditing and budgeting. The Finance department, employees, and the team/department manager are the key players in the expense management process.

Let us now consider the lifecycle of an expense reimbursement request.

• Making a purchase is the first step in the reimbursement process. This is done after the necessary approval for the purchase has been obtained.
• Once the purchase is made, the employee obtains the receipts issued for the purchase.
• These receipts are submitted along with the reimbursement request to the manager.
• Once the manager reviews and approves the request, it is directed to Finance for review and approval.
• In case the manager requires additional information the request is redirected to the employee asking for missing or additional information.
• After approval by the finance, the claimed amount is reimbursed into the employee’s account.
• When all the steps of the process are executed smoothly, the reimbursement is credited quickly.

In practice, manual expense reimbursement is marred by inordinate delays and bottlenecks. Apart from expense reimbursement, there are many other components in an expense management system that need to be executed seamlessly for efficient business operations.

Perils of Manual Expense Management

Managing expenses using conventional methods may seem the easiest option for a small organization. Manual expense management methods are incapable of scaling up to the needs of growing businesses. Traditional expense management systems are not robust enough to provide a seamless expense management experience for your clients and employees.

Here are some disadvantages of using manual expense management methods:

• Tedious: Manual data entry and validation are typical of traditional expense management methods. Such methods are time-consuming and eat up the productive time of employees.
• Fraudulent practices: There is an increased possibility of submitting exaggerated or duplicate claims through manual expense management systems. Lack of policy and regulation compliance arises due to manual expense management.
• Erroneous: Manual processes are run by humans. So, the scope for human error or overlook is more in manual processes.
• Compromised productivity: Since a lot of time is spent on reporting, claiming, and validating expenses, the time spent on project-related activities is reduced. This results in decreased productivity and efficiency.
• Transparency and visibility: All the transactions are carried out through emails or personal interactions in a manual process. As a result, visibility and transparency into the status of the claim are restricted.

Manual expense management is ridden by hidden costs due to the above disadvantages. The inherent disadvantages of manual processes, push businesses to explore cost and time-effective alternatives to expense management.

Reasons Why Businesses Hesitate to Automate Expense Management

Despite expense management being one of the most critical business functions, most businesses do not recognize or appreciate the inherent complexity of the process. Here are some interesting statistics from the 2019 Travel and Expense Management Trends Report are given below:

• Nearly half of the organizations did not track the cost of processing expense reports
• 43% of the companies are following manual expense reporting
• Nearly 44% of the companies do not intend to automate their expense management process
• Out-of-policy expenses are flagged off in a meagre 27% of the organizations

The above statistics reveal that most organizations are not giving expense management the importance that it deserves. Also, there is considerable reluctance to adopt automated expense management systems. Why? Some of the most popular reasons why companies do not see the need to shift to automated expense management are:

• We are happy with our current processes.
• The volume of expense reports processed in our company does not require automation.
• Automating the expense management process is a cumbersome and costly affair.
• We are too busy or do not have the resources to spare to facilitate the transition to automated systems.
• We do not possess the necessary skills or knowledge for the transition.

Despite the growth of expense management automation solutions, many organizations continue to process their finance operations manually. Procrastination and lack of technological knowledge seem to be the main reasons why companies are not adopting automation.

Automated Expense Management System

Businesses looking to overcome the drawbacks of manual expense management consider automating their expense management process. Does automation mean the complete elimination of human intervention? Not exactly! Only the repetitive and redundant steps that can be performed without human intervention are automated.

Simplifying the expense management and reporting process for employees and management is the main reason why businesses are moving to automated expense management. Deploying an automated expense management system can translate into rapid ROI for companies of varying sizes. Here are a few reasons why you must consider moving to an automated expense management system:

• Cut down on hidden costs
• Improve accuracy and policy compliance
• Increase visibility and transparency into processes
• Focus on strategic work rather than mundane admin work
• Improve employee satisfaction

Automation of expense management aims at reducing the manual burden on finance and admin teams, by automating repetitive tasks. Uploading supporting documents is greatly simplified in an automated process. Any inconsistency or violation of policies is immediately recorded and reported to the concerned employees and managers. Explanations or corrections of the violation can be provided immediately and the admins can directly view these explanations and respond to them.

Automation of expense management is worth every penny of investment. Businesses realize the return on investment from day one. The 2019 Travel and Expense Management Trends report by Tallie revealed that 57% of the 585 respondents realized a positive ROI in one year or less by investing in automated expense management solutions.

Traditional versus Automated Expense Management

The table below compares traditional and automated expense management systems based on key performance metrics.

Metric	Traditional	Automated
Process time	Tedious and time-consuming	Reduces process time by eliminating redundancies
Productivity	Compromised productivity	Improves productivity and efficiency
Visibility and transparency	Restricted visibility into statuses	Complete transparency and visibility into process status
Process Compliance	The scope for fraud and violations is more	Standardization of process leads to 100% compliance to policies and regulations
Process cost	Redundancies and repetitions lead to high process costs	Optimal use of resources and time leads to reduced process costs
Employee satisfaction	Lowers employee satisfaction and morale due to more time spent on low-value tasks	The employee feels more valued as more time is spent on productive and strategic initiatives

Cost Cuts through Automated Expense Management

Automation of expense management helps cut many hidden costs like loss in productivity, loss of time due to bottlenecks, etc. Here are some of the hidden costs that can be avoided by automating expense management.

Loss of money due to claimed expenses:

The pressure to meet deadlines often makes employees enter erroneous data while submitting an expense claim. Manually entered claims are prone to errors and overlooks. Some employees also take this as an opportunity to earn quick money through fraudulent entries. Validation of manually entered claims takes a long time.

Loss in productivity and efficiency:

Traditional expense management is cumbersome for the employee and Finance team. Employees spend time gathering supporting documents, entering claim data, and uploading the details. Approvers or managers spend too much time validating the data, and adhering to policies and regulations. If there is any missing or incorrect information, the claim is sent back to the employee asking for information. The entire process from submission of a request to approval eats up the productive time of employees. As a result productivity and efficiency comes down, leading to a loss of money.

Future of Expense Management Software

The Travel and Expense Management Software Market report by Grandview Research reveals that the market is poised to grow at a CAGR of 12.4% from 2020 to 2027. Business expansions at a Global level translate to a rise in the number of employees. The need for an efficient and cost-effective way to manage operations at a global level is the main reason for the rise in the adoption of automated expense management systems.

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