Keeping track of and controlling your organisation’s expenses can be tricky without a sound management system. To begin, one must find the best method to control expenses. This will include taking a closer look at aspects that are working, the ones that should be kept in place, those that can be improved, and those that will need to be overhauled and entirely replaced. Say you determine reimbursements are not the ideal way to cover employee expenses. In this case, you can figure out an appropriate per diem amount or use corporate expense cards to pay for the entire cost of a business trip. Here, we’ll dive into common expense management issues, the common mistakes businesses make, and how automation software streamlines the overall process.
1. A lack of management insight into expenses
The best way for businesses to plan for future expenditures is first to comprehend the current state of those expenses and then analyse trends. Thus, it is essential to have access to reports detailing expense distribution. Traditional methods of managing costs do not provide for such openness. In addition, manual operations are inefficient, making real-time expense monitoring impractical. Expense management is vital, especially when business travel is involved. In addition, due to the possibility of fraud, management needs accurate expense reports to find problems and develop solutions. With the advancement of AI, modern expense management software can self-learn over time to automatically discern duplicate expenses or non-compliant. It can even detect instances where expense submissions constantly touch the policy threshold or even a sharp increase in specific months. Expense management software such as Reimburse and its traffic light feature can quickly mitigate these issues for SAP SuccessFactors users.
2. Unauthorised Bookings for Travel
Occasionally, employees adhere to travel restrictions while booking flights and hotels but later upgrade to more expensive seats or accommodations without approval. Instead of a cheaper hotel, your employees may choose somewhere fancier (and more costly) without prior approval from HR. The company ends up paying for the expenses, disrupting the planned budget. This issue can be resolved by comparing the initial booking fees to the actual costs and stating that your policy says you will not pay for unapproved expenses.
3. Overspending the budget
Since it is impossible to ensure prices remain static from the day you check to the day you transact, there will always be a possibility that it may go over budget. It’s impossible to foresee the price of a surging plane ticket, nor can one predict when inflation may finally invade your suppliers. The price can be substantially decreased or increased depending on the transaction period. This can result in cases when the cost of processing an invoice exceeds the value of the actual expense. With higher levels of competition and fewer available resources, effective spending management is more crucial than ever for businesses. By investing in expense management software, your company can track its spending better and use financial management to find ways to cut costs.
4. Unclear Expense Policies
Employees can’t steer clear of problems if they don’t know precisely what constitutes acceptable expenses. Standard travel expenses, including accommodation and food, should be specified under the company’s costs. For instance, some employees try to save money by booking cheap hotels, but they spend more than they would have with a business partner. Employees should have easy access to the appropriate policies and information to ensure they don’t get into a scenario where they can be suspected of padding their expenses.
5. Loss of receipts
It takes work to keep track of and file away stacks of receipts. But it is the most crucial factor when settling accounts or preparing tax returns. Therefore, save the receipt and other documents correctly to avoid complications in the future. The time spent searching for missing or misplaced receipts is substantial. Moreover, missing paperwork may cause erroneous expense reporting.
6. Late employees reimbursement
Work trips involve employees’ money before getting reimbursed by the company. Once documents are submitted, employees expect their money to be reimbursed quickly since they financed it with their own money. So you can imagine the frustrations when reimbursements arrive late. One may be irritated by business travel and other associated expenses if this becomes consistent. These may easily lose you a few business deals.
Expense Management Automation: The Key to Ultimate Efficiency
When it comes to expense management, most businesses have a myopic view of the amount of effort involved and the benefits automation may bring. Investing in expense management software can significantly enhance internal processes, reducing the time and effort required to settle expenses quickly. Here’s why automating expense management is the key to optimisation:
Avoid Paperwork: Keeping a detailed paper trail is essential, but avoid getting lost in audits. Longer time makes paper receipts harder to read and find. Scanning and saving receipts in the cloud are ideal.
Transparency and Complete Visibility: Lack of financial transparency complicates budget management. Cloud-based expense management software can help. It can monitor all locations and units simultaneously.
Ensure Compliance: Compliance issues can arise when your finance team is overwhelmed with hundreds of expense reports. Your company’s travel and expense policies are adhered to with automated software, and expense requests can be instantly approved or denied.
Employees in charge of managing expenses prefer to avoid such laborious work, especially since they have to do it on top of an already hectic business trip. In addition to refining your expense policy and maximising the value of your investment, deploying expense management software simplifies the tasks and reveals hidden cost-cutting options beneath the manual methods.
A good strategy for managing expenses will help uncover areas in businesses that might be costing monies (and allows one to plug that hole). In addition to increasing productivity and lowering costs, it gives the company’s management a more accurate picture of its finances, which helps them make good decisions and keep its finances healthy. It is also paramount that an organisation invest in specialised expense management software that is compatible with its existing HRIS solution (rather than a basic expense solution that does not automate) and streamline the expense process, resulting in direct savings and productivity gains for its employees. For example, if you use SAP SuccessFactors, you can use solutions like ‘Reimburse,’ a specialised expense management solution built for SAP SuccessFactors. Managing expenses wisely is not a choice; it makes or breaks a company. With that said, expense management will remain a crucial aspect of any organisation.