Manual reporting system may seem like the ideal solution for business owners who feel that their budget won’t cover an automated system, on closer inspection it comes with huge costs in lost productivity and expense fraud.
In fact, for companies of up to 100 employees, those costs could be as high as almost $38,000 per year, with businesses reportedly losing roughly another 5% of their annual revenue to expenses fraud.
So, how do you replace an inefficient system with something more effective, that on top of everything, an expense management software your employees will actually embrace or even enjoy?
In this article we’ll guide you through some of the key things to consider to find an expense management software that’s the perfect fit for your team, no matter how big or small you may be.
Before we dive in, let’s first take a look at some of the key issues with having a manual expense reporting system.
Costly margins of error
The average cost of processing a single report comes in at around $21.
While this number doesn’t sound too big, it doesn’t really end there. According to a recent study, one in five (19%) of all expense reports contain errors or missing information, costing an additional $52 (and 18 minutes) to correct. By this logic, a company the cost of human error, even for a small company, is staggeringly high. Who knew that morning coffee at the train station could be so costly?
High administration costs
The actual processing and maintenance of receipts and spreadsheets is a huge administrative task, especially if you’re managing expenses across a number of offices or countries.
The resources required to keep on top of the paperwork and ensure that every claim is legitimate (and that employees are paid in a timely manner) can often cost far more than the return you’ll get on the expense being made in the first place.
Low employee satisfaction
Employee satisfaction is one of the major issues with a manual system.
Most employees paying for travel expenses will be using their own accounts, and for larger travel payments, even having to wait a week to be reimbursed could put them deeply out of pocket. If your expenses system leaves workers waiting to be repaid, satisfaction levels will of course take a hit.
Nobody wants to work somewhere that jeopardises their own financial security, and, over time, employees may become more hesitant to take on company expenses, which is ultimately limiting for the overall company growth.
Disputes that hold up payments only further exacerbate these feelings of frustration. If managers feel that their employees are taking advantage of the system, whether they are right or not, tensions are more likely to build.
Lack of overview
Manual processes make it much more difficult to keep a real-time track of company money. Since companies usually wait for employees to submit their claims, there is often a delay in data for how company money is being spent.
This can make life for those in the finance team difficult, as the everyday monitoring of the company’s margins and ROI can be wildly inaccurate. Add this to errors in employee claims and the figures get more muddied and complex.
Things to consider when choosing an expense reporting software
When deciding which expense solution to go for, it’s really crucial to consider things from your team’s perspective. From the staff members spending the money, to those accounting for it: it’s absolutely essential that you consider how easy (or not) the solution you pick will make their lives.
Pick something difficult, and they quite simply won’t use it properly. Pick something that’s perfectly suited to their needs, however, and you could be on your way to huge savings for your business.
Here’s a rundown of the key questions to ask yourself:
How big is your business?
The first thing you’ll need to consider when deciding on an expenses system is the size of your business. As a small business, manual expenses data handling may seem like the most straightforward option.
However, as a small business you’ll also have to consider factors such as how often you’re reimbursing expenses, but not just thinking about how many of your employees travel.
As more expenses move from traditional invoices to cards and subscriptions, think about all the things you are buying for work, from software to supplies (and chasing all those receipts). In fact, it’s perhaps especially important to choose a streamlined solution as a small business with limited resources.
Equip your team with an automated solution, and you suddenly free up hundreds of hours to do work that actually benefits your company.
What are the technological requirements of your business?
You will also need to consider technological requirements, not only of the system but of your staff. What would be best for your workers? An on-the-go, cloud-based system could be best for workers from several offices.
A card or app would best help your finance team with the real-time monitoring of money. This would be especially suitable for larger companies with many travelling employees but could also be a useful part of a larger system for smaller companies to monitor regular expenses payments, helping you keep on top of where your money is going, day to day.
For companies with young travelling professionals, online or app-based solutions would be not just useful, but expected.
In this age of smartphones and hyper-digitalization, few employees appreciate having to keep a physical paper-trail just to get back money they’ve spent to do their job.
What is your budget?
Budget also plays a large part in identifying the right system for your business. If you feel that there is little room in your budget for a company spending platform like Pleo, consider the long-term costs of an inefficient system.
In a report conducted among enterprises and small businesses, 37% listed manual data input inefficiency as the leading challenge with an analogue system. When considering this, leaving your expenses open to inaccuracy and inefficiency could end up costing you far more in the long run than the initial outlay for a new system, especially as your business continues to grow.
Do you have multiple offices?
Are your workers spread out across a number of sites throughout the country or even internationally? For workers in offices beyond your head office, a receipts-based or petty cash system becomes an almost impossible system to maintain.
If your finance team needs to keep track of employees from multiple offices, automating your expenses processes might be the only workable solution. Offices in other countries create other unique challenges.
So what would an ideal solution look like?
The best system for your business would be one that is most suitable to your needs at every access point – starting with your employees.
The most straightforward process is always going to win big with your staff. Requiring them to fill out details such as VAT, reasons for claiming and exact amounts being charged from each receipt makes the process a deep drain on their time.
An automated system gives you the best chance of empowering your staff, simplifying your process, eliminating inefficiencies, and keeping everyone in your company happy.
What are the benefits of expense management software?
A good expenses system should empower your team to make decisions that are compliant and in the best interests of the company, whilst also making each person feel respected and able to do their job.
With an automated expense solution, this suddenly becomes not just achievable, but affordable. Your company can also be better at predicting how money is being used on a regular basis.
By equipping your team with a spending card, for example, you can:
-> Empower your team with in-pocket spending solutions, whilst maintaining full control over spending limits. They’re not out of pocket, and you know exactly what you’ve authorised.
-> Gain back thousands of hours of lost time by no longer having to manually process individual expenses.
-> See where company money is going in real time, whilst integrating seamlessly with your accounting system.
And so, whilst a manual expenses system could feel like the easiest, most cost-effective way to manage your expenses, is it really right for your company?
The outlay for an automated system may initially be hard to justify but finding one that works for your business could really help your costs, save your company thousands of pounds each year and keep your employees satisfied.