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The true cost of manual expense management

The idea of automating expenses – just clearing that hassle right out of your life – can sound pretty appealing. That’s probably why we love to talk about it.

But it’s more than just a nice-to-have. Automate your expenses with a tool like Pleo and you instantly get a better grasp on what’s being spent across the business.

And you save money. How much? We’re glad you asked.

The reason expenses cost so much

But first, let’s talk about why manual expense management costs what it does. It comes down to two main factors: the people power involved and the potential for errors.

Traditional methods of controlling your business spend involve a process. A laborious, occasionally labyrinthine, process.

Which is weird, given that most business purchases are pretty straightforward. Renewing a software subscription, booking a taxi, buying someone on the team a birthday cake… it’s not rocket science (except when it is).

On an individual level, handling expenses manually takes people away from the things they should be focusing on.

On a business-wide level, it slows down growth and innovation, forcing everyone to deal with friction and bureaucracy instead.

Here's how it works:

As time-consuming as they are, skip any of the steps above and it can feel like the risk of fraud or administrative oversight shoots up.

No fun.

And it’s even less fun when you get the calculator out and work out the cost of that process.

How much is expense management costing you?

But first, a health warning – and some transparency. Trying to uncover an exact estimate for the average cost of an expense report is tough.

The most widely-cited estimates vary. But the discrepancies in the figures speak to the messiness of manual expense management – no two companies handle it quite the same.

A conservative estimate from the Aberdeen Group, quoted in a lot of places – even though it’s now nearly a decade out of date – puts the cost of processing one report at around £16.50.

Some other reports, with a heavy focus on travel-specific expenses, quote figures closer to £30-£40 per report.

To round out the picture, a more recent report from Levvel (formerly Paystream Advisors) puts the average cost – adjusted for inflation – at around £23 per expense report.

£23.14 to be precise. That number is more up-to-date yet still fairly conservative, so let’s roll with it.

Aberdeen’s research worked out that 1.5 expense reports are submitted per employee every month. Which leaves with a simple sum to work out how much your company is spending on manual expense reporting.

Cost of one expense report (£23.14) X Number of employees X Average number of expense reports processed (1.5)

What that means for your business

A company of 10 people: £347.10 a month

In a small company of 10, you’re spending more than £4000 a year just accounting for what your people buy. Not paying for what they buy, but paying for all of the hoopla around what they buy.

They buy a new laptop? £23.14. They grab a sandwich on-the-go? That’s £23.14 too.

That’s money that could probably come in handy elsewhere.

On a small team, you’re also running the risk of swamping one person with the task of taking care of all those expenses. With more stress and less time, expect mistakes to be made as they dive into that hill of receipts.

Meet one company of this size that uses Pleo: Convivio. They’re a team of five helping government bodies to step up their digital offering. For their CEO, Pleo means real visibility on where company money is going.

A company of 50 people: £1735.50 a month

Your company’s reached 50 people, great work. But managing the expenses of those 50 people is going to cause even more headaches than when you were a small operation.

£20,826 a year of headaches. At least.

And by the time you’re a team of 50, we’re guessing your expenses have become more varied. That makes budgeting for outgoings harder and a sense of control can easily be lost.

Not to mention your pile of expenses paperwork is now a small mountain.

Meet one company of this size that uses Pleo: Forza Football. Their goal wasn’t just to see where money was going, but to also build a culture of ownership around company money that matched their ambitious growth. With Pleo, “there’s a person behind every expense”.

A company of 100 people: £3471 a month

Now we’re really talking about a big impact on your company’s bottom line.

Not only do you have to cover the costs of the things your people are buying, but you pay more than £40,000 a year making sense of it all.

And you’ve got a Mount Everest of receipts for the finance team to wrap their heads around. Even the hottest number crunchers will struggle with this – and are you getting the most value from them if they’re spending hour after hour interpreting tatty receipts and incomplete reports?

Meet one company of this size that uses Pleo: Cobe. These pioneering architects started using Pleo because they were keenly aware of the cost of processing 300 expense reports a month. But with Pleo, they also found some powerful connections to the things they value.

And those are just the direct costs

After talking to our customers, we’ve identified a stack of hidden costs that you accrue if you stick with traditional expense management.

They’ll impact different businesses in different ways, but they’re all things you'll want to avoid.

Maybe these sound familiar:

Wasted time

As outlined above, the time pressure around expenses is an issue for businesses of every size.

Another statistic that’s hard to pin down (but worthwhile to think about) is how many minutes are involved in processing each report.

A Global Business Travel Association survey puts that figure at 20 minutes, on average. You might think that sounds like a long time for a standard expense – but it can be (eek!) even worse.

Because you know what manual expense reporting brings with it? Human error. It takes 18 minutes on average to correct every single report that has an error.

And 20% of expense reports have errors. Ouch.

Fraud risks

We were talking about some big sums earlier – but how’s this one for size?

Expenses fraud costs British businesses around £2bn a year.

In most cases, it’s not a prolonged scheme to rip off a company. It’s oversight, or opportunism, or a failure to grasp company expenses policy.

Small things that Pleo’s automated expense management deals with, really effectively. Whether that’s through spending limits or the ability to freeze a card if you spot something suspicious, we’ve got you covered.

Lost receipts

This is a big problem for your people of course – we’ve all had that sinking feeling of not being able to locate a receipt for something you paid for weeks ago.

But when it comes to business finances, lost receipts are costing money too.
Obviously, every expense without a receipt is one that will take more time to process, since it requires investigation.

Lost receipts can also mean paying more tax than necessary. Plus they stop you tracking budgets properly – can you be confident that spending is on track without the documents to prove it?

Out-of-policy spending

Whenever we profile Pleo customers on our blog, we ask them for any nightmare stories from the days before they used our automated expense management system.

Guess what? There’s always a story.

One that usually cost the company a fair whack and involved spending policy being breached. More than 10% of employees exaggerate their expense claims, according to YouGov research.

They have a variety of reasons for doing it (some pretty relatable), but it’s the business that ends up paying.

Get that money back with Pleo

So now you’ve got a rough idea of what traditional expense management could be costing your business.

Spooked? That’s understandable – but don’t be.

Because this is the fun bit of the story, where we reveal the happy ending: Pleo’s here to automate your expenses and win back that money for you.

With Pleo, receipts are captured as soon as our smart company cards are used. Purchases are categorised right away, while admins have real-time overview of all spending.

So that laborious process that costs thousands every year becomes something that’s handled by us in a matter of seconds.

The risk of fraud goes way down, the amount of human error is reduced… and you can figure out smarter ways to spend your money.

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Neil Brennan, Pleo

Neil Brennan

Content lead

Journalist with the BBC, LBC and others for a decade or so. Now doing words for Pleo. Spot a typo? I'm all eras: neil@pleo.io