The true cost to your business of manual expense reporting: A full breakdown

Whilst it theoretically seems like a good idea to automate your expense processes, without concrete figures to demonstrate the ROI, it’s difficult to convince yourself or others to make the jump. So, is your current manual process really that cost-efficient?

Expense automation: You may have heard of it. You may even be intrigued by it. But until now, you may also be fairly skeptical.

Whilst it theoretically seems like a good idea to automate your expense processes, without concrete figures to demonstrate the ROI, it’s difficult to convince yourself or others to make the jump.

So, is your current manual process really that cost-efficient?

To help you answer that question, we’ve pulled together a comprehensive guide to measure the true cost to your business of manual expense management.

Let’s dive in.

The direct costs of manual expense management

To calculate the cost to your business of manual expense management, we need to map out the full process of your expense reporting, from start to end. Typically, processing a single expense form is a cumbersome 6 step process, often involving 3 or more employees.

For an average organisation, a manual reporting process often looks something like this:

The impact of this inefficient process is a direct administrative cost to your business. In fact, according to data published by the Aberdeen Group on averages for expense report processing, we can put a figure on that direct cost.

SMEs (companies under 1,000 employees), are spending on average, $20.65 to process a single expense report. The same report cites that an average of 1.5 expense reports are submitted per employee, per month.

Using these figures, we can estimate an average direct monthly cost of manual expense reporting:

(cost to process a single expense report)
(# of employees) x (average # of expense reports processed per month)

So, for a company with 100 employees, a manual expense process costs on average up to:



100*1.5 = $3097.50


➡     $20.65 per single report

➡     $3097.50 per month

➡     $37,170 per year

Ultimately, what these figures demonstrate is that the cost to businesses of having an inefficient expenses process is staggeringly high.

Companies are shying away from automating their expense processes because it’s difficult to make the case to do so. But the reality is that traditional processes are costing huge amounts of time, money and inefficiencies – preventing businesses from achieving their true potential.

The other, hidden costs of manual expense reporting

Whilst these figures are high, they’re perhaps nothing you haven’t heard before. However, to calculate the true cost of expense reporting to your business, we need to dig a little deeper still. This time to the indirect, hidden costs of the process.

The 4 most common issues that lead to indirect costs of expense reporting are:

⌛     Wasted time on unproductivity

📈     Additional fees and interest rates

☺     Employee satisfaction

⚠     Expense fraud

Let’s dive into each of these areas one by one to look at them in more detail.

Wasted time on unproductivity

Put simply: time distracted from actual work costs your business. It costs not just in terms of overheads, but also in time spent not doing things that have value to the company.

According to a report by the GBTA Foundation, processing a single expense form takes on average 20 minutes. If any error is made (as is the case in 1 in every 5 reports), then a further 18 minutes are spent to correct each report.

A typical medium to large sized company will process an average of 51,000 expense reports each year. This means that, on average, approximately 3,000 hours are spent correcting errors in expense reports annually.

Let’s just consider that staggering fact for a moment.

That’s 3000 wasted hours each year.

Additional fees and interest rates

When employees pay for company expenses, there is more often than not an additional credit fee incurred with each purchase.

Most employees are reluctant (or unable) to fund company expenses from their checking account. This means that those purchases are often made on credit. Irrespective of whether that’s credit on a personal or company card, unless you pay within 30 days – there’ll be an additional interest rate on top of your primary spend.

According to a report in the Financial Times from 2017, last year average credit card interest rates have topped at 23% APR.

That’s a significant potential compounded charge on top of every, single purchase.

Employee satisfaction

No matter how much you try to streamline a manual expenses process, it’s no fun for employees.

Waiting to be reimbursed for company expenses is frustrating, and (where credit isn’t available) could even put employees in financial hardship. This situation is particularly acute in instances where expenses are disputed or repayment is withheld. This contributes to unhealthy work culture and tension between employees and their managers.

According to a recent report, more than one-third of workers say they never claim expenses back, and over half say they will not claim unless they are owed more than £5.

All of this is to the detriment of UK workers who are out of pocket by up to £2.1 billion every year through unpaid business expenses.

So why is this important?

As well as it simply being unpleasant, unhappy employees also cost businesses thousands in lost productivity.

Research conducted by The University of Warwick has shown evidence of a direct correlation between happiness and productivity. According to the study, happier people are 12% more productive.

When left unchecked, employee dissatisfaction could eventually lead to high staff turnover. On average, it costs around 20% of an employee’s annual salary to replace them. Some studies even indicate that it can cost up to $150,000 to replace a good employee.

Of course, no one single expense report is going to make your employees decide to leave their jobs. However, over time, a frustrating process that disadvantages your staff will make them less engaged, happy and committed. As the figures on employee happiness demonstrate, that could lead to huge costs for your business.

Expense fraud

With every yin there is a yang. And in the case of unclaimed business expenses, the yang is the directly opposing issue of expense fraud.

This occurs when employees claim for expenses that are not compliant, or worse still, fraudulently manipulate receipts to claim more than they are owed.

As workforces become more remote and flexible, employees are increasingly able to ‘blur’ legitimate business expenses with fraudulent personal costs. These include things such as meals, accommodation and even mileage for family or friends.

This blurring of the lines between legitimate and illegitimate costs makes it incredibly difficult for finance teams to untangle, and it’s costing businesses billions.

According to a recent report, it’s estimated that businesses typically lose five percent of their annual revenue to workplace fraud – amounting to an average of more than $30,000 per organisation. Companies with less than 100 employees have a 28 percent higher median fraud loss than those with 100 or more employees.

At a macro level, expense fraud amounts to global losses of $2.9 trillion.

Streamline your expense reporting and start saving money

Businesses have to pay expenses. It’s a central – and essential – part of running a company. But there is no reason why that process should be inefficient or incur additional costs.

Put simply: if something is difficult to do, it will cost time and money.

That’s why automation is the single, most effective means of reducing the cost of the expense reporting process to your business.

The Aberdeen Group report shows demonstrates that where there is some degree of expense automation, the cost of processing a single report drops drastically from $20.65 to just $7.50.

That’s a reduction of 64%.

Over the course of an entire year, automation will save your business tens of thousands of pounds . Perhaps even more importantly, it will free up crucial time for your staff to do more of the tasks that have high impact, and less of the ones that don’t.

So, what next?

The accounting industry is going through a period of rapid technological change. Much of which can seem daunting…and costly. But when you look more closely and analyse the true cost to a business of sticking with a manual status quo, it soon becomes clear the reality is quite the opposite.

Automation has been the linchpin that’s exponentially increased productivity across countless industries. Now it’s accounting’s turn.

Manual expense reporting is needlessly draining money, resources and time. It’s costing businesses thousands of hours (and millions of pounds) in lost productivity. But with expense automation solutions like Pleo, that no longer needs to be the case.

Empower your staff, streamline your reporting and simplify company spending by automating your expenses: it could just be the key to unlocking your company’s true potential.