Many people believe that undertaking expense management with manual processes such as paper reports or Excel spreadsheets can help them to save money. But what they don’t realize is that in return they are trading in valuable time and resources that could be dedicated to more productive projects.
Here, we’ll shed some light on some of the hidden costs of manual expense management and what you can do to tackle these costs and pitfalls.
According to a survey conducted by the Global Business Travel Association (GBTA), the average time spent on a single business expense report is 20 minutes. Additionally, according to a report written by the Aberdeen Group, employees submit an average of 1.5 expense reports per month.
So let’s just say your company has 100 employees who each spends 20 minutes on a report and submits 1.5 reports per month. Over the course of a year, they would have collectively racked up 600 hours or the equivalent of 75 (8-hour) workdays in time spent solely on expense reporting!
That is not all. The GBTA survey also found that on average, 20% of expense reports contain errors and it takes another 18 minutes to correct each of these reports.
If you thought that 600 hours sounds bad, think again!
Waste of company’s money
Manual expense management calls for extra manpower and time required for claims preparation, handling approval and reimbursement, and processing data entry. Sounds like a lot of work, doesn’t it?
Despite all this extra effort, you still pay a heavy price. Do you know how much an average expense report costs for your organization? According to data published by the Aberdeen Group, “manual expense reports cost small businesses, on average $35.02 to process a single report.” Now imagine that your company has about 100 employees again. If we take 100 employees multiplied by 1.5 as the average number of reports submitted by employees per month, and multiplied again by the average processing cost of $35.02 per report, it will add up to $63,036 in total costs annually.
Not to mention, imagine all the extra space and clutter that you can get rid of if not for all these stacks of documents piled up within your office over the years.
High potential for fraudulent expense claims
Conflict of interest is a real concern as expense frauds remain prevalent. A study conducted by the Association of Certified Fraud Examiners (ACFE) estimates that organisations worldwide lose 5% of their annual revenues to fraud, potentially amounting to over $4.5 trillion a year.
When employees are given the power to process and report on their own expenses, they are effectively also granted the opportunity to claim more money than they are owed. Of course, this does not mean that all employees are out to rip the company off. Sometimes, failure to grasp the company expense policy can also mean that employees end up incurring and claiming reimbursement for purchases that are not compliant with the company’s policies.
As it is often difficult to differentiate between legitimate claims and fraudulent ones, many managers often let questionable cases slip by since the expense has already been incurred. A lack of audit trails and proper controls in manual processes only perpetuates the abuse, which could lead to unnecessary expenditures and significant losses over time.
To curb such risks, it might be more worthwhile for companies to invest in tools that can automatically enforce company policies within their expense management system. This is especially helpful when the volume of transactions has increased to an extent that makes processing and supervision difficult.
Low visibility of expenditure
With most manual approaches, much of the details of transactions still lie stored within hardcopy documents. Unless you know exactly what you are looking for and have an excellent filing system, it would be a nightmare to manually sieve through files and cabinets of documents to extract information on a transaction.
This also means that the company would be hard-pressed to pinpoint where exactly it might be overspending, as data on past transactions is not readily accessible for retrieval or analysis. Without visibility on details of transactions, it would also be challenging to keep track of the costs incurred by every single employee in real-time.
This is where an automated expense management system will come in handy. With data digitally captured at every step and documents automatically indexed to transactions, you will never have to bother with manual searching and sorting again. Having digitalised real-time data on hand would also enable companies to effortlessly monitor and analyse employee spending behaviour and possibly even derive valuable insights on corporate spend.
Traditionally, a manual expense management system means that employees need to pay out of their own pocket first and wait to be reimbursed. The reimbursement process may take some time, especially if there are many claimants in the company vying for the attention of a select few overburdened processing staff.
This prolonged waiting time can lead to employee dissatisfaction or possibly even cause employees personal financial stress especially if the expenses account for a significant percentage of their salaries.
In some cases, employees may find the company’s reimbursement procedures too complicated or laborious to even bother with filing claims. In a study of British workers, it was found that more than one-third of workers never claim back on expenses. Although this presents an immediate benefit of lower costs for the company, it comes at a price. Given enough time, such practices would inevitably breed employee dissatisfaction, and eventually manifest as plunging productivity or even higher turnover rates.
Automate your expense management system
Automated expense management systems can save businesses a significant amount of time and money that can be put into better use in upgrading business capabilities and improving client outreach.
On the surface, it may seem expensive to make the switch from a mostly ‘free’ manual system to an automated system. However, if you do the math and delve into it, you may find that the hidden costs of a manual system may well overwhelm the upfront costs of making the switch. If you are still sceptical about how automation can help you, go on and check out the free trial that Navisteps is offering and experience the difference that it can make for your company.
If you are interested to learn more about automated expense management, feel free to contact us and we would be happy to share more details with you!