How Next-Gen Systems Are Changing The Way We Manage Business Expenses
A digital transformation for business expense management
It was in the early 1990s that the Excel spreadsheet emerged to become the go-to tool for managing company finances. And nearly 30 years later, it’s still commonplace within our companies for expense management.
While so much has changed in those intervening years, as we’ve moved into a digitally connected world, spreadsheets and manual accounting processes have managed to survive.
One of the areas where you’re most likely to find them used is with the management of employee expenses. Businesses continue to handle employee reimbursements with a traditional approach - a combination of paperwork and spreadsheets.
But this reliance on an outdated method of controlling expenses comes at a cost. It’s estimated that each year businesses lose around $2.9 trillion to expense fraud. Along with the financial losses, there are the increased compliance risks of supplying tax offices with incorrect or misleading information.
Businesses also have to factor in the stifling impact of slow, inflexible and frustrating work processes. The problems include:
- It consumes too much employee time
- It fails to safeguard a business from waste, error, and fraud
- It limits management’s ability to make money-saving decisions
- It slows reimbursement to a crawl
Why expense management is changing
While the Excel spreadsheet remains a powerful and versatile tool, its fundamental weakness is its lack of connectivity. Information in a spreadsheet is effectively ‘siloed’ with data manually input and no easy ways to share.
It’s a limitation that’s increasingly out-of-kilter with the fully connected digital landscape in which we live our lives. We’re used to accessing cloud-based data - whenever and wherever we want - from social media messages to banking apps.
This changing way we interact with information has also dramatically altered what’s required from a modern expense management system. These changes include:
Time pressures
The move to digital has accelerated the pace of business life and increased productivity expectations. The bottom line is that digital tools allow more to be done in less time.
It has led to what the Harvard Business School’s Leslie Perlow has described as a “time famine”. Business can no longer afford to allow employees to spend large amounts of time on slow, menial and unproductive tasks that can now be automated.
From an expense management perspective, this is exactly what traditional set-up demands. Employees spend their precious time at the end of the month putting together expense reports.
Finance teams have to manually check and process each claim and managers have to review and approve a monthly flood of reports. It’s a slow and clumsy system which eats into company time and resources.
Mobile workforce
Spreadsheet-based expense management dates back to a time when working routines were much more rigid and office-bound. It meant that spreadsheets could easily be shared and any queries about expenses could be dealt with by a manager in an adjoining office.
These days, employees are much more mobile. They could be working from home or in flexible office space. Much of today’s workforce aren’t even full-time direct employees. Instead, they are contractors who may rarely even set foot in the office.
Despite this much looser way of working, it’s just as important that a business is able to promptly and fairly compensate any worker who incurs legitimate business expenses.
Complex costs
Expense management used to be fairly straightforward. Employees needed to be reimbursed for travel, entertainment and any other miscellaneous costs paid out-of-pocket. So they submitted their receipts, along with appropriate notes about the client or project associated with each expense.
Today, expense management is much more challenging with business expenses increasing in volume and variety. Increased mobility has been accompanied by a growing variation in the form expenses take with different payment methods emerging and receipts provided in multiple digital ways.
All of these changes highlight how an expense management system designed to deal with the demands 30 years ago is no longer able to keep pace with today’s business world.
Next generation expense management
So what does the next generation of expense management look like? What specific features should business managers be looking for if they want a system capable of handling today’s challenges?
While specific solutions will vary for each organisation, three attributes are essential:
Cloud-based
A next-gen expense management system is securely stored on a cloud server, allowing the software and data to be accessed from wherever the user has an online connection.
This provides significant advantages over traditional spreadsheet-based approaches. It replaces the need for multiple ‘siloed’ spreadsheets and email attachments with a single centralised repository for all expense-related data and documents.
A cloud-based solution is also inherently mobile. Claimants, business managers and accounting staff can log in from anywhere and do their work any time. It eliminates the need for capital spending while keeping monthly costs tightly aligned with actual usage.
Real-time
A next-gen solution allows expense policies and processes to be built right into the system with real-time monitoring. Instead of forcing staff to pore over spreadsheets manually to validate and check claims, the system does it automatically.
Whenever the system finds a cost that’s outside of defined limits or an associated project code that has been entered incorrectly, it triggers an alert.
The alerts can trigger an on-screen notification for the claimant as well as being used to alert account managers - allowing them to check the validity of a claim.
User-friendly
It doesn’t matter how powerful a system is if employees can’t figure out how to use it. So despite their sophisticated features, next-gen solutions place a major focus on being user-friendly.
The systems are designed to be intuitive so that employees with no technical ability can use them with a minimal amount of training required. This is down to constantly refining the software, refining user interfaces and tackling any annoyances.
The system should make it easy for an accounting team to modify policies, workflows, expense codes and any other expense related settings. A system that is too “brittle” and time-consuming to use won’t be able to keep up with the accelerating pace of business change.
Why switch to a cloud-based system?
The move to a cloud-based set-up isn’t just a slightly improved version of the way we’ve traditionally managed employee expenses - it’s a fundamentally new approach.
It provides a more efficient and effective way to keep control of costs, in ways that weren’t previously possible with a traditional spreadsheet and paperwork processes.
The benefits are felt throughout an organisation. Here’s a look at the three main beneficiaries:
Claimants
Employees benefit by being able to easily submit their expenses, anytime and anywhere. They no longer need to face the painstaking task of collating a claim from a pile of paper receipts at the end of each month.
They receive immediate feedback if they make a data entry error, submit an out-of-policy cost or accidentally make a duplicate claim.
Perhaps most importantly, the automated workflow of a next-gen expense management system gets claimants reimbursed more quickly and reliably. Claimants can also be reimbursed more frequently, should that be deemed appropriate.
Managers
For account managers, approving or rejecting claims can be done with a simple click of ‘yes’ or ‘no’ from wherever they have an online connection.
This prevents backlogs from building when an approver is away from the workplace, a common problem when relying on a traditional expense set-up.
With much greater speed and efficiency, managers can also access accurate and up-to-date spending costs, rather than having to wait weeks or even months before employee expenses have been processed.
Accounting
Finance teams get timely, accurate and fully documented claims that have already passed through the filter of automated policy checks. It removes the need for manual processing and lets them focus on ensuring internal and external compliance.
The combination of accurate data and integrated reporting tools makes collating information a fast and simple task. Reports that could take days to put together using a traditional system can be done in minutes.
This greater visibility allows spending patterns and trends to be identified and any particular ‘weak spots’ exposed. It allows them to provide decision makers with the information needed to build stronger and more effective organisations.
So while we are seeing digital technology being used to accurately and automatically quantify so many aspects of our lives - expense management has been slow to take advantage.
Businesses continue to rely on traditional ways of working which are slow, inefficient and incapable of effectively controlling costs. It’s by moving to next-gen expense systems that businesses can empower themselves to fight fraud and waste, and remove the frustrations caused by the traditional approach.
This is why it’s time to look beyond the Excel spreadsheets and manual processes of old and start to maximise the business benefits of expense management systems that are built to compete in 2018 and beyond.
Webexpenses provides a smarter way to manage employee expenses. Find out for yourself by requesting a free demo.