Most businesses don’t have the luxury to just sit and wait for customers to get to know their products and buy them. Since ancient times merchants have travelled to faraway lands in order to find customers who will buy their produce or products. Since then travel & entertainment expenses have been an integral part of any business. According to GBTA, global travel spending crossed USD 1.2 Trillion in 2015 and India was said to be the fastest growing business travel market. Yet most Indian businesses still utilise manual methods for T&E expense reporting which comes with a few hidden costs that are often overlooked.
LOSS OF PRODUCTIVITY
Often businesses make it difficult for their employees to report expenses. Employees have to collect receipts of each expense in order to get it verified. They have to enter each expense into an expense voucher or an excel sheet and submit it to their managers or finance for approval. Following this process for an expense or two isn’t an issue, but when employees go on extended business trips or multi-city trips they often incur a multitude of expenses which can be time consuming to report this way. Most travelling employees often have to take a significant time off their work just to report expenses. This loss of productivity could have a direct effect to the company.
Due to the cumbersome processes that businesses follow in order to report expenses, many times errors can creep up in the reporting process. Employees may unintentionally or intentionally submit the same expense again for reimbursement. Due to the large number of expense reports that get submitted, manually verifying each report for duplicates from previous reports can be cumbersome and even practically impossible in many cases. Such errors often slip through the cracks and end up costing the company.
STRAIN ON THE FINANCE TEAM
Since finance teams carry the responsibility of verifying business expenses and awarding reimbursements, every expense reporting cycle, whether it is monthly, or fortnightly, they are overloaded with expense reports. During this time finance teams aren’t able to perform their day to day tasks. Hiring a bigger team would mean that most of the team is sitting idle except for when expenses are being reporting and verified. Manually processing a report costs businesses around $26.63 according to a 2015 paystream advisors report.
POLICY COMPLIANCE AND FRAUD
With manual verification it can become very difficult for the finance team to eliminate fraud from the process. Employees could abuse the system to submit duplicate expenses, overinflate costs, submit forged bills or even nonexistent expenses. According to ACFE, expense fraud comprised around 14% of occupational fraud in 2014. Enforcing expense policy compliance can also become impossible with manual expense management processes, as it would be impossible for finance teams to verify each expense with the expense policy of that particular employee. Hence expense policies can only act as guidelines with manual expense management.
As manual expense reporting is time consuming at each step of the process, it means that there is a delay in the visibility of expenses incurred. Employees may take their own time to report the expenses incurred by them. Managers may or may not approve the report on time, especially since they may be busy with or travelling for their work. Finance teams also take much longer to verify these reports, resulting in a lengthy expense reimbursement cycle for employees. According to Paystream Advisors, the biggest expense management challenge for 16% of small to medium sized businesses were their long reimbursement cycles. After all the expenses have been reimbursed and reconciled is when businesses can accurately measure their operational expenses. But due to the delay, businesses often miss out on proactive actions through which they could’ve saved costs or improved efficiency.
As you can see there are multiple hidden costs involved with T&E expense reporting. Most of these costs can be eliminated through automation of expense management. Click here to learn more.