Expense Management Challenge
Depending on the size of your organisation, the expense management challenges can be numerous.
Don’t you wish expense management were as easy as managing your monthly allowances? Keep track of the starting balance, note down your expenses in your diary, and match the end balance up with what you have in hand. Voila! It’s done!
However, the complexities of numerous stakeholders, functionalities, and a growing business contribute to several moving parts. Due to this, streamlining the expense management process becomes a challenge.
Read more – 10 Best Expense Management Software
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Top 7 Expense Management Challenges and How To Overcome?
1. Human Errors
The Element of Human Errors is a Significant Expense Management Challenge
Traditional processes are mostly manual. The excessive dependence on people interferes with a smooth flowing process causing time delays. Plus, manual workflows are a drain if you consider the effort involved in manual checking expense reports, authenticating entries, cross-verifying the claims against compliance, and the time needed for approvals or clarifications.
Further, the human element increases the possibility of errors. Let’s say that an employee Ajay has just returned from a business trip. He has just sent in an expense report.
Going through the report, the accountant finds that the receipt does not match the amount claimed. A proper search reveals that Ajay has entered an amount of ₹ 5,764 instead of ₹ 5,674. The process of clarification has cost the company and Ajay four days.
Automation: Happay offers expense management solutions to overcome the challenge. With customised software that understands your work, you can look forward to cost, time, and effort savings.
To learn how Happay can help, schedule a demo with us today.
2. Complex Approval Process
Automation applied to any “efficient” operation will magnify the efficiency – Bill Gates.
Before modifying or changing your workflows, check if your processes are efficient. You cannot improve a poorly designed workflow with automation alone.
One of the most significant expense management challenges is the approval management process. The approval management process involves a manager/approver who validates an expense claim so it can proceed to the settlement stage.
This stage is critical to ensure accountability and transparency across your business. The more complications, the longer it takes to settle reimbursement claims.
So, do you need to simplify your approval process?
There could be a couple of different roadblocks to having a straightforward workflow.
- Imagine an approval overload. It is a situation where there are too many approvals in the pipeline you must address.
- Slow workflows cause many hiccups as managers or finance teams must go through the information in spreadsheets, cross-check, and then approve/reject.
- Multiple approval levels complicate processes and cause time delays. The approval policies may require more than one person to approve a single claim. For instance, an expense report must go through a designated manager and the accounts head. Some companies also insist on another level of authentication when the claim exceeds a specific amount.
You can customise Happay’s expense management software to suit your travel and expense policy. It offers transparency as users can check the status of an expense report or approval (at any time). By incorporating the various levels of approval hierarchy, the system ensures that you stay 100% compliant all the time. Click here if you need to know more about why you should automate your approval process.
3. Expense Fraud
Dodging the Deceit – Expense Fraud
Ask any accountant (especially one drowning in paperwork) how much time they spend reconciling expense claims. The answer is sure to be “way too much”! It is reported that 30% of the accounting department’s time is spent reconciling accounts (manually).
In most cases, employees raise expense claims after the completion of a trip. Therefore, the stress revolves around reconciling these numbers quickly and effectively.
Since the entire cycle of recording, tracking and verifying expense claims is tedious, the risk of errors is considerably higher. As the scale of such work increases, manual processes also contribute to a greater risk of expense fraud.
What are the kinds of expense fraud?
a) Duplicate reimbursements
Duplicate reimbursement claims can be pretty common. For example, if a couple of employees have a meal together (while on a business trip), they must claim only half of the bill as their expense. When each of them claims the entire amount, it is categorised as a duplicate claim. It can be hard to identify if you are using manual processes for expense management.
b) Padding Expense Claims
One of the more common expense management challenges is addressing exaggerated claims. Global Payroll Association’s research shows that one out of every ten employees admits to claiming erroneous claims all the time.
Also, one out of five employees admits to doing so irregularly. While 27% of the employees claimed excessive mileage often, 20% of employees admit to buying office supplies but reserving them for personal use.
An example of such padding is inflating the cab fare and claiming more than the actual.
c) Fictitious Claims
Many organisations have a policy that allows employees to claim expenses (up to a specific limit) without receipts. Employees may claim such amounts without actually incurring such costs. In other scenarios, employees may produce fake receipts without incurring such expenses
d) Misrepresented expense claims
This kind of expense fraud is when employees misrepresent personal expenses and claim them as business expenses.
Read more – 5 Signs That Your Employees Are Committing Expense Fraud
4. Expense Policy Compliance
A small leak can sink a great ship! How compliant are your employees?
One of the significant pain points for any CFO and his team is out-of-policy expense claims. Policy violations arise from unclear travel and expense policies, lack of communication, or when employees feel under-compensated. This expense management challenge leads to several problems, including:
- Employees must wait longer for the settlement of the claims
- There is a heavy burden of work for finance teams (authentication and verification of expense claims)
- During the expense reporting stage, there will be more number of errors
Read more – How to Improve Your Travel Compliance?
5. Lack of Spend Visibility
The goal of forecasting is not to predict the future but to give you what you need to take meaningful action in the present- Paul Saffe.
The key stakeholders must have an overall view of expenses before making strategic business decisions. Such spend visibility is only possible when finance teams access real-time (and historical) data.
While traditionally-managed businesses have access to data, mostly, it is not in real-time. Plus, converting historical data into relevant reports and charts is time-consuming and tedious.
Automation: Expense management solutions can play an important role in helping organisations gain cost optimisations and averting financial leaks. For instance, Happay offers fully integrated cloud-based expense management software for enterprises.
Through robust and relevant insights based on real-time data, business stakeholders can exercise control, spend intelligently, and invest appropriately to help their organisations grow. Here are a few advantages that it can offer:
- Expense capture is instantaneous as the mobile-based app captures receipts and other proof of expense. They can compile such information into expense reports on the go.
- Finance teams can access the information in real-time and do not have to wait for the completion of business trips.
- The most significant advantage is the ability to study patterns, abnormal or otherwise. For instance, companies can identify the big spenders, violators, or the potential for vendor negotiations.
Schedule a demo with us if you would like to know how spend analytics can help with your expense management challenges,
6. Complicated Processes
Simple can be harder than complex but accomplish it, and you can move mountains-Steve Jobs.
It is far easier to overcomplicate a process than to make it straightforward. How complicated is your expense management process?
- How does the employee file an expense report? Does he have to hold on to the proof of expenses long before he submits the claim?
- What is the turnaround time for settling a claim? Does the wait time frustrate your employees?
- What is the approval hierarchy like in your company? How long does it take for approvals?
- Does your finance team lose sleep over expense reconciliation?
- How long does your finance team take to give you a customised report with numbers on the highest travel spend for the last quarter?
Complicated or manual expense management processes present a considerable challenge for companies. Apart from the above, it would help if you questioned whether your existing process is the most effective and efficient.
Read more – A Guide to Expense Management
7. Employee Experience
To build a rewarding experience for your employees, you must consider what’s important to them- Julie Bevacqua.
Businesses require employees to submit claims with matching receipts to address compliance issues. It helps the audit process and accounting teams in reconciliations. However, saving the receipts and other proof of expenses for submission increases the pain value associated with the expense management workflow.
Sometimes, the papers may be misplaced, and at other times the contents of the document may not be legible enough. These scenarios can lead to a delay in the reimbursement, causing further inconveniences to employees. It is one of the most commonly reported challenges of expense management; addressing it as soon as possible is essential.
Automated expense management solutions can completely transform the employee experience. Apart from quick and easy data capture (OCR technology allows employees to capture the receipts instantly), the far more efficient approval process reduces the time to settle reimbursement claims.
Expense Management Challenges – FAQs
1. What can be common challenges in travel expenses?
Some of the most common challenges in travel expenses are
- Unclear or complicated travel policies
- Complicated approval processes
- Delayed reimbursements
- Time-consuming and cost-intensive processes
2. How can management improve expenses?
There are many ways to improve the expense management process.
- Firstly, you must draft a complete and easy-to-understand travel and expense policy.
- It is equally important to focus on enforcing the policies.
- Consider automation as it offers numerous benefits
- Ensure the automated expense management software integrates well with your existing systems
3. Why is expense management important?
Business resources are limited, and therefore, to limit expenses, employers must capture and track business expenses. For instance, using Happay’s expense management software offers deep insights into spending, allowing CFOs to follow through with suitable business decisions.
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