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Inefficient processes and inadequate insight into purchases drive a lot of wastage and fraud in businesses. Software that automates expense controls can help achieve a lot, sometimes spotting 90% violations, says Anshul Rai.
Dark purchasing, or the inability to track company expenditures, has become one of the major issues, resulting in companies losing a hefty amount of money each year.
Procurement function contributes majorly to organizational spends but in most cases, there is a huge gap between what companies think they spend on procurement and what they actually spend. This gap is essentially because of inefficient processes.
As per a survey done by AmeriQuest Business Services, with procurement professionals, more than half of them said they purchase supplies for their organisations on their own, either through approved vendors or by buying and then filing an expense report.
Tracking of these expenses becomes extremely difficult since they are not recorded in the organisations’ system properly, which often results in fraudulent practices within the company.
According to the recent report by Association of Certified Fraud Examiners, the average organization loses 5% of its annual revenue to internal fraud. Even more concerning is the fact it takes around 18 to 20 months to detect any expense fraud.
In this scenario, expense management softwares, have the potential to keep a track of company’s purchases in a user-friendly and accessible manner. In fact, automation eliminating dark purchasing can lead to savings of up to 25% as per Supply Chain Quarterly, September 2016.
FRAUD CONTROL
Expense policies and their compliance: Most multinational organisations today have a large workforce comprising of number of global and mobile individuals. India, in fact, is the world’s tenth largest business travel market and is likely to clock the fastest growth in this segment in the next five years.
Business travel spending is expected to treble until 2030 from $30 billion in 2015, according to a KPMG report.
Without proper policies in place, it is difficult for organizations to question employee spending, especially for senior employees as well as keeping a track of all travel and related expenses.
Expense-related policies play a key role in ensuring employees are aware of their permissible limit for spending. If policies can be integrated into the expense management solutions, it can help employees know their rights and limits at the time of reporting expense itself.
In addition, before expenses are submitted, the automated system can also check if expenses are in line with policies and flags violations automatically so that employees can take corrective action.
Meaningful approvals: Integrating policies into expense management solutions benefit not just employees but also help managers in understanding policies better. They can be more aware of policy violations and keep a check on those as per guidelines.
When in doubt, approvers can add their comments to the reports and seek clarifications from employees instantly. This also makes on the go approvals easy, in case there is a requirement of incurring additional expenses, procuring a service through a new vendor, etc.
Actionable analytics: Automated expense management solutions offer detailed insights into violations, most frequent violators, category-wise spending etc. This can help finance and HR management teams to improve policies over time, identify preferred vendors and drive cost efficiencies.
According to The Hackett Group, Inc., a global business consultancy, “world-class” procurement departments operate about 20% more cheaply than average companies. This can be only achieved when the management teams have proper insight into expenses.
Card controls and close monitoring: Besides several benefits that automated expense management solution can offer on the go, such solutions can offer employees a physical card, which they can use just like a credit card.
The card can also be linked to the expense management system, with in-built policies and controlled remotely by the admin or senior management. It would provide the managers with the flexibility to increase or decrease cash limits if required, at anytime, from web and mobile.
Admin can also block or unblock cards with a click of a button. Expense management solutions also offer a live dashboard, to ensure complete visibility and transparency and real-time update of card transactions.
Automated expense management solutions and e-procurement are areas that are being recognized by all departments to not just bring in efficiencies in the process and adhere to compliance norms but also improve relationships with suppliers and customers.
With Happay policies and controls in place, violations are automatically identified and corrected. If previously with manual processes, 50-60% of violations were identified – with Happay’s automation, the percentage goes up to 90% and above.
About the author: Anshul Rai is CEO and co-founder, Happay. He heads engineering, product and business collaborations at Happay.
Bengaluru-headquartered Happay is a business payments and expense management solution provider. It was founded in 2012 by IIT Kharagpur alumni, Varun Rathi and Anshul Rai.
DISCLAIMER: Views expressed above are the author’s own and ETCFO.com does not necessarily subscribe to them. ETCFO.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
Originally published in CFO-Economic Times
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