Counting the cost of expenses

Published : 6 years ago, on 04/07/2018

• Johnny Vowles

As I sat on a Google Hangout with colleagues all in different locations the other week, I thought to myself, it’s baffling how far innovation has evolved how we work and yet there are some aspects of the working world that for many have painfully not evolved in the slightest.

Expenses remain a headache for business owners, accountants and employees alike, yet fear of an additional migraine prevents changing archaic processes in place. In workplaces up and down the country, the practice of manually printing off excel sheets and attaching receipts probably has been in place long before many of the current employees began working there.

It’s slow, ineffective and tedious – yet it remains, despite there being simpler options available.

“This is the way things have always been done” – the common reason for not changing the expenses process, though this doesn’t mean a better solution to the problem isn’t available. There is also a more important point to consider in that not only is this process not working optimally, it’s actually costing businesses money.

The plight of the Financial Controller

As a financial decision maker within a business you might be tasked with several responsibilities such as ensuring each department has the necessary amount of budget to work effectively, assessing the return on investment of purchases and balancing wages for hiring talented staff with reinvesting into the growth of the business. The problem of expenses often gets pushed to the back of the queue, but even when completed late will remain a drain on the business in terms of lost man hours every single month across the whole organisation. Even qualified accountants that we have spoken to have admitted they take hours filing their own personal expenses, so clearly this is an issue even the experts struggle with.

When processing expenses, the finance department can also struggle to efficiently turn around claims that are inaccurate when submitted or chase up employees to file their expenses on time. This is valuable time that should be rather spent on more important tasks to the business. Hoarding of receipts is also a massive issue, not just for the employee who has to file a massive batch of receipts, but for the financial director in charge of the company’s cash flow. At the end of the tax year, some employees might have amassed a year’s worth of receipts that they file in one go, which could amount to thousands of pounds. In smaller businesses, the administrative headache tends to fall on the business owner, whose time would be better spent creating better products or winning new business.

We spoke to one financial controller at a major international firm who said that the beginning of every year after the Christmas holidays is a particularly trying period. Despite the best planning, he still receives a deluge of expenses from employees claiming back money for business lunches and Christmas hospitality from the end of the year before, and this significantly hinders his ability to plan spend for the business.

Headaches all round

For some smaller organisations, the financial impact of many employees claiming expenses at the same time can significantly disrupt cash flow. This could make the difference between the company remaining in the black or needing to take out a business loan to keep the company afloat. From the perspective of the business’ clients, they are unlikely to be very happy if they receive a glut of expenses recharged to them in one go, which could impact on retaining their business over the long term.

For accountants, expenses form a burgeoning proportion of their work, made more difficult by having to scrutinise each claim before submitting into their systems. Delays and inefficiencies are inevitable when accountants are using several incompatible systems, often having to duplicate the entry of information across manually. However, even the most well-defined and structured expense claim processes are subject to human error, meaning time is wasted querying or rejecting claims until they are right. This is before we even consider the fact that some expenses are being made fraudulently. All the above means expenses can quickly become a huge time-waster for all parties concerned, so greater control is needed so that companies, accountants and employees can benefit from a more streamlined process.

Streamlining efficiencies and cash flow

Businesses have a vested interest in streamlining expenses processes as the automation of these tasks frees up time (which is popularly known to equal money), increases productivity and, in many cases, makes cash-flow more efficient for the organisation. A desire to automate the expense claim process has long been a priority for accountants and business owners, but now it is achievable thanks, largely, to smartphones and the advent of cloud-delivered services. The first step of automation was receipt scanning software, but expenses have a number of different considerations that technology is now finding solutions for as it becomes more sophisticated. For example, prompting employees to log expenses at the point of purchase and managing international exchange rates in real time so that expenses repaid always match the amount of the purchase.

Cards can also now be allocated to employees specifically for expenses that have a set limit each month, ensuring employees are never out of pocket and that the business retains full control over company funds. By linking a company card to a mobile app, companies can set up expenses flexibly, choosing between just simply digitally logging all expenses, pre-loading cards with set limits for expenses or approving each individual expense before it is processed. Back at the office the person responsible for accounts can approve payments immediately, request more information or reject a claim through a cloud-based dashboard in real time, which in turn links to existing accounting packages.

For accountants, automation now means they can spend less time compiling receipts and correcting mistakes and can put this time toward their core business or acquiring new clients. For the financial decision maker, expenses can become just another process in the business and stop being something which needs dedicated hours to complete every month. Similar to the automation of office IT years before, automation of expenses can now take the pain points from the expenses process while delivering all of the benefits to the organisation.

Expenses are almost as old as businesses themselves, but now is the time to take expenses out of the dark ages and into the present day. Modernising expenses doesn’t need to be a hassle and the time and money saved can actually give a competitive edge to the business, so there is no longer any reason not to embrace automation to benefit your business.