Employee expense management is one of the most challenging business operating costs to control — and the current climate of remote work only adds to the complexity. Do you have an accurate idea of how much it costs your company to process expense reports? A lot of companies don’t, so don’t worry, you’re not alone. More companies are realizing that expense management solutions can save time and lower that cost though. Here, we offer five ways automating expense management application could impact your organization.
1. Expense processing is costing you more than you think
It takes an average of 20 minutes to manually process a single expense report. Nearly 20% of those reports will contain errors that take another 20 minutes to correct. Then there’s the average cost to process an expense report — $58. If your company manually processes 500 expense reports in a month, this adds up to:
$58 processing cost x 500 expense reports = $29,000 / month
That’s $348,000 a year.
With processing costs like that, it makes sense to look for ways to streamline the process, and expense management software is one way to do it. This expense drops to about $17 when the process is facilitated with a bit of automation**, that’s a 70% drop. A 2015 report from analyst firm Levvel Research identified even more savings. Their research saw costs falling to $6.85 with a fully-automated expense management system.
2. Corporate travel will return
Travel expense management is one of the most common reasons companies adopt dedicated expense management software, and for good reason. The typical business trip costs an organization nearly $1,300*.
Using travel and expense management software helps ensure employee travel fits within your organization’s budget limits and provides visibility into corporate-wide travel activity that can ultimately help you negotiate better travel-related contracts.
While corporate travel ground to a near halt in 2020, 2021 projects a modest return to travel, with significant increases expected in 2022. Some organizations are taking advantage of the relative lull to implement a travel & expense management solution and new processes, so they’re all set when travel picks back up again.
3. Spreadsheets aren’t free
Organizations — and their employees — experience numerous challenges in managing expenses. Most of those challenges can be attributed at least in part to dated processes and procedures, including spreadsheets and manual routing of expense reports, lengthy approval and reimbursement cycles, lack of visibility into spend, and difficulties enforcing corporate spend policies. Expense management automation can help modernize and streamline the expense report workflow.
Currently, many small and medium-sized businesses use manual methods to manage expenses. Most use a mixture of spreadsheets and scanned receipts, while nearly one-quarter mail receipts to their AP department.
There’s a lot a spreadsheet can’t tell you that an expense solution can, like spending trends over time, who your most profitable clients are, and how you’re spending your money. A spreadsheet can’t notify you when someone violates your expense policy. Spreadsheets are easy to break too — a mistake can be as simple as using the formula for Sum instead of Average. In short, spreadsheets as a tool for expense management are far from free.
Lest we blame spreadsheets for all our problems, understand that dated software applications or simple add-ons to an ERP are also inadequate in addressing multi-stepped expense management processes.
4. Audits are no fun
No one likes an audit — we’re guessing even auditors don’t like them very much. For businesses though, they are disruptive, nerve-wracking, and expensive. An expense management application can help streamline the expense audit cycle.
With expense management software, all of the data required for tax and compliance purposes resides in the system — in electronic form and ready for review. No more sifting through paper files looking for a paper receipt or scouring email messages looking for an approval. Expense management software allows you to better meet the requirements of your industry’s financial standards, minimizes the risk of manual errors while speeding and simplifying the job of your auditor.
5. Expense management software generates a big ROI
So how much could your organization save? Many of the leading providers offer expense management solution ROI calculators. Industry-leader Concur boasts an average 482% three-year return on investment. While we can’t personally vouch for such a generous ROI, we can say our clients are enjoying real efficiencies and cost savings following their adoption of expense management software such as Nexonia Expenses and Expensify.
Remember the statistic we quoted earlier, about it costing $58 to process an expense report?
A 2019 report, also from Levvel Research, found that surveyed organizations reported these benefits associated with expense automation:
• 50%—Improved visibility over spend
• 50%—Quicker reimbursement of employees
• 49%—Fewer errors
• 48%—Better able to enforce travel policies
• 43%—Lower processing costs
• 48%—Improved ability to detect and prevent fraud
How to pick the right expense management application
Expense management solutions vary considerably in the functionality they provide. There is no clear winner. Your business partner can help you select the best solution for your business, based on your organization’s size, requirements, and budget.