For years, businesses have managed employee expenses through a primitive combination of paper, Excel spreadsheets, and email. But this antiquated approach no longer makes sense. In fact, conventional expense management is a drain and a danger for the business.
· It consumes too much of everyone’s valuable time.
· It fails to adequately safeguard the business from waste, error, and fraud.
· It impedes accurate allocation of expenses to projects, business units, locations, etc.
· It limits management’s ability to make money-saving decisions.
· It slows reimbursement.
None of these outcomes are good for the business. Finance leaders therefore should strongly consider moving to a configurable, cloud-based expense management platform that streamlines workflow, enforces reimbursement policies, and delivers accurate, complete, and up-to-date expense data to those who need it.
Reality check: 2018 = 1988 + 30
Most businesses haven’t substantively modernized their expense management processes since the late 1980’s, when desktop spreadsheets first entered the market. Business conditions, however, have changed dramatically in the three decades since. New conditions relevant to expense management include:
Intensified time and productivity pressure on knowledge workers
Downsizing, accelerated time-to-market pressures, and elevated productivity expectations driven by digital technology are forcing knowledge workers to get more done in less time. Prior to the onset of this “time famine,” as it has been dubbed by Harvard Business School’s Leslie Perlow, people were only moderately inconvenienced by the time it took them to perform expense management tasks.
Today, personal and business tolerance for such low-value administrative tasks is approaching zero. Employees can’t afford to spend their precious time at the end of the month putting together expense reports. Managers don’t have time at month-end to review and approve those reports. And finance staffs don’t have time to manually analyze and allocate expenses, especially as expense volume and complexity continue to grow.
A highly mobile and decentralized workforce
Spreadsheet-based expense management dates from a time when people were much more closely bound to the office. So they could readily share spreadsheets and send paper receipts to accounting. They could also easily ask a manager or a peer in an adjoining office about current expense policies.
Nowadays, employees are highly mobile. They may work from home or flex office space. Much of today’s workforce aren’t even full-time direct employees. Instead, they are contractors and “gig” workers who may rarely even set foot in the office. Yet they must still be promptly compensated for their legitimate expenses.
Expanding, more dynamic, and increasingly complex expense management requirements
Expense management used to be fairly straightforward. Employees needed to be reimbursed for travel, entertainment, and other miscellaneous expenses that they paid out-of-pocket. So they submitted their receipts, along with appropriate notations about the particular client or project associated with each expense.
Today, expense management challenge is much more challenging. For one thing, expenses have increased in both volume and variety. Growth in air travel, for example, has outpaced inflation three-fold. Employees are also submitting more different types of expenses as they independently subscribe to work-related online services, incur roaming expenses on their personal phones, and otherwise lay out personal funds in ways they never did before.
Also, in today’s highly dynamic business environment, expense codes change more quickly as project timelines get compressed, businesses reorganize more often and customers continually merge or get acquired.
Moreover, finance departments now need more granular insight into growing expense outlays. Who is spending what—and why? Where is spending anomalously high or redundant? Are low spenders doing something right that should be replicated across the company? These questions can only be answered if expenses are fully and accurately coded.
Simply put, 2018 is not 1998. And 2028 isn’t likely to be 2018. Every organization must therefore evolve its expense management accordingly.
Next-generation expense management
So what does the next generation of expense management look like? What specific attributes should finance leaders look for as they seek better insight into ad hoc spending—while also taking the friction out of expense management workflows?
While solutions may vary in their particulars, three attributes are essential:
Cloud-based. Cloud-based expense management offers several advantages over spreadsheet-based approaches. For one thing, it replaces multiple spreadsheets and email attachments with a single, centralized repository of all expense-related data and documents.
For another, cloud-based solutions are inherently mobile. Claimants, business managers, and accounting staff can log in from anywhere and do their work any time. Cloud-based software also eliminates the need for capital spending, while keeping monthly opex costs tightly aligned with actual usage.
Rich business logic and rules-based workflows. Next-gen expense management solutions let accounting build policies and processes right into the system. So instead forcing accounting staff to pore over spreadsheets manually to validate and assess claimant inputs, the system does so automatically.
The system can also immediately alert claimants if airfare spending for a given month or client exceeds a defined limit—or if the project code associated with an expense was entered incorrectly.
A smart system will also generate alerts, reports, and dashboards that provide all stakeholders with intuitive visibility into events, trends, policies, and issues that relate to their personal roles and responsibilities.
Highly intuitive and configurable. Despite its sophisticated features, next-gen expense management solutions must be user-friendly. Its considerable long-term benefits make some modest upfront investment in training-and-explaining worthwhile, but the system must nonetheless be intuitive to use.
Ideally, the system should also make it easy for the accounting team to modify policies, workflows, expense codes, and other system parameters as necessary over time. A system that is too “brittle” and/or time-consuming to maintain won’t be able to keep up with the accelerating pace of business change.
Why it matters
Accounting teams shouldn’t update their expense management systems just because they haven’t done so in a while. They should do it because major changes in business and the nature of work make the benefits of modernized expense management truly compelling.
Those benefits can best be understood in terms of expense management’s three constituencies:
Claimants benefit by being able to more easily submit expenses and supporting documentation, anytime and anywhere. They get immediate feedback if they make a data entry error, submit an expense that’s out of policy, or accidentally make a duplicate claim—instead of waiting weeks to find out that they need to re-submit a corrected report.
Next-gen expense management is also much more contractor-friendly than archaic spreadsheet-and-paper systems, since it allows anyone with an authorized system login to use it. A sufficiently intelligent system will even allocate contractor expenses to the right client and project automatically—and apply contractor-specific policies to their submissions in accordance with the terms of their respective agreements.
Perhaps most importantly, the automated workflow of a next-gen expense management system gets claimants reimbursed more quickly and reliably. Claimants can also be reimbursed more frequently, should that be deemed appropriate.
Business managers benefit by gaining a single screen where they can simply click “yes” or “no” on expense approvals from their desktop, laptop, tablet, or phone whenever they find a convenient minute for review. They can also easily track current spending by any relevant parameter. They may even be granted permission to modify expense policies for a project or client under their purview as appropriate.
All of this makes claims approval and control fast, easy, and convenient. That’s a non-trivial benefit for managers who have little time to spare for administrative tasks. Next-gen expense management also helps business managers better accomplish their objectives by minimizing the time their teams have to spend working on expense reports—especially at end-of-month “crunch-times.”
Accounting teams benefit by getting timely, accurately, and fully documented claims submissions that have already been subject to applicable policies. They don’t have to chase people for late submissions or waste time explaining policies already documented in the system. And they can handle ever-higher volumes of increasingly complex expense submissions without adding staff or working longer hours.
With robust cloud-based expense management, decision-makers also gain unprecedented insight into what’s driving expenses—and where they can cut costs. Spending too much on hotels in Chicago? Maybe it’s time to lease a corporate apartment and get a tax write-off. Car rental costs skyrocketing in Dallas because support techs keep having to assist a client there? The numbers may indicate a leased vehicle will save money.
By validating claims data and unifying it in a single, well-structured database, a next-gen expense management system also makes it much easier to integrate expense figures into enterprise accounting systems. This ensures that expenses are properly allocated for P&L, tax filings, and other requirements.
Digital technology now enables us to accurately and automatically quantify everything from the mileage we put on our vehicles to the BTUs we expend daily on heating our offices. There is no reason for T&E and other expenses to lag behind these metrics—especially since companies lose tens of thousands annually on expense fraud alone.
Fortunately, next-gen expense management empowers accounting teams to eliminate fraud and waste, while saving everyone across the organization time and aggravation. That’s why it’s time to put Excel aside and implement expense management that’s appropriate for 2018 and beyond.