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The COVID-19 pandemic changed how businesses function forever. With remote working, employees no longer needed to work under one roof to get the job done. Unfortunately, this opened up Pandora’s box of expense policy violations and expense fraud owing to distributed teams and inefficient communication and policies.
To overcome this challenge, forward-looking businesses are now actively switching to expense management software to control costs, mitigate violations and eliminate expense fraud. This blog builds a business case as to why your business needs to adopt employee expense management software to stay afloat in such testing times.
How do traditional expense management processes hurt your finances?
- Traditional means of expense management are tedious, repetitive, and time-consuming. This may translate to manual data entry errors.
- Manual data entry increases the chances of duplicate, error-prone, or fraudulent expenses. This, if ignored, can affect the financial bottom line.
- Finance teams have to verify expenses for expense fraud and out-of-policy violations manually. This may lead to missing out on fraudulent expenses.
- Any errors that slip by can lead to either a loss to the company (policy violations or fraud) or the employee (delayed reimbursements)
How an automated expense management software can help control employee expenses?
1. Digitizes and automates your entire expense management process
Traditional manual processes are error-prone and slow. Automating your expense management process reduces labor-intensive work for both employees and finance teams. Also, adopting a cloud-based expense management software converts challenges faced in the manual approach into one-click wonders. This enables::
- Seamless expense reporting and expense tracking anywhere, anytime, and by using any device
- Accurate data extraction of vital information from expense receipts like amount and spend date
- Real-time expense policy checks for policy violations and fraud at the source of expense creation
- Data analytics into spending patterns, trends, top policy violators, top spenders, and more
- AInsight into actionable insights to cut or save costs via discounts and, partnerships with frequent vendors
- Access to secured and unified cloud storage of expense receipts with detailed digital audit trails
Note: Collection and storage of expense reports are crucial to staying audit-ready. Not doing so can lead to trouble with the IRS.
2. Effectively enforces expense policies and real-time policy checks
Sometimes even with the most straightforward expense policies, companies may struggle to gain expense policy compliance. Unfortunately, this often leads to overspending and frequent policy violations.
An expense management software allows Finance teams to create and customize elaborate and well-defined expense policies. The software then runs real-time policy checks on all expenses right at the source of expense creation.
In case of expense policy violations, it flags the expense and ensures only policy complaint expenses get through. If an employee still wants to report the expense, she can explain the violation in the comments while submitting the report. This enables Finance teams to quickly verify and approve expenses as the expense software does all the heavy lifting in the backend.
3. Monitors organization-wide business expenses
Implementing a detailed expense policy is a great way to control employee expenses. One major part of this would be setting realistic budgets for every expense category that the company has: purchasing office equipment, advertising, business travel, office parties, etc.
An expense management software notifies the employee in real-time if they have filed an expense that surpasses the company’s limit. For example, suppose the maximum reimbursable amount for a client meeting within the city is $500, and the employee has created an expense for $800. In that case, the employee is made aware that only $500 will be reimbursed.
4. Analyzes expense data and provides insight into cost-cutting measures
Unlike manual reporting, expense software comes with advanced data analytics to help finance teams draw logical conclusions from the expense data. It provides insight into various types of expenses within the organization and across departments, cost centers, budgets, and more. Based on these insights, finance teams can look for opportunities to either save money or cut costs. For example, if traveling employees frequently travel with the same airlines, look for discounts or negotiate to get the best deals.
These insights can also help evaluate or reevaluate budgets and expense policies as and when needed. It can also help optimize cost-cutting via insight into top-spending departments and top-policy violators. As a result, it creates a comprehensive strategy that ensures that the company’s financial health is stable.
5. Ensures no expense fraud or policy violations get by
The Association of Certified Fraud Examiners stated that the most fraudulent expense reimbursement activities are:
- Multiple reimbursements for the same expense (duplications)
- Mischaracterized or misrepresented expenses
- Fictitious expenses
- Overstated expenses
Pymnts once reported that a massive 85% of employees admitted to lying on an expense report. This roughly translates to a sum total of $150 million that businesses lose annually on expense fraud.
An expense management software flags fraudulent and out-of-policy expenses while notifying both the employees and the finance teams. It maintains a digital audit trail that covers all actions taken on a particular expense or expense report. It also makes sure all submitted expense reports stay compliant with the IRS guidelines. This ensures that businesses remain audit-ready at all times. This helps companies put an end to expense fraud.
Summary
Manual expense reporting is cumbersome for employees and Finance teams alike. An expense management software like Fyle automates your pre-accounting process seamlessly while effectively providing insights to control employee expenses.
Additionally, with expense software, employees can quickly check company policies and spend limits across departments and cost centers at the time of expense submission. Finance teams can seamlessly verify and approve expenses with the software ensuring only compliant expenses get through. Finance teams can also leverage advanced data analytics to ensure they make the right business decisions with data. This ensures your company’s finances are always secure and audit-ready.
7 Tips to Make Keeping Track of Business Expenses a Breeze
About the Author
Rahul believes everyone has a story to tell. If he isn’t writing one, he’s hearing one from someone.
