Why the Expense Reporting Process is Hurting Your Business
Ah, expense reports. *sigh*. Employees don’t like creating them, and finance teams certainly don’t enjoy pouring through them, or worse, reprimanding employees when they make out-of-policy purchases. Despite the headaches they cause, the expense reporting process is just an unavoidable part of conducting business, right?
Wrong! Your company doesn’t have to waste precious time on expense reports. In fact, expense reports might actually be hurting your company. Keep reading to learn why the expense reporting process is detrimental to business operations and employee morale, and how you should be managing business spend instead.
3 Reasons why the expense reporting process is hurting your business
The expense reporting process is seen as a necessary evil. However, it may not actually be necessary. Here are three reasons ways expense reports are hurting your company.
1. With expense reporting, employees have to wait weeks to be reimbursed
The expense reporting process isn’t fair to employees who don’t have access to a corporate card and have to pay for business expenses out of pocket. Interns can rack up hundreds of dollars in charges to their personal cards for Uber rides to go to attend client meetings. A sales executive might have to dish out thousands for international travel. Out-of-pocket travel and expense (T&E) spending can really add up and affect employees’ personal finances, no matter their seniority or pay level. The expense reporting process takes a toll on employee credit scores, credit limits, and savings goals.
Even after dealing with these financial frustrations, your employees still have to collect receipts, record reasons for the expenses, submit expense reports, and then have to wait weeks (sometimes months) to be reimbursed for this spending. Everyone is sick and tired of this process, and it’s taking them away from being productive!
2. Traditional T&E reporting obscures business spend until the end of the month
Have you heard of the executive who filed an expense report for Botox so that she could look her best for a panel that she was leading? Imagine the shock that the finance employee who received that expense report must have felt.
Surprise expenses are par for the course with the travel and expense reporting process. Finance departments don’t know what employees have spent company money on until expense reports have been submitted. For this reason, they can’t know how much of the budget was actually spent until the end of the month, when expense reports are typically submitted. Conducting the monthly budget to actual process and closing your books is hard enough; being surprised by the massive amount that your company went over budget turns it into a nightmare!
It’s clear that the expense reporting process obscures company spending and makes it difficult to stay on budget. There has to be a better way...
3. Spend control is impossible with the expense reporting process
Have you heard of the Silicon Valley CEO who submitted an expense report requesting a $75k reimbursement for charges made at a strip club? How did he think he could pull that off? Unfortunately, the finance team must not have been paying close attention to his previous expense reports, as they had already reimbursed him more than $60k for strip club entertainment expenses.
Expense reporting follows an “ask for forgiveness rather than permission” model. Because the expense reporting process requires proof of purchase only after spending has happened, finance departments have no visibility business spend after a purchase has been made. Without visibility, there can’t be any control!
Some purchases made on a corporate card can be reversed. Most, however, can’t be. For out-of-policy, out-of-pocket expenses, the finance team is left to pay for the expense – or deny it and leave the employee to cover it, even if the expense was an honest misunderstanding of the T&E policy.
Moving past expense reports with spend management
Thankfully, expense reporting is an unnecessary evil as spend management can give you the visibility, control, and automation that you as a finance professional need to get s%&t done and keep everyone happy.
What is spend management? It involves 1) using spend management software to get real-time visibility and control into your budgets and 2) giving everyone seamless access to company cards tied to these budgets to take back control of company spending.
With access to their own company card, employees will no longer have to wait weeks to be reimbursed for out-of-pocket expenses. But won’t employees abuse their privileges?
Spend management software lets you issue single-use virtual cards, and set limits on who can spend how much, and at what types of vendors. With platforms like Lola.com you’ll never see a strip club expense on the company card… unless, of course, the strip club was an approved vendor (which is hard for us to imagine).
When business spend only happens through company cards, the finance team gets instant visibility into how much is being spent. There’s no more waiting until the end of the month to know how much of the budget is left and what expenses were racked up. If your company wants to truly embrace agile operations, making the switch to spend management is a no-brainer!