The Expenses Process Can Be A Pain – To Everyone!
When I speak with organisations today, despite all the technological advances, for many nothing seems to have changed. The expenses process is as time-consuming, manually intensive, and prone to error as it ever was.
How do organisations deal with expenses?
There are two angles to expenses. The first is the employee one, the person who makes the spend and reports it, the second is the involvement of the finance team and authorisers.
Employee
The reality is that most expense processes are fairly basic and look like this:
- Employee decides to make spend
- Employee fills in an expense form. This can (unbelievably) be a manual form or, more likely, a soft form of some kind (e.g. Excel)
- Employee makes copies of receipts again, either hard or soft
- Employee submits the form and receipts to the finance team for approval/processing
This task can be a weekly or monthly one and, for most employees, it will take precious time out of their busy day or eat into their personal time. Human nature dictates that this task is often completed reluctantly, retrospectively and in haste. This is especially the case if the employee has a credit card as the incentive of reimbursement is removed. I know this because I used to be the worst offender, even though I am an accountant myself!
Finance team
The responsibility now moves to the finance team. Once the submissions are received (and chasing may be required):
- Various checks are performed i.e. coding accuracy, VAT identification (always an issue), receipts matching, credit card statement reconciliation (if used)
- Passed for authorisation (either manually or electronically)
- Posted to the accounting system
The level of intervention by the finance team will depend heavily upon the employee. In my experience, this was variable with some requiring detailed review and correction, others being easy to check. After authorisation, which can be a pain if manual, posting to the accounts system can take a while especially if there are multiple employees.
The final related activity is the overhead variance analysis that occurs as part of the period end. This will cover expense spend although this may only be at a summary level depending upon internal procedures.
What are the problems with expenses?
When we look at the expenses process in detail, there are several issues to consider.
Efficiency of the process
This is always an issue, never more so than now. The employee completion and the finance team aspects both need consideration. The employee gets frustrated as the process is seen as an overhead that creates no value, apart from keeping the finance team happy and being reimbursed (if they pay out of their own pocket). In this case, the only positive you can give them is to improve the process and make it as easy as possible.
From a finance team point of view, there is the amount of time consumed by this process, the checking, coding, reconciliations and chasing employees to comply. In nearly every organisation I have worked in, this process is incredibly manually intensive. As we say repeatedly, surely, we have better things to do with our time!
Control over spend
The problem as it stands for many is that control is re-active, after the spend is committed and submitted for authorisation. At this point it can be too late.
One of the main issues for organisations in the present climate is spend management and a desire to be pro-active rather than reactive, controlling spend at the point of commitment.
Analysis of expenses
One disadvantage when we post expenses to underlying finance systems, is that we tend to do this at a summarised level, and we lose the detail necessary for analysis. This can be as a result of the need for efficiency (i.e. it takes too long to post all the details) or because the underlying system is not structured to hold the detail (e.g. it does not have cost centres). To control spend, it is vital that we have as much detail as possible to perform analysis.
Find the right technology platform
For what should be a simple and straight-forward process, the majority of organisations struggle to be efficient and effective. Why is this? Quite simply, a lack of investment in the right technology.
Unfortunately, traditional finance systems are not designed to address this process, and this has resulted in the development of bespoke internal solutions. However, many of these were developed years ago and not using current technology advances and capabilities (e.g. SaaS). I was talking with a young accountant a few weeks ago and this very subject came up as she laboured through yet another period end, calling sales staff who had yet to send in their expense forms and receipts.
There are many good solutions out there that will address all the issues highlighted above, and that are reasonably priced for small and enterprise level organisations.
As we enter the recovery phase of the current crisis where finance transformation is high up on the agenda, add expenses to the list of processes to be reviewed. You may be surprised at the amount of business benefit you can find that will easily justify the investment. You may also make the employees happier too!
