According to a study conducted by Wakefield Research, 69% of businesses use spreadsheets and 49% use handwritten records to track spend. Please, don’t do that. Manage reimbursable employee expenses in an automated system. It’s easier on the administrator and a much better experience for employees.
What is an Automated Expense Reporting System?
Automated expense reporting is the online process of collecting, submitting, and approving business expense reports, versus doing the process manually on paper or in spreadsheets. These expenses typically include costs related to travel (e.g., airfare, lodging, vehicle rental), daily meal allowances, business entertainment (e.g., happy hour or dinner with clients), etc.
The most common and frequently used method of keeping track of employee expenses is through a physical corporate credit card. Employees who entertain clients or travel to worksites can be issued a card, with the billing sent to the finance or accounting team. All the major players in the card space automatically categorize expenses making it easy for the accounting team to keep track of who’s spending what where.
Challenges of Expense Reporting
Before the pandemic, business travel expenses were on the rise. Today, the situation has flip-flopped and become something of a hybrid, with costs related to working from home outpacing work travel. The biggest challenges with expense reporting, however, remain more or less unchanged.
Unclear travel policies—Vague business travel policies make it much more likely that employees will unintentionally overspend, misfile, etc.
The finance black hole—Expenses that are submitted by employees far too often turn into a guessing game for the finance department. Without an effective system, it can be difficult to gather insight into how much still needs to be paid at the end of each month and determine exactly where the company’s money ultimately goes.
Not enough insight—Credit cards don’t provide the opportunity for an employee to indicate, for example, who attended that $2,500 client dinner at the best restaurant in town; you still need paper or a spreadsheet to keep track. An added downside is that some employees might take advantage of having a company credit card and use it for personal expenses.
Benefits of Automated Expense Reporting
The primary benefits of using automated expense reporting are basically a mirror image of the previous paragraph. By implementing an automated expense reporting solution, you gain more insight into the costs your business incurs, you make the entire reporting process more efficient, and you can better implement your own business travel and expense rules.
Features to Look for in Expense Management Software
While having an online tracking of expenses and a cloud-based location to store scanned receipts are great features, they’re the basics that every expense management software should provide. Additional functionality will offer greater efficiency for employees and finance. Look for:
- Configurable, multi-level approval flows—The software should have the capability of supporting multiple approval levels to perfectly align with your company’s structure. For example, an employee’s manager can be assigned to approve business travel up to a certain amount, but the manager’s boss must approve larger expenditures.
- Mobile app—Employees who are on the go often find it difficult to keep track of all their paper receipts, never mind keeping everything in order. With a mobile app, employees can scan receipts and enter their expenses in real time and managers can approve reports anytime, anywhere.
Create a Travel and Expense Policy
When building a travel and expense policy, you should include a few sections to help ensure employees understand company expectations.
Clarify what’s considered travel expenses
Travel expenses include any type of transportation or lodging expense that employees incur while on a trip for company business. Some amounts, including employee meals, should have limits set. Expenses in this category include airfare; train, bus, and rideshare fares; rental vehicles; tolls and parking fees; hotel accommodations; mileage for personal vehicle use; required medical expenses (vaccinations for overseas travel); passport and visa fees.
And what’s not
Expenses made by a non-employee traveling with an employee (e.g., a significant other or family member) should be clearly marked as exempt from reimbursement. Upgrading a flight reservation to business or first-class and any personal activities such as sightseeing are billed at the employee’s expense. Fines such as a speeding ticket are also not covered expenses.
Save Time and Improve Accuracy with Automated Expense Reporting
When companies automate the expense management process, they can save considerable time, make expense reporting more precise, and greatly decrease the time it takes to repay employees for their business expenses. Bottom line: The expense reporting process doesn’t have to be cumbersome, especially if you use expense report automation.
Paycor’s unified expense management software makes it easy for employees to enter eligible expenses, for frontline managers to approve them, and for payroll administrators to submit reimbursement. But if you’re still on the fence about automated expense reporting, this expense management template can help.