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How To Improve Your Expense Management Strategy

Expense Management

Every year an increasing number of companies are turning to global business travel solutions to spur bottom-line growth, solidify customer and supplier relations, and remain competitive in an international market.

However, only 41% of business leaders regard expense management as a function of equal importance to other internal departments.

According to one study, North American companies that met “best-in-class” performance standards were 40% more likely to utilize expense management solutions. Similarly, they had a 35% higher likelihood of reporting regularly on expense policy compliance.

Expense reimbursement, and the policies that govern such procedures, encompasses the paying back of an employee’s money spent while on the job. Usually, these expenses are incurred during business-related travel.

As the price tag for business travel and related expenses continue to rise, business leaders are feeling the heat. To regain control of company spending and address the rising costs of business expenses, expense management solutions provide an excellent resource that can make a lasting difference in an increasingly globalized market.

Travel Expense Management: Trends and Predictions

According to the American Express Global Business Travel Forecast 2018, some regions of the United States, such as the Chicago and Charlotte metro areas, experienced upwards of five percent higher total business travel costs in 2018 compared to the year prior.

Globally, business expense costs continue to rise as the demand for air travel expands and fares skyrocket.

Business travel expenses encompass more than just airfare. Many company expense policies treat lodging, ground transportation, rideshare programs, tips and gratuities, meals, and even leisure activities as eligible business expenses.

Meals with customers or prospective clients are also typically expensed on the company’s dime.

Even with spending limits that cap the amount that an employee can expense during travel, sky-high spending can add up quickly. Consequently, a company’s expense accounts can suffer, and confusion can arrive regarding what can or should be expensed.

 

 

Managing Travel Expense Policies

It doesn’t help that many employee travel expense policies can be convoluted and difficult to understand. Complex and poorly managed expense policies constitute one of the most common causes of overspending.

After all, unless an employee understands what is and isn’t considered an eligible expense, expensing errors are all but inevitable.

For many companies, mobile expense management can help bring spending under control by systematizing employee expense policies in an intuitive mobile app. With the company policy explained in a smartphone app, employees can pull up the policy on the go.

This way, they can make an informed decision regarding their expenses and mitigate what would otherwise be considered suspicious activity.

Simplicity is crucial when it comes to travel and expense management. No matter how robust the expense policy may be, it matters little unless employees take the time to read and understand it.

Expense policies should be easily accessible and should conform to the following expectations and best practices:

  • Be concise and provide only the necessary information
  • Use a tone appropriate for one’s company culture
  • Refrain from using jargon or “corporate speak”
  • Be treated as an organic, “living” document that is updated to adapt to a changing business environment

What To Include In An Expense Management Policy

At its core, an expense management policy must spell out what is and isn’t classified as a work-related expense.

In the policy document, ensure that all employee expenses are delineated into one of two categories: expenses paid directly by the business, and expenses that the employees pay and are then reimbursed for.

For international travel, employers must include information regarding legal documentation such as vaccination records or Visas. Usually, these are reimbursable expenses that fall under the latter category.

 

Free Bonus Guide: 12 Ways Procurement Automation Can Improve Your Work Day

 

On the other hand, most telecommunications expense management policies offer discounted mobile phone plans that are directly paid for by the company.

For an expense management system to be effective, budgeting is required. Therefore, for budgeting purposes, it may be advisable to include spending limits on certain line items such as meals. For instance, lunches and dinners may be eligible for reimbursement up to $25, with the employee covering the remainder of the bill.

To avoid awkward miscommunications, it’s also recommended that companies dedicate a section of their expense management policy to non-reimbursable expenses. Expenses that are often ineligible for reimbursement include:

  • Personal leisure trips (e.g., day trips)
  • Fines and infractions (e.g., parking tickets)
  • Souvenirs and personal items purchased during the trip
  • Unauthorized additions or upgrades (e.g., business class airfare)
  • Meals for spouses or “plus-ones”

How Employers Pay Employees for Expenses

In most cases, an expense reimbursement claim report is manually completed and filed by an employee and submitted to an HR department or accounts payable.

Once verified and approved, the eligible expenses are reimbursed up to a predetermined spending limit. Most manual expense reports include the following information:

  • The date of purchase
  • The name of the supplier or vendor
  • A description of the goods or service
  • The total amount of the purchase

Many companies have centralized corporate expense management processes that require proof of purchase such as receipts, invoices, or ticket stubs, to be submitted for review. This can be done digitally using purchase order software that enables you to automate your company’s purchase order process and control costs by preventing unwanted purchases.

Streamlining Expense Reports

Understandably, manually expense reporting can be a time-consuming task. Keeping track of physical receipts and invoices is a challenge enough, but having to organize them, cross-check their reimbursement eligibility, and submit them in-person can be an incredibly daunting and labor-intensive affair.

The same risks that plague paper payments also negatively impact paper receipts, invoices, and credit card bills. When managing physical documents, processing costs are always higher, less transparent, and less dependable.

That’s why expense management systems should be as streamlined and digitized as possible, taking you all the way from procurement, to payment. Reducing friction between employee spending, claim approval, and reimbursement can save time and money where it’s needed most and can free up resources for other AP processes.

Systematize Transparent Reimbursements

Employees need to be informed regarding how and when they will receive reimbursements for their business expenses. A transparent payment schedule should be the cornerstone of every expense management process, which will reliably spell out how and when employees can expect to receive their reimbursement and by what means (i.e., check or direct deposit).

Whenever reimbursements are issued, the reimbursed employee should be made aware via a signifier or statement on their paycheck. This is an important step in ensuring transparency and building rapport between the employee and employer and can prevent frustration and confusion down the road.

Automated payroll or accounts payable automation solutions can help streamline these processes so they don’t have to be inputted manually.

Find Expense Management Tools That Work for You

Expense management should be simple, transparent, and streamlined. Fortunately, trusted expense management tools exist that can help migrate your existing systems to the digital space.

Presently, travel and expense costs remain the largest controllable cost in business. With the use of a well-designed expense policy and effective expense management automated solutions, business owners can cut their expenses, increase productivity, and keep employees focused on business goals.

To attack unruly expense management effectively, efforts need to be concentrated on the source: slow, outdated, and inefficient manual systems.

Incorporating digital, automated expense management systems will help cut down on the paperwork, speed up reimbursements, and reduce confusion—leaving a cleaner audit trail and an error-free expense account in its place.

ABOUT THE AUTHOR
Bill King
Bill King™ leads digital growth at AvidXchange. His work has been featured in Inc, Entrepreneur, Forbes and many other top publications.

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