6 Reasons for introducing a cost management system for your organization
Forty-six percent of respondents to a recent survey said they still enter their expenses manually by filling their bags, purses, and briefcases with crumpled receipts. These sheets are then stapled into printed spreadsheets that must be entered, listing all the details of each item and sent to the accounting department. At a time when the majority of corporate functions have been automated expense management is one of the few areas where manual effort is still too high.
Here are six of the main reasons why organizations should use an automated solution:
The cost of manually submitting, processing and reimbursing each expense report was calculated at more than $26, compared to $7 for a fully automated solution. The need to manually enter all details into spreadsheets, send, verify, approve and enter into the company’s general ledger is a labor-intensive and time-consuming process. In addition, the need to manually submit and send paperwork is very time-consuming, which slows down repayment delays.
By definition, most business expenses are incurred during the trip, whether for meals, hotels or car rental. Instead of keeping all these receipts until they return to the office, an expense management solution allows travelers to simply take a photo of a receipt and send it directly to the system. From there, the receipt can be automatically read using optical character recognition (OCR) and travel expense data is entered into the system for the user. The best spending solutions work on mobile phones and trays as well as on a laptop, so expenses can be submitted for reimbursement even before the traveler enters the front door.
By manually entering expense and GL code data into a spreadsheet, approvers must verify that receipts match the amounts submitted, and finance teams must re-enter all data into an accounting solution. This offers many opportunities for human error at each step of the refund process. The absence of an audit trail often makes it impossible to determine the cause of the problem.
Through the use of sophisticated OCR combined with rule-based interpretation technology or direct integration of electronic data such as credit card transactions, current systems are able to extract almost all transaction data from a voucher. An expense item can now move from receipt, submission, and approval to approval and reimbursement with virtually no manual input of information. With features such as drag and drop reports and one-click approvals, the risk of human error is significantly reduced and, in many cases, virtually eliminated.
The financial costs associated with the administrative time saved by automating the collection and processing of expenses often only pay for the solution. However, the greatest financial benefits come from exploiting the intelligence and data that these automated solutions can provide. A simple example is volume discounts: if you know how much your company spends on hosting each year, you can use this data to negotiate volume discounts with hotel chains when they become your preferred partner. With discounts that can be more than 20% lower than normal rates, savings can grow rapidly.
While some aspects of the travel policy (such as the cost of lunch) are easy to follow and apply, there are many others, such as day packages or flight class restrictions, which can be difficult and time-consuming when they are listed in a table. Company-specific regulations, such as booking flights less than 14 days in advance, can also be difficult to enforce and are often overlooked by stressed administrative staff. Companies can lose tens, even hundreds of thousands of dollars a year due to unenforceable travel costs.
Employees who submit excessive or completely fraudulent expenses are now a $2.8 billion problem in the United States alone. To effectively combat fraud, companies that use spreadsheets to manage their expenses should manually verify that each expense is legitimate before they can approve it. Has this month’s receipt already been submitted, or did the applicant just find it in their laptop bag? How can we know the accuracy of the kilometres travelled between the two cities cited by an employee It’s totally impractical, of course. Cost management solutions make it possible to fully automate this type of submission (in which case it is easy to track duplicate receipts or integrate with Google Maps to map a route instead of relying on an employee’s estimate).
Of course, these are just some of the many reasons why and how organizations can benefit from automating their cost management processes. Nearly all business travelers agree that one of their most hated and daunting tasks is to submit receipts and spreadsheets after the trip. It is also one they do with extreme hesitation. Satisfied employees lead to higher productivity, so it should be easy to justify implementing an automated cost management solution.
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