1. Embrace paperless
Streamlining expenses in the very essence means removing all parts where human intervention is needed.
In accounting terms, the biggest moving parts are documents. At Payhawk we believe that paperless accounting is a necessity for every business. Reducing paper receipts saves time and improves the audit trail. In the UK receipt loss estimates go up to £2.8 billion for SMBs. On average, it takes 20 minutes to complete one expense report. On the other hand, if the expense report needs to be corrected, it takes almost the same time as doing a new one. This only highlights that paper is a legacy tool that carries hidden costs we often overlook just because we are used to it.
Using expense management software is the first step to ensure that important documents don’t get lost. On top of that, you get the benefit of enriching your data. There is not a restriction on the additional information that you can attach to the receipts and invoices. All of these benefits come packaged with an efficient way to monitor expenses and get reports in real-time.
2. Bring every employee on board
Streamlining expenses is only possible when the whole company follows the same processes and rules.
Everyone in the office should have a clear and concise idea of how to manage expenses. With the right tools, every employee can contribute to the accounting flow. Mobile apps empower employees and give them access to company funds while emphasizing transparency and security. This leads to numerous benefits. Management has direct supervision over the expenses. Accountants can focus on analyzing data and building forecasts, rather than menial work. Lastly, employees will experience higher job satisfaction and won’t be worried about reimbursement when they manage travel and other business expenses.
3. Have a single place of truth
Expense management is a sequential process and there are four main phases.
Getting access to company funds
There are different processes across companies when it comes to spending. Some companies prefer to keep the funds available to only a certain group of people from the finance and accounting office. For example, when you need to purchase a digital license you need to get this approved through a manager and then go to the accounting team who are making the purchase on your behalf. Other companies rely on reimbursements or advance requests. Lastly, high spending businesses such as travel and marketing agencies provide direct access to company budgets with corporate cards to a large number of employees.
Once the payment is done, the employee must make sure to provide the invoice or the receipt that matches the corresponding payment. Additionally, when the expense is handed over to accounting there needs to be some explanation of what the expense was and who authorized it.
Accountants and reconciliation
The accounting team reads the bank statements and matches all the expenses that are provided by the employees to the corresponding transactions. Additionally, all that data is used for basic analysis, optimizations, and tax purposes.
Financial controlling and forecasting
All the previous steps provide valuable insights for improving and optimizing expenses. The financial controlling team analyzes the results, develops forecasts, and sets specific KPIs which are crucial for the operation of every business.
Every company defines its own mechanism on how to deal with these 4 parts when it comes to spending. Businesses rely on separate products to manage each part of the expenses lifecycle. However, there should always be a vision of how these products work together. After all, substituting a document for a stack of spreadsheets or a number of separate products that cannot work well together doesn’t bring any value.
The holy grail of tracking expenses comes in the form of fintech. For example, a corporate card coupled with an expense management platform that is directly integrated with accounting software. With the press of a button, companies can eliminate 3 out of the 4 steps above. In this way, all spending data is stored in the same place and can be easily used according to specific needs.
4. Don’t micromanage
Research shows that 6% of employees haven’t read their company’s expense policy; 10% of employees aren’t aware they can submit expense claims or reimbursements; and 25% of employees will avoid a meeting with a client, supplier or potential hire because they do not know how to pay for it. This highlights the issue that employers and managers need to invest efforts in monitoring the whole situation.
The process needs to be clear and concise and work without having a person spending work hours overseeing it. All this is cleverly handled by spend policies that provide the opportunity to implement company-wide rules that have an easy and intuitive flow. In this way, there is not an additional strain on employees to remember complex policies and mechanisms because it is all automatically done in an app on their smartphone. On top of that, every manager has direct supervision on employees’ spending and can easily increase or decrease their limits.
Sadly, 23% of the businesses in the UK are still manually processing their expenses. While it’s true that automation is not a silver bullet, companies that are not using it for frequently repeated tasks such as expense are disregarding an opportunity to gain competitive advantage.
Automated expense management reduces human error, and provides data in real-time. To put it all in perspective, automation cuts entirely the need for paper documents. Reducing the time employees deal with bureaucracy saves time and money. In addition to this, when automation is used alongside spend policies and software integrations, the whole expense management process becomes seamless. The result is a complete picture of the company spending in real-time. This is a strong base to build forecasts and make decisions.
How to tell that there’s a need for streamlining expense management?
There are plenty of red flags we discussed in this article that can be easily spotted but by far the biggest one boils down to one question.
Do you want to optimize?
This simple question reveals one large truth. There’s a need for streamlining the process because employees spend valuable time that could have been invested elsewhere. Streamlining leads to better productivity, lower costs, and higher efficiency.
If you want to find out more about how Payhawk streamlines your expense management, book a demo with us.