To better understand expense reimbursement, let’s examine how most companies go through the reimbursement cycle, starting from the two perspectives that suffer its consequences the most.
Anna works for an IT Insurance company as a salesperson. The firm often sends her to networking events abroad, where she uses her personal card to cover expenses related to her trip.
To adequately reimburse them later, there are 4 things that she needs to do:
Before purchasing anything, she must be thoroughly familiar with the company’s reimbursement policy. Research shows that 64% of employees haven’t even read that policy. However, any purchase that is not compliant with the company’s rules will result in a personal expense she has to cover.
The second priority for traveling employees is to make sure they have enough money to cover their expenditures. As we’ve mentioned, using private funds is far more convenient for companies as they reduce their risk of running out of cash. In our opinion, this is not the best way to treat an employee as it creates stress for individuals. Nevertheless, it is a reality for many individuals.
Thirdly, Anna also has to make sure that she keeps excellent records. The company will pay back all of her incurred expenses under the condition that she maintains and submits all of the receipts. In the UK alone, receipt loss estimates go up to £2.8 billion for SMBs. Unfortunately, if she loses any of them, she won’t be getting her money back.
And finally, once the event is over, Anna has to fill an expense report, which in some instances might take more than 20 minutes to complete. The whole process causes employees like Anna, time, money, and stress. As we’ll see, she is not the only one affected by the traditional way of reimbursement.
Once an individual submits a report, it goes to the accountant for a review. On average, 19% of expense reports have errors. Тhe correction of the report often takes as long as creating a new one. Even if the statement is error-free, however, accountants often have to chase employees for missing invoices or receipts, losing valuable time they could be spending elsewhere.
Even in the perfect scenario, the accountant still has to do the heavy-lifting herself. Most business trips, for example, are in foreign locations where employees spend different currencies. This makes it particularly time-consuming to calculate all foreign currency expenses into the domestic currency that the report is based on.
Lastly, companies have to pay back what they owe to their employees, which managers do via a bank transfer. To do that, one has to double-check the payment and then copy-paste IBANs, reference numbers, and other details into the online banking software that the company uses. Unfortunately, this is an error-prone and inefficient process.
Luckily, there’s a better approach that helps you save time on mundane tasks.
The Smart Way to Reimbursement
Going back to our first question of how to reimburse expenses from personal cards more efficiently? We have found that there are two fundamental aspects that every company can achieve in order to be more efficient.
The first step to streamlining your expense management and easing the reimbursement process is going paperless. At Payhawk, we believe that paperless accounting is a necessity for every business. A GBTA report shows that the average cost to process one expense report is $58.
Removing the need for paper receipts improves the audit trail, which in turn saves the time of the accounting team and the company’s money.
Digitalization also allows employees like Anna to have peace of mind. She would not have to bear the risk of any lost receipts since everything is digital.
Automated expense management reduces human error and provides data in real-time. Reducing the time employees deal with bureaucracy also preserves companies’ resources. That means that Anna no longer has to deal with long expense reports, and the accounting team no longer spends time correcting them.
In a good expense management system, pre-accounting is already taken care of. Payhawk, for example, uses a robust OCR algorithm to extract and pre-fill the relevant information from the scanned receipt. The accountant has all the information they need in one place.
Payhawk also saves valuable time for accountants by automatically calculating the total reimbursable amount in euro. When the time for paying back what’s owed to each employee, the management can reimburse all of Anna’s expenses (which could be in franks) altogether.
How much time and effort would your accounting team save if all reimbursable expenses for a specific employee are automatically calculated and paid with a few clicks?
Payhawk is the first expense management solution to allow accountants and managers to reimburse employees’ expenses without going to their online banking. They can initiate a SEPA transfer directly from the platform, making the reimbursement process much more efficient.
Are you ready to step up your game?
Thinking only about how to reimburse expenses from personal cards more efficiently is not enough. No matter how efficient your reimbursement process is, ultimately, it is not the most reliable option. Employees like Anna still have to pay from their pockets and bear the burden of planning their personal finance. Moreover, out of pocket expenses cannot ensure that employees are compliant with the company’s policies.
The right solution would empower employees to use company funds while ensuring that their access is under control. With Payhawk, employees’ cards are aligned with spend policies, which ensure that employees don’t overspend. At the same time, Anna would not be worried about her personal finance or receiving her reimbursement on time.
If you think your employees deserve a card, don’t hesitate to drop us a line.
Feel free to find us on our email address or chat with customer service directly through the chat pop-up window.