While business travel itself can be both rewarding and challenging, nothing makes an employee’s eyes glaze over more quickly than the thought of the post trip expense processing. Time-consuming, rife with potential for error, it can be a hotbed for both inadvertent and deliberate fraud that can lead to severe consequences for individuals and businesses.
While the global average for fraudulent expense claims is approximately 7% of total value expensed, most CFOs do not know how much fraud is occurring – either unintentional or deliberate.
Take this extreme case where a US employee was charged on three counts of wire fraud after she used her corporate credit card to purchase personal flights, accommodation, gift cards and concert tickets. That brings a potential penalty of 20 years in jail and a $250,000 fine. The risk clearly didn't outweigh the reward in this case.
But it doesn’t have to be large scale fraud; sometimes it’s the little things that add up to significant errors over time. Without the ability to identify duplicate expenses and analyze trends, manual systems are unable to identify low-level fraud, which over a year adds up to a significant and improper expense.
Sometimes fraud can be unintentional, but this still carries the same risks. This can lead to inadvertent fraud, where employees forget or don’t know how to allocate expenses that are work-related versus leisure activities.
Streamlining expense policies with expense management systems is essential
Many companies still manage expenses manually, which has a high degree of errors in auditing, reconciling and effective reporting.
Furthermore, trusting that everyone is doing the right thing (both employees who travel and finance staff who check that policies are being adhered to) is a significant risk factor.
Benefits to employees and businesses
Companies that do implement a best practice solution to solve business expense management challenges reap the rewards.
Typically, executives and sales staff are the heaviest users of business expense management systems. These roles usually pay salaries of $200,000 and above. These employees are spending on average two hours per month reviewing claims for approval – a monumental waste of their time (which could be focused elsewhere) as well as representing an enormous cost to the business in administration overheads.
Furthermore, the cost represented by your finance team’s time (measured by salaries and size of the team) is an additional administrative overhead which can be addressed through automation. Removing the need to re-review all expense claims, investigating tax implications, keying in data and manually processing payments to employees represents hard dollar savings on staff time.
By automating your business expense management processes, you can reduce the cost of manual processing from over $35 dollars to under $15 per claim. This is directly proportional to reducing the time required by your finance staff to process, check and audit claims, which can be reduced by over 50%.
A manager can reduce the time taken approving business expenses from two hours to 20 minutes. The finance team can go from taking 30 hours per month across all activities to five hours.
Finally, being able to identify trends through better reporting means the opportunity to negotiate with suppliers. Imagine being able to use the data locked in your systems to make smarter decisions about which suppliers can give you better rates for recurring expenses?
By improving the way your finance team reports business expenses, you can identify outlier incidents and correct low-level fraudulent claims.
Limiting expense claims submitted months after they are incurred also leads to better visibility and oversight of the budgeting and forecasting process.
By structuring your reporting so you can quickly pull up a wide variety of reports means being able to access data across programs to determine anomalies in business expense claims.
Systems that automatically control bookings according to business expense policies lead to increased policy compliance by over 38%.
While most employees will try to do the right thing, this is often difficult as it’s not made explicit at the point of expense purchase. By integrating business expense management with travel management systems as a single system comes to the fore. This way, you can manage expenses before they happen, rather than reconciling them after the fact by inserting the policies into the approval process.
Your business will achieve better compliance when the system teaches employees the policy rules.
Mismanaging expenses can land both employees and businesses in hot water. Serko's Zeno Expense Management program available through OMNIA Partners will help you streamline your expense policies to protect your employees and your bottom line.