The Case for Automating Expense Reports

by FEI Daily Staff

Many companies have cut their travel and entertainment costs. Executives who used to fly business class are flying coach, staying at three-star hotels instead of pricier venues and eating at less expensive restaurants.

But despite the greater scrutiny of T&E, many companies are overlooking significant savings on expenses for reasons that have little to do with budget and everything to do with processing.

More specifically, they are missing the benefits of automated expense report systems.

Quantitative Benefits

Automation not only reduces costs, it also saves valuable time and makes it harder for employees to inflate expenses. The statistics are revealing: The 2009 T&E Expense Management Adoption Survey from revealed that expense processing through automated systems costs 78 percent less than manual processing systems.

These savings can add up. Considering that 7 percent of an average company’s annual budget is allocated to corporate travel, according to analyst firm Aberdeen Group, it’s clear there is a solid financial case to be made for automating expenses. The financial case grows stronger when the costs of fraud are factored into the equation. A 2008 study by the Association of Certified Fraud Examiners found that expense reimbursement accounts for approximately 13 percent of company fraud, equating to a median annual loss of $25,000.

Automated expense management systems make it much easier to help identify and prevent fraud. For example, they uncover patterns that might be red flags. Is one employee spending a lot more than another in a similar position, or spending more in one quarter than in a previous quarter for no obvious reason, and at a time when everyone else’s T&E spending is staying flat?

Automated systems allow for comparing the claims of employees across an organization so that patterns are immediately evident, in contrast to the typical 24 months the ACFE says it takes before expense reporting fraud is detected.

Qualitative Benefits

Few traveling employees enjoy the task of collecting and transporting easily misplaced paper receipts from place to place so that they can submit their expenses. Nor do employees appreciate the lag time that often exists between submitting an expense report and receiving reimbursement, especially if they are experiencing financial difficulties.

In addition, employees who travel internationally might not want to convert their onsite expenses into U.S. dollars before submitting expense reports. There are plenty of reasons employees deem the expense reporting process a hassle.

Instead of holding paper receipts, online photo records can be forwarded to accounts payable. Some automated systems can convert amounts into U.S. dollars. And the time lag for payment is significantly reduced since expenses can be submitted on the road through mobile applications.

There is also the issue of employee morale at the office. Those colleagues who spend many hours processing expense reports and chasing down paper receipts can devote their energies to far more rewarding and less frustrating tasks. They can avoid the unpleasantness that can result from rejected claims due to insufficient paperwork. In fact, companies can program their systems to automatically reject expense claims without appropriate backup.

The Value of Data

Another attribute of automated expense report processing is the valuable data it provides. At companies with manual systems, it is unlikely that employees have the time or inclination to painstakingly compile graphs and charts displaying expense reporting trends. With some automated systems, these can be created with a few clicks. In addition to identifying fraudulent patterns, such charts and graphs can do much more.

By analyzing T&E spending across an organization, policies to increase savings and create greater efficiencies can be adjusted.

For example, is the organization paying an exorbitant amount on flight or hotel costs? Perhaps it’s time to find a new travel agent or negotiate a corporate rate with a hotel chain. Are employees spending an inordinate amount of money on client dinners? Employees can be encouraged to take clients out to breakfasts instead, or the company could compile a list of restaurants in the most visited destinations that are good and fit the budget.

Naturally, each company is different and expense policies vary. But there is one common denominator: Every company can adjust its policies in an informed way by taking advantage of the data mining capabilities of automated expense reporting systems. Keep in mind that T&E is the second most controllable cost after payroll. Through automated expense management, the degree of control rises exponentially.

John Tangredi is president of Insperity Expense Management, a provider of expense management solutions for clients through its 56 offices in the U.S.