Today, many small to medium-sized businesses handle their expense reporting and reimbursement processes by manually filling out and printing reimbursement requests and attaching supporting documentation and receipts. Then they pass this package around the office for approval and finally hand it to Accounts Payable for further approval and payment. Finally, the request and support will either be filed or scanned and stored online so the support is available for auditor or tax preparer requests. Eventually, the employee either receives a check or ACH – and hopefully this is all done quickly enough that the employee is not impacted financially.
Often this is the chosen business process because it is considered the cheapest alternative – after all, it’s not a hard process so why invest in a software solution to help? Let’s dig a little deeper.
The Hidden Cost of Manual Reports
While it is true that filling out a manual reimbursement form and attaching paper receipts for support saves the cost of a software subscription – it is actually quite costly in terms of time spent by your employees on tasks that add no value to your business – especially if many of your employees are filling out one or many expense reports per month. A normal manual process usually looks like the following:
- 15 min – 1 hour – Employee fills out a manual excel worksheet and attaches receipts; time spent depends on how many charges there were.
- 10 – 30 min – The report then ends up on the Supervisor’s desk, where the report will eventually get reviewed and approved – or will get returned to the employee for edits, which only adds more time to the process; time spent depends on the number of charges and complexity of the report.
- 5 – 10 min – After approval by the Supervisor, the report is forwarded to the Accounts Payable department for further approval and reimbursement. Of course, if the report is not approved and needs edits this will add more time to the process. But assuming everything checks out, the AP staff can then code the report into the accounting system.
- After the expense report is in the system, the reimbursement is finally ready to be approved and released. This can be done in many ways – either by check, ACH, or it can be added to the next payroll run. The time to complete this step can vary – but it is usually part of a batch payment process, so it is probably minimal.
- 5 – 10 min – Finally, the report needs to be archived in case there are questions from tax providers and/or auditors. This typically requires someone to scan all the documentation and then attach it to the record in the accounting system or file it into an electronic file system. Depending on the size of the report and the shape of the receipts this could be rather tedious and time-consuming.
Overall this is somewhere between 30 minutes and 2 hours spent on completing a rather simple process that adds no value to your business. Rather than working on finding new customers and increasing sales, for instance, employees are doing paperwork. If the average cost of an employee in your business is $20 per hour (equivalent to $40,000 per year for a full-time employee) you have just spent $10-40 to reimburse just one expense report.
It should be noted that in addition to the time spent on this process, it is very error-prone. It relies on several levels of human coding and review and there are many places where the process could break down.
There is a Better Way
Businesses should consider a cloud-based expense reporting solution to automate their expense reporting business processes. There are a variety of solutions to consider – such as Expensify, Nexonia, Abacus, and Concur – that offer an easy to use, easy to implement a solution for your company at a very affordable price. Many of these offer month-to-month pricing per employee (as low of $9 per month), and you only pay if the employee actually uses it – which makes it an attractive solution for even the smallest business.
These solutions offer many great features to help automate and error-proof the process, including:
- OCR scanning – receipts can be scanned using a mobile app, computer or they can even be emailed. The software will read important data off the receipt such as the vendor, amount, and date and will pre-populate that into the form. This drastically reduces the amount of time needed to code and submit an expense report.
- Machine-learning – as you use the software it begins to learn how you like to code things to further simplify the data entry and make life easier. Future receipts submitted will be even easier to code as the system leans.
- Online approvals and audit trail – everything is online and accessible either through web-browser or mobile app. No need to push piles of paper around the office. And you can approve expenses from anywhere you can find internet service!
- Automated reimbursement – once expenses have been approved for repayment, the reimbursement can be handled automatically and quickly. Users will enter their bank account information into their profile – and when reimbursement is approved the money can be transferred from your account to theirs. No need to issue checks or process ACHs and your employee gets their money back quickly.
- Accounting system integration – many of these solutions offer the possibility of automatically syncing all the journal entries needed to your accounting system, taking even more time out of the process, and reducing the chance of errors.
Best of all – these solutions have no long term obligations and are rather easy to configure – so with relatively small effort and risk you could give it a try in your organization, and maybe even roll it out to a small audience as a test case.
Want to learn more – or have specific questions? We are always happy to help. Simply shoot us a note at info@madkenadvisors.com and we will point you in the right direction.
