It is more challenging than it might initially seem to manage a company’s expenses. Companies use expenditure management systems to track employee spending on company items and determine how the costs will be reimbursed. However, such a method entails numerous phases and can present difficulties with expense control. Understanding how to overcome these obstacles will greatly improve the effectiveness and efficiency of your spending management procedure and reimbursement claim.
What is expense reimbursement?
Business costs are the most common association of reimbursement. Many firms have policies outlining when employees should be reimbursed for out-of-pocket expenses. These expenses are usually associated with travel and include the cost of housing, food, public transportation, and flights.
Challenges faced by expense management team with employee reimbursement.
Hours are spent by employees collecting receipts, filling up expense reports, and entering transaction information. Management must review and approve the request before being forwarded to finance. Before releasing reimbursements, the finance team must process the claims and reconcile the transactions. And that doesn’t consider any back-and-forth between the parties before the decisive action. This means that employees may have to wait a little while to receive their money returned, which worsens the financial hardship mentioned above.
The expense reimbursement approach puts workers in a challenging situation. Either employee must offer an interest-free loan, or they must approach their manager or the financial staff and risk upsetting the balance. Additionally, no one likes having back-and-forth discussions with finance about a missing receipt, an incomplete expenditure report, or a policy guideline.
Overall, the worst issue with the expense reimbursement approach is the negative experience it gives your staff. Your workforce is merely attempting to achieve for your business, and this process adds unnecessary stress, and frustration.
- Problematic policies
Many business purchasing policies are overly complicated, ambiguous, or contradictory to account for every conceivable circumstance. Contrarily, some businesses don’t have specific policies and merely rely on workers to apply their best judgment, which could not coincide with that of the financial team.
Employees may unintentionally spend money that is against the policy in both situations. They suffer a financial loss because they cannot get reimbursed even if they only attempt to do their jobs.
This is a business paradigm that has been around for a while, but it is out of date. Finance should enable procedures that guarantee staff follow policy in the first place instead of reprimanding them after they have broken it.
- Errors in receipt management
One of the most frequent issues with spending management is errors brought on by human participation. A lot of human involvement is needed when handling your company’s expenses manually.
The system must contend with the scourge of intentional or negligent human mistakes due to this human component.
In truth, mistakes in data entry, expense reconciliation, double payments, and many other areas can result from human involvement. Your organization may have to spend much time and money repairing these mistakes.
- Lack of communication
Finance teams are uninformed of what has been spent and are unable to stop out-of-bounds purchases before it is too late because expense reports are frequently provided days or weeks after transactions. As a result, employees are unfairly forced to pay for business expenses out of pocket, and finance is forced to decide whether to grant or deny reimbursements.
Instead, put a more proactive approach that doesn’t rely on employees to adhere to rules or front personal funds. Finance teams can grant staff access to corporate funds while controlling this spending by offering preapprovals.
- Reimbursement frauds
Employee expenditure fraud is a very real, serious expense management challenge, which is regrettable. Fraud involving employee expenses can take many different forms. For instance, employees may submit duplicate reimbursement claims, exaggerate the true cost of a transaction, submit claims using bogus receipts, and much more.
Employees claiming personal expenses as work expenses, intentionally or accidentally, is another instance of employee expense fraud.
- Lack of visibility
Ineffective visibility can be a serious issue with spend management. A thorough knowledge of where and why your company’s money is being spent is essential for good business management.
To gain a complete view of business expenditure, you should wait until the end of a month or quarter when using a traditional, manual expense management system.
Effective expense management can be very challenging when using obsolete or unworkable methods. Employee expenses can be managed by identifying problem areas, putting the best solution for your company into place, and using straightforward management techniques. Utilizing a cloud-based cost management system that interfaces with your accounting software will help you overcome these difficulties. With such software, the employee can take a picture of a receipt and instantly provide it as soon as expenses are made. With no need to clip paper receipts to fit into paper expense folders, there is no longer a chance of delays or misplaced receipts.