In terms of operations at your company, travel and expense management should be a high priority. Every decision you make within your organization must take spending into account, after all, so it’s important that you have an established method for tracking the flow of cash going out for things like trips, meals and more. Companies have experienced big changes in recent years, though, especially in how operations are structured, and these changes necessitate an update to travel and expense management.
Travel and Expense Management Costs
Travel and expense management encompasses your reimbursement procedures for employees and travel and expense policies that everyone must follow.
When you think about the costs of managing travel and expenses (T&E) at your company, you must consider the expenses themselves and the costs to track, process and manage them. T&E regularly takes up anywhere from 10-20% of your operating budget, and it’s one of the more difficult expenditures to control.
On one hand, several different departments are involved in managing T&E such as HR, Accounting and Operations, making it difficult to unify processes and centralize data reporting. Human error is another big problem, Plenty of companies still have employees manually reporting expenses, and still have managers manually approving them. Of course, you can’t analyze T&E costs without considering out-of-policy or fraudulent expenses. Up to one fifth of employee expenses could fall outside of your expense policy.
All the factors working against you increase the cost of travel and expense management. According to CFO.com, your company could be spending anywhere from $1.10 to $14.50 per T&E disbursement to process expense reimbursements. The average is about $7.80, which is probably not a price tag that inspires happy thoughts when you consider how many expense reports employees submit on a weekly or monthly basis.
If you’re reading this and watching the dollar amounts add up in your head, don’t worry. Just because T&E management is difficult to get a handle on doesn’t mean it’s impossible. Below are a few tips to help you control your costs.
Clarify T&E Guidelines
Confusion of policies has especially become an issue since the start of the pandemic flipped business operations on its head. According to Business Travel News, spending violations increased about 207% year-over-year due, at least in part, to first-time corporate spenders and their confusion with limits and policies.
When employees aren’t entirely sure what the rules are — and it’s difficult for them to find out — they’ll simply go for it and wait to see what happens. This means that managers and Accounting teams must enforce expense policies after the fact, rather than being proactive. As one would expect, this is more difficult and increases the opportunity for out-of-policy expenses such as at-home food delivery or office equipment to slip through the cracks.
By clearly stating which expenses are covered and which aren’t, employees will be better able to determine what expenses will meet the criteria for reimbursement. A good way to increase compliance with your expense policy is to create a one-page summary that provides a brief overview of allowable expenses, expense reporting procedures and each employee’s responsibilities.
Issue Business Credit Cards
You may be thinking, how exactly does giving my employees credit cards help to better manage their spending? It may seem counterintuitive at first glance, but business credit cards help companies monitor spending, simplify the reporting process for employees and eliminate the need for employees to wait to be reimbursed for using personal funds. Cards also help to centralize spending data, lessening the time and energy needed to perform recordkeeping activities.
If you’re a bit hesitant to give employees permanent credit cards with high limits, you may find prepaid or single-use cards to be more doable. This way, you can specify the limit and prevent misuse before it happens.
Set Fraud Controls
According to the Association of Certified Fraud Examiners (ACFE), expense reimbursements account for 19% of total fraud in the US and Canada. Admittedly this becomes more of an issue for smaller companies, with 20% of small businesses having reported fraudulent expense reimbursements, compared to 13% of larger firms. Overall, it’s estimated that organizations lose 5% of their revenue to fraud each year.
Setting fraud controls is vital to nipping fraud in the bud. Typically, fraud occurs because employees aren’t aware of the policy or don’t have the time to look it up, so the best control should be awareness. By stating what types of behavior you consider to be fraud and what the consequences will be for fraudsters, would-be perpetrators may be deterred, and all employees will be better equipped to identify the warning signs. After all, 43% of fraudulent activity is uncovered thanks to tips according to the ACFE.
Other controls you should consider implementing include segregation of duties to ensure no one person can act without accountability, saving documentation and maintaining audit trails for every process, and requiring pre-approval for large expenditures. The goal here is to improve oversight for travel and expense management procedures to increase the likelihood of catching discrepancies early and reducing the impacts of fraud.
After tips, the ACFE reports that internal audits are the next most reliable way to catch fraudulent activity at 15%. However, that’s not all internal audits are good for. By auditing yourself, your company can track T&E spending over time and gain important insights such as employee spending habits, seasonal patterns, where you’re losing the most money, and how policies can be adjusted to tighten spending controls.
Travel and expense management should not be a process you simply allow to run in the background. By actively reviewing everything you’re doing on that front, you’ll be able to detect small abnormalities before they become a bigger issue. Even the smallest uptick in spending can cost you thousands of dollars if you allow it to continue for too long.
Go Paperless With Automated Management
Manual T&E expense management requires a lot of paper and spreadsheets to get the job done. Not only is that unwieldy, it’s also expensive. According to The Paperless Project, up to 80% of business processes are still being managed on paper costing US corporations over $120 billion on printed forms each year.
An automated expense management software eliminates paper-waste while simplifying the expense reporting process for employees, supervisors and accounting teams alike. Moving to an automated system will make it easier to spot inconsistencies, review and approve expenses and track expenses over time. After all, paper receipts may tear or fade over time, but digital paper trails are forever.
A centralized system will also improve accessibility for employees at every level, which will in turn improve accuracy. All information can be stored in a single database, allowing everyone from the employee to the manager to the accounting admin to submit expense reports for reimbursement, ask questions and document their activity.
Get Control With CompanyMileage
This may surprise you, but controlling travel and expense management costs can go hand-in-hand with simplicity and efficiency.
With the help of CompanyMileage and its suite of travel and expense management software — SureMileage, SureMobile and SureExpense — many activities can be automated and streamlined. From tracking employee mileage to submitting expense reports to managing the approval process, SureMileage keeps your business organized and on track. Employees spend significantly less time documenting their travel expenses, and our point-to-point calculations essentially eliminate the risk of mileage expense fraud. Our system also integrates with all major payroll and accounting systems. From start to finish, managing expenses can now be a simple, automated process.
CompanyMileage customers regularly see a return on their investment of ten times what they spent on the service, and that doesn’t even account for the hours of time saved not contending with outdated expense management systems. To learn more about the advantages of SureMileage, SureExpense and our SureMobile app, request a demo with CompanyMileage today.