Impact of Poor Expense Management on Corporates

There are several things that can impact a business and its savings. More often than not, business leaders focus their attention on sales and marketing, but the best leaders realize that it is the whole business infrastructure that impacts growth and development. A major part of this infrastructure is travel and expense management, and the way a company handles these two aspects can be detrimental to its budget. Let us learn why it is important to pay close attention to the company’s expense management process:

Corporate expense management is important for every business, be it small, medium, or larger enterprises. Each company, whether it is big or small, has to dedicate monetary resources to develop its business and generate revenues. This expense could be pertaining to the rent, leases, wages, business lunches, and more. However, one of the most common components of a company’s expense is business travel. Managing these expenses manually can be tiresome and full of errors. Such erroneous expense reporting and management can prove to be catastrophic for an organization’s financial health, and thus it needs to be addressed at the earliest.

Poor Expense Management Solution Has Negative Impact   

In many companies, employee expense management involves many steps and cross-communication among several different departments and stakeholders. This is due to the fact that expense bookings and approvals have multiple steps, like-

• Step 1- Justifying
• Step 2- Analysing 
• Step 3- Validating
• Step 4- Approving

However, these steps of expense processing are not linear and often take a lot of time to complete. This has a direct impact on the productivity of the employees, preventing them from being more efficient.

Here are some of the most prominent consequences of poor expense management-

• Inaccurate financial insights
• Financial well-being impacted 
• Unhappy employees
• Fraud
• Indirect consequences that cost the company

Let us explore these in more detail below-

 

 1. Lack of Expense Tool Gives Inaccurate Financial Insights:   

In the absence of efficient management of expenses, a company’s financial reports are bound to be unreliable. This is primarily due to the unreported expenses that will make it difficult to arrive at a true picture of the spending patterns of the company’s business travellers.

 

Contrary to this, carefully managed expense management solutions make it easy to track patterns and discover new ways to save costs that can enable better decision-making with regard to the company’s finances. Effective ways to save and cut costs have the potential to save a business and propel it towards growth. 

 

There are several challenges that crop up with outdated expense management, like losing invoices, errors in recording data, delays in reimbursements, and more that impede the growth of a business. Alternatively, updating it with travel and expense management software can automate these processes helping companies get rid of errors and delays that hamper the success of a business.

 

2. Unmanaged Business Expense Management Leaves Discontented Employees:

Sometimes employees have to spend money out of their own pockets during business travel. Usually, companies reimburse the full amount to the employees once the employee justifies the spending with relevant invoices as a part of the travel expense process. However, in the case of unmanaged expense management system, employees are met with delays and frustrations due to the hassle involved in getting reimbursed. This creates distrust between the employees and their employer when an individual has to pay for expenses as an act of goodwill, sparing the company from offering payments or credit in advance. It makes employees less likely to pay out of pocket in future circumstances, disrupting the smooth functioning of various operations. 

Furthermore, the delays can be equated with a lack of responsiveness which becomes emblematic of negative company culture. Slow processes can feel obstructive in this age of technology. A competent expense management tool like myBiz can prevent this by automating the processes and establishing standard procedures for reimbursements, ensuring quick, on-the-go claims settlement.

Also Read: Reasons to Automate Corporate Expense Management

3. Travel and Expense Management System Impacts Financial Wellbeing:

As an employer, the onus of the responsibility for your employee’s wellbeing falls upon you. Additionally, there is also the responsibility of your employee’s financial wellness upon you. This can be ensured by not putting undue financial pressure on your staff as an employer. There is a need to recognise the delicate relationship employees have with their savings, and even small pressures created due to unmanaged expense management can rattle their everyday financial health.

Poor company expense management that results in late reimbursements causes anxiety in employees, making them hesitant about going on further business trips that require them to pay out of their pocket. This can be potentially constraining for the growth of any business but especially for SMEs that need small business travel expense management even more.

With an online expense management system, you can integrate bookings with expense reporting and make the claims process hassle-free and transparent. It can streamline approvals while also ensuring complete compliance. 

4. Potential of Fraud Without Corporate Expense Solutions: 

Businesses run the risk of losing a lot of money due to fraud. Every year, many companies incur losses because of dishonest employees who-

 

• File duplicate invoices
• Incorrect amounts
• Seek reimbursements for personal expenses
• Book expensive options

..and more.

       

This is possible only because of the absence of a travel expense management software. In the absence of the ability to identify duplicate expenses and analyze the spending trends, a manual expense management system cannot keep track of small-scale fraud. However, these low-level frauds are not to be overlooked as they have the potential to add up, costing businesses dearly. Owing to efficiently managing travel expenses with an online expense management software, the chances of fraud can be significantly reduced, saving huge sums for the company.

 

5. High Costs to Pay Without Online Expense Management:

There is a lot of back and forth required in T&E management. There is a need for efficient communication between several different stakeholders like the employees, their managers, the finance team, the travel admin, HR, and more. Each claim has to be duly verified, approved, and validated. Consequently, there is a lot of productive time that is lost at each of these steps when there is no business travel and expense management software.

 

Lack of automation can make these processes complicated and prone to errors, especially if it involves a lot of paperwork or spreadsheets for filing expenses. While paper receipts run the risk of getting lost, manually entering data is always susceptible to mistakes. Added to that, manual verification causes more productive time of the employees to go to waste. It involves each expenditure to be validated by cross-checking the receipts. Furthermore, each claim has to be checked against the corporate policy when using a manual travel expense management tool. The time lost in getting this done is equivalent to time getting wasted and thus costing the company. It is, therefore, the high cost that the company has to pay for manual expense management as this time could be productively used to add more value to the business instead. With automated tools, however, errors and complications involved in expense filing can be a thing of the past.

How to Improve Corporate Travel Expense Management?

Here are some steps that can help you to leave behind poor expense management for better control over the company’s expenditure:

 

Step 1- Implementation of strategic steps with the help of a TMC that also offers an online expense management software gives visibility across the entire business expenditure and the spending trends of the enterprise.

Step 2- Set up a formal business travel expense policy so that the business travel expenses are compliant, giving better control over the finances of the company. 

Step 3- Opt for configurable policies that are integrated with the bookings to help in getting quick approvals and higher compliance rates from employees. It will also help to get all the data regarding spending and enable the collection of expense data for analysis.

Step 4- Analyse the approved budget and spending with expense reporting online to exert better control and subsequently alter the policies and take targeted decisions for more savings.

Step 5- Identify the key areas of expenditure for better price negotiation and reduce the recurring expenses and increase your savings.

 

Sub-standard travel and expense management system will hamper a business’s ability to have control over employees’ spending and check for areas of improvement. This further impacts the organization’s ability to optimize their business for better growth. With an automated travel and expense management tool like myBiz, you can have more visibility over your company’s spending, and take decisions to cut costs accordingly. It will help you strategize better to ensure your company is financially healthy and ready to take its next steps towards more success. So, join myBiz and get an integrated expense management solution free of cost! Explore more!

Frequently Asked Questions (FAQs) 

Q1. How can companies make travel & expense management more efficient?

Ans. Travel and expenditure management can be made more efficient by partnering with an ideal TMC like myBiz that also offers an integrated expense management solution free of cost. 

Q2. What is the biggest drawback of late reimbursements?

Ans. Poor expense management and late reimbursements can be a cause of anxiety for the employees. It might even cause personal hardships to some, preventing them from going on future business trips, that can be potentially disastrous for a company’s growth.

Q3. How can travel & expense management help companies strategize?

Ans. End-to-end visibility of travel and other expenses gives insight to the decision-makers regarding the key areas of spending, helping them to decide where it is feasible to cut costs and where to spend for more business growth.

Q4. Can travel and expense software ensure policy compliance?

Ans. An automated travel and expense management system integrates the company’s policies with the bookings ensuring 100% compliance.

Related Blogs:

• •  Ultimate Guide to Expense Management for Businesses
• •  Challenges of Corporate Expense Management
• •  Role of Effective Policy Enforcement in Corporate Expense Management
• •  Benefits of Corporate Travel and Expense Management
• •  5 Ways to Control Business Travel Expenses
• •  What is Expense Tracking? How It Impacts Business Growth?