Benefits of pre-spend expense approval for corporate travel
Employee travel expenses are taking over other categories in terms of frequencies and spending amounts.
If a company is still following archaic methods to report and approve these, it will lag heavily. A better replacement for this is the pre-approved spend.
Your employees don’t have to go through lengthy reporting procedures after spending. Rather, they can get it pre-approved. It simplifies travel and expense management for your finance department and employees.
What is a pre-spend expense approval process?
In general, employees submit their travel documents and get reimbursed. Before they receive their money, it goes through an approval process. Whereas with pre-spend expense approvals, you don’t go through this approval process at all.
This doesn’t mean that the money spent is never brought to attention — rather it gets pre-approved for quicker future processing.
Employees who want to make this pre-approved spend should get authorization from their relevant managers beforehand. Managers will check and make sure that the request is applicable for reimbursement as per their T&E policies.
Employees can’t always remember rules and policies. Pre-spend expense approvals will be a reminder to them.
Why is pre-approval of expenses important?
Out-of-pocket expenses are painful to most employees. They have to spend their own money and wait till reimbursement. What if the claim gets rejected if the expense doesn’t meet the company policies?
To avoid risking their money, pre-approved spending is important. Before any planned trip, an employee can create a report for all of their pre-approved spending and ensure they have funds to cover that.
Now, they can directly spend their company’s money instead of waiting for months on dragging reimbursement processes.
Pre-spend expense approval workflows are also necessary for the finance team to look into the travel expenses and track them in one place.
Pre-approved expense reports can be compared with actual travel expenses to review the actual values required.
It’s also a reduced burden for the accounting people. They can learn better about travel expenses employees incur and decide if there is non-compliance.
Overall, expense management and reporting get better, more accurate, and more transparent than it was before.
Benefits of following the expense approval process
Every company has an expense approval process. But what’s being practiced is totally different. It depends on the kind of system being implemented. Having a solid expense approval workflow benefits in many ways.
1. Eliminates expense fraud
It’s easy to dupe receipts these days. Not all, but some employees tend to submit fake receipts to receive more money.
They might also submit receipts with exaggerated values or report expenses that are not covered under the policy.
Hence, the finance team has to be on their toes to catch these acts that could have been overlooked. Falsified expense reporting happens where there is weak vigilance and poor monitoring.
With pre-expense approval policies in place, finance teams can maintain accuracy and compliance without sweating. It’s their final word that decides whether the expense will be allowed or not.
2. Expediates the speed of reimbursements
The time required to process a reimbursement request is long, which tells why it’s not a favorite activity for many. Also, employees have to fill out long forms, collect supporting proof, and submit them.
Another week goes by when they try to follow up with busy managers who can’t approve it instantly. It typically takes 25 to 30 days to get the money back.
Pre-approved spending only involves approving requests in advance. Thus, it’s very effective for employees to get instant funds even if they submit requests late.
3. Effective expense policy compliance
It’s the finance team’s duty to stay watchful about policy compliances and if they are met or not.
Even one instance can break this flow, forcing them to investigate and take action. In case of pre-spend expense approvals, they can check and let in only the eligible items.
To further tighten the spending regulation, they can set limits or further authorization steps to break limits. With this strong system, it’s easier to maintain policy adherence and enforce that on employees too.
4. Access to company funds
Pre-approved spending allows employees to take up business travel options even if they are low on funds. By going through expense approval workflows, they will get guaranteed access to company funds.
These funds can be used to cover the basic expenses of their journey. This allows them to plan their trip’s expenses and estimate the amount they must manage on their own. And they don’t have to wait forever to get the out-of-pocket expenses reimbursed.
5. Controls costs and reduces overspending
In post-approval expense, the company reimburses the spent amount after the employee submits expense reports.
There is no control over how much an employee spends. Even if the company has spending limits on categories, the additional cost will be bare by the employee.
Hence it’s not effective as either one of them overspends. Pre-approved spending gives more control to both.
Finance teams can only pre-approve if the spend is within the limit. Employees can plan their trip based on how much is offered.
6. Calculate work travel cost-effectively
Finance teams don’t have any idea how much a business trip actually costs due to inconsistent reports submitted by employees. Travel and expense management will be a lot better if they know this amount.
They can make budgeting and forecasting accurately and make pre-spend expense approval decisions quickly.
By comparing pre-spend expense approval decisions with post-trip spending, the team can figure out how much it actually costs.
Next time, they can set precise limits within which an employee can comfortably plan the journey.
Best practices to build an efficient pre-approval process
Planning to set up pre-expense approval workflows? Here are some guidelines you must not miss.
1. Using an expense management solution
Relying on manual or semi-automated solutions won’t give you many privileges in managing travel and expense management.
If you have expense management solutions, you can upload your T&E policies there and streamline the expenses. You get a way to apply limits and pre-approve expense categories.
With expense management software, it’s possible for accounting teams to manage travel expenses together with other accounts payable tasks.
2. Automate approval of expenses
What’s more complicated than reimbursement is approving the incoming requests. You can have one or many approvers, but without an automated expense approval workflow, it takes time to get this done.
A best practice would be to choose an expense reporting system with an automated expense approval workflow. If you have this, the expense request is directly passed from one approver to another without human effort.
3. Set multilevel workflows
Whether it’s pre-approved spending or post-approved, setting multi-level approvers ensures more accuracy. Every organization will have its own hierarchy and workflow process.
If you have established this already, it’s a quick task to upload it to your expense management system.
The software automatically hands over the request to the next approver from the first one. Multi-level workflows are there to strengthen your checkpoints and see if an expense fits your policies.
4. Usage of corporate credit cards
Corporate credit cards are rather an advanced means of employing pre-approved spend. No one raises any request here prior to and after business travel.
Accounting teams can act as admins and distribute cards to those in need in lieu of reimbursing or pre-approving. Cards have greater control and flexibility compared to any other reimbursement method.
The admin sets the limits and shares the card details with the employee. Every expense on each card can be monitored centrally.
Automate your pre-spend expense approval process with Volopay
The above guidelines clearly underline the need for a smart and automated expense management system.
They don’t just automate your expense reporting and approval process but also provide advanced options like virtual cards. Talking about automated expense approvals and virtual cards, meet Volopay.
Volopay has the most intuitive reimbursement systems with customizable approval workflow options. Employees can submit reports from anywhere and track their status.
For pre-approved spending, they can get virtual cards assigned to their names. They work like any regular credit card and can be used for online payments.
Whether employees use the reimbursement portal or virtual cards, the finance teams will have full control over travel and expense management.