8 expense management challenges and how to avoid them?
Managing the expenses made by an entire company is a far more difficult task than it might appear to be at first.
Through the expense management system, companies aim to track employee spending on business purchases and determine how reimbursement will happen for the incurred costs.
However, such a system involves various steps and can be ridden with expense management challenges.
Knowing how to navigate these challenges can go a long way in making your expense management process more streamlined and efficient.
Lack of visibility can be a major problem in spend management. In order to manage a business effectively you need to have complete visibility over exactly where your company’s money is being spent and for what reasons.
With a traditional, manual expense management system you would typically have to wait till the end of a month or quarter before you get the full picture of company spending.
This delay means you will be unable to take quick and responsive actions to optimize business spending.
Errors that are a result of human intervention present one of the most common expense management challenges. When you are managing your company’s expenses manually there is a lot of human participation that is required.
As a result of this human factor the system also has to suffer from the bane of, intentional or unintentional, human errors.
In fact, human involvement can lead to errors in data entry, expense reconciliation, duplicate payments and so much more. These errors and the process of fixing them can cost your company a lot of time and money.
The approval workflow aspect also makes up one of the most significant expense management challenges that companies face.
The approval workflow essentially involves a process where a supervisor, manager, or approver must validate an expense claim so that it can progress to the settlement stage.
The approval workflow plays a critical part in ensuring compliance and accountability in a company.
In case your approval workflow is overly complicated or inefficient it can lead to an overload of approvals in the pipelines, a slow approvals process, and time delays due to complicated multi-level approvals.
A lot of the complications that arise with expense management challenges start at the part where expenses are reported in the first place.
This is especially true if you have a traditional expense management system and expense reports have to be submitted manually. Traditional expense reporting processes are far from efficient.
Employees have to manually log in expense data, keep track of receipts and follow rigorous guidelines before they can report an expense.
A lot can go wrong with this process, there can be data entry errors, receipts can go missing and so much more. Additionally, such an inefficient process takes up a lot of valuable company time and money.
Related read: Paperless expense reporting to streamline expense management
While unfortunate, employee expense fraud is a very real, problematic expense management challenge to deal with. Employee expense fraud can take place in various forms.
For example, employees may make duplicate reimbursement claims, may inflate the actual cost of a purchase, may use fake or fictitious receipts to submit claims and so much more.
Another form of employee expense fraud is where employees, intentionally or unintentionally, claim personal expenses as business expenses.
Out-of-policy expense claims are some of the most significant pain points for any CFO and their team. Ensuring compliance with company expense policies is easier said than done.
Issues such as lack of communication, unclear or inaccessible policies, or under-compensated employees may all lead to policy violations.
As a result of expense policy violations, employees have to wait longer for claims settlement, there is a heavier burden on finance teams, and the number of errors in the reporting stage increases.
Overcomplication of any process will always, eventually, become a challenge. The same applies to your company’s reimbursement process.
If your reimbursement process is overly complicated and has too many steps or hoops to jump through then chances are that it is hindering your efficiency.
Complicated reimbursement processes lead to longer turnaround times for claims settlements, extra pressure for finance teams, and disgruntled employees.
Keeping company spending within budget and managing that budget efficiently and effectively also falls among the most common expense management challenges faced by businesses.
Allocating and dividing a budget into the various expense categories a business needs to make on a daily basis can be challenging.
This problem is aggravated even further if you are using a traditional expense management system and have to wait till the end of a month or quarter to get the full picture of company spending.
Manual expense management systems are infamous for the number of issues and obstacles they come with.
In the challenges discussed in the previous section, we can easily see how many of them arise out of a manual expense management system.
The best alternative you have to prevent these issues is automation. An automated expense management software can do the same job a manual one can do far more efficiently and effectively.
Check out our article, key benefits of expense management software to get a complete idea of how an automated expense management software such as Volopay can help your business.
How efficient your company’s expense approval workflow is will go a long way in determining how efficient your expense management system is.
To ensure your approval processes are efficient and up to date you should ideally conduct regular reviews of the processes.
Examine how the workflows are playing out for your company, what the turnaround times are, and what needs to be addressed and update your approval workflow accordingly.
Corporate cards are excellent payment tools that can help companies manage their expenses. Instead of having employees pay out of pocket and wait for reimbursements, you can simply issue company corporate cards.
They can use these cards like any other normal card to pay for business expenses and avoid paying with their own money.
The expense management process has many moving parts that can be difficult to manage at the same time, especially when companies work with a variety of expense management tools.
Using a unified platform that can take care of all the expense management needs of a business can be useful in this case.
Platforms that can do this come with comprehensive expense management software as well as corporate cards that make the expense management process far more simple and more efficient.
Most expense management challenges are the result of inefficient or manual systems. You need a comprehensive system that can automate and streamline your expense management system from start to finish.
This is where Volopay comes in. Volopay is an expense management platform that comes with highly advanced features as well as corporate cards to streamline company spending.
From the point where an employee makes expenses to the point where that expense is recorded by accounting, the entire process can be automated with Volopay.
Volopay comes with an easy and fast expense reporting process, customizable multi-level approval workflows, expense reconciliation as well as bookkeeping features. Volopay corporate cards are a bonus on top of these features.
Employees can use Volopay cards to make hassle-free business purchases. In fact, you can issue an unlimited number of Volopay virtual cards completely free of cost. Hence, Volopay is the answer to all the expense management challenges we have discussed.