Attributed Article by SAP Concur
Wai Leng Fok, Managing Director, Southeast Asia at SAP Concur
Business leaders know that the careful planning and evaluating of spend data is important, and yet, 75% of finance leaders reported that they frequently exceed their budgets for expense, travel and invoice.
One reason could be that more decentralised spending models are coming to the fore as business spend is handled by the various siloed business units. When left unmanaged, businesses and CFOs do not have the necessary oversight to moderate overspending, errors and compliance risks.
So, now more than ever, expense visibility is crucial to insightful decision-making in the fast-changing economic climate.
The perils of purchasing practices
Business transactions and purchases are happening at a much faster pace today with the growth of online purchase channels, leaving business units with lesser time to wait out legacy processes. This comes at the expense of letting companies collate comprehensive expense data. The data that organisations collect from purchasing decisions tend to be incongruous, filled with errors or worse, missing.
Internal expense management systems ought to keep up with how employees track their spending. With the aid of modern machine learning and artificial intelligence tools, updated internal systems will let organisations track and study employee spend data more efficiently and implement ways to save without compromising on budget.
With the right internal expense management systems in place, businesses can get a comprehensive overview of their expense data and begin to implement cost-saving measures via the following ways:
- More transparent processes
Knowing what makes up the company’s finances is forms the basis of managing employee spend, but 81% of finance leaders admit not having the full picture of their company’s travel, expense, and invoice spend, while 65% of procurement leaders lack visibility beyond Tier 1 suppliers. This mismatch, which may be caused by legacy systems, time-consuming processes or data siloes, is therefore a concern.
For a start, companies can consider rejuvenating current systems in place to combine policy and platform. An example is when corporate cards are used with an automated expense reporting system to give the accounting team real-time insight into spending without having to wait for an expense report, which lets them efficiently manage accruals and cash flow.
Spend management platforms such as SAP Concur let companies match corporate card purchases to invoices for efficient and effective spending.
- Flag noncompliance with expense policies
When varying legislations across markets impede the formation of coherent expense policies, putting these policies into practice poses a greater challenge. Research from SAP Concur found that 68% of finance leaders are unaware if employees comply with company T&E policies.
A GBTA study found that processing a single expense report costs $58 and 20 minutes to complete, with errors and missing information adding $52 and 18 minutes to that cost. These additional costs can add up to a huge sum when multiplied across the average 51,000 expense reports compiled annually, creating a huge drain of labour and capital.
Instead of using a manual expense management system that incurs additional costs and barriers, consider using an automated expense management tool that can indicate out-of-policy options and flag concerns to the approver to prevent noncompliance. This tool also increases compliance by reducing the administrative effort to file expense reports.
An example of an expense policy is the integration of Google Maps with Concur Travel & Expense. Driving does not come with receipts, but this system lets users report their miles on the road truthfully and prevents fraudulent claims in mileage costs.
- Boost efficiency
A large part of expense can be attributed to time-consuming outdated administrative work, and legacy processes also make businesses vulnerable to carelessness, oversight and even fraud as financial leaders make sense of the data in hard copy. Up to 54% of eligible value added tax (VAT) is often unclaimed by businesses. And even for small companies, expense reimbursement fraud make up 21% of fraud.
Besides cutting these inefficiencies from workers’ schedules, automated platforms can record expenses and make data on spend and budgets more transparent across the organisation. To top it all off, as only authorised personnel can approve invoices and initiate payments, the risk of fraudulent claims will be lowered.
- Achieving buy-in across the company
In our discussions with customers, business leaders may propose to separate travel and expense spend across different teams or enacting restrictions on spend in hopes of conserving spend. However, these initiatives may generate new obstacles like additional paperwork and checks within the finance team, setting back the business’ long-term growth.
Instead, business leaders can opt to implement an automated business spend platform to increase process transparency through the introduction of various spending policies. The flexible spending policies can also help to build a culture of compliance across the workforce by mitigating risks, preventing accidental errors and fraud.
Ultimately, transparency across the board can help leaders set benchmarks, identify common trends in spending and make informed decisions to cut down on inefficiencies — all of which contributes towards making better choices for the company.