Expense requests and approvals seem like they should be fairly straightforward processes, right?
The fact of the matter is that they’re anything but simple. This is particularly true if you rely on manual processes, which have a ton of back and forth and cause headaches for everyone involved.
So then, what’s the solution to this problem?
Automation. By automating expense requests and approvals, you can say goodbye to manual data entry, reduce admin work, and optimize the entire process from beginning to end.
So, how do you do that? This guide will show you.
The Problem with Manual Expense Report Processes
Nobody likes dealing with expense reports, especially when they’re based upon manual processes. It’s a major hassle for all parties involved, including the:
- Employee – Who has to keep track of their expenses, hold on to their receipts, confirm credit card bills, and then spend countless hours documenting their expenses.
- The manager – Who has to manage and approve their team’s expenses.
- The accountant – Who has to make sure that the employees attach proof of purchase, manually enter these vast swaths of data into spreadsheets, and then ensure that the books line up.
- The CFO – Who has to manage a budget, only to find that there are significant expenses that aren’t accounted for.
It’s crucial that your business is constantly tracking expenses and monitoring your employees’ spending habits, particularly as your business grows. But when that happens, performing the expense claims process manually will likely take up more time, create more delays and inevitably lead to chaos.
The truth is, paper receipts and manual data entry are avoidable, costly processes. According to Business Insider:
“Recent research by Forrester showed almost 80% of organizations still relied on expense data that is manually entered, which exposes them to errors, duplication and fraud. A study of Australian small-to-medium sized businesses conducted by Fairfax found most businesses could save up to $40,000 a year just by removing duplicated claims.”
Put simply, automating expenses allows your business to create processes that are more time efficient—for both the employee making the claim and the manager charged with approving the expense. Over the long-term, this saves your business hundreds of hours and tens of thousands of dollars.
Anatomy of the Manual Expense Request and Approval Process
Before you can dive into the fine details of automation, it’s first necessary to discuss the typical expense management process. You’ll see why the process can cause so much hassle when it’s not automated.
- Submit individual expense requests – The employee must make an initial request to their manager to approve a purchase in the first place.
- Track receipts and record expenses – The employee (who’s seeking reimbursement) must collect the various paper receipts, bills, credit card statements, and other documents needed to demonstrate proof of purchase.
- Submit expense reimbursement request – The employee must fill out an expense report to clearly detail each expense, along with memos and receipts attached. Some companies ask employees to submit expense reports on a weekly basis, or for individual business trips or one-off events.
- Manager’s approval – The employee’s direct manager must then find the time to thoroughly review the expenses and confirm that they’re permitted. This is complicated by the fact that not all employees get approval to spend in the first place. So, a significant portion of time may inevitably be wasted on the managers figuring out whether they need to deduct the expense from the employee’s paycheck or just reimburse it anyways. If the manager rejects a certain expense item or notices a problem, they must notify the employee of the issue and send the report back for corrections—which tends to involve an awkward conversation.
- Expense processing – Just as with the manager, if a problem is triggered, the expense report must be sent back to the employee for fixes. In some cases, the qualified expense claims will be approved and forwarded to the finance team. Only after another round of review is expense reimbursement is queued.
- Payment – After the expense report has been approved, the finance team will need to ensure the employee receives reimbursement. This reimbursement payment can also take several days to process. When it finally does come, it typically arrives in the form of: Check, Direct deposit, Cash reimbursement and Payroll card
- Accounting – Once the employee expense request, approval, and reimbursement is completed, the expenses need to be logged for accounting and auditing purposes.
This complicated, lengthy process tends to create more problems than it solves. Fortunately, there’s now a better way to do it.
Automating Expense Requests and Approvals
The first step towards automation is to conduct a self-review during which you can clearly understand your current set of processes and identify low-hanging fruit to tackle.
Once this has been accomplished, you can turn to an automated spend management platform to streamline the entire business expense report process. From the request stage to final approval, there are a variety of features that simplify the process and alleviate significant pain points. After this, it’s vital that you thoroughly train employees to better understand each one of the steps in order to reduce the redundant back and forth.
What does automated expense management entail?
Digital Expense Requests and Approvals
Digital requests and approvals transform a lengthy paper-based process into a one-click approval solution. Managers are able to review and approve expense requests at all times, from convenient channels.
At Ramp, we even integrate this solution into Slack.
Automated Receipt-Matching and Receipt Reminders
With a spend management platform, creating business expense requests is fast and simple. There’s no longer a need to track receipts, scan through bills, and conduct manual data-entry.
Automated receipt matching allows you to automatically map your employees’ purchases to the correct transactions on your corporate card platform. How it works is simple:
- Employee makes a purchase
- The card platform logs the transaction
- Employees send a photo of the receipt via text or email
- The card platform automatically matches receipt to the right transaction, and notifies the employee if any additional details or memos are needed to help the accounting team categorize it
The process only takes a few seconds. Once a receipt has been matched, transactions will be confirmed by SMS or email. In addition, if an employee doesn’t send a receipt when prompted, a receipt reminder can be sent out automatically.
This not only saves time for the employee, but also helps ensure that managers and accounting teams don’t need to chase people down later to get receipts or memos. It’s a win-win for everyone.
Real-Time Spending Visibility
One of the best ways to expedite the business process is to allow employees and their managers to see an expense the moment it happens. This improved visibility creates accountability and empowers managers to oversee their team’s spend habits in real-time.
There’s no need to wait until the end of a trip, month, or quarter to see how much the team has spent. Managers can reconcile transactions, manage their teams, and view their spending as it happens. You can either receive a top-line view of your company’s spend or zoom in to a single user or transaction.
Automated Spend Tracking
Smart businesses look into spend management tools that are tied directly to their corporate card so that expense reports can be automated.
Expense reports tend to be time-consuming, filled with manual errors, and a point of stress for both employees and your finance team. By automatically tracking and logging all purchases, then pairing this with specific spend limits on employees, no one’s time is wasted on expense management.
Benefits of Automating Expense Reporting
There are a number of reasons why it’s a no-brainer to automate expense approvals and requests, including:
- Fewer errors – According to the Global Business Travel Association, 19% of all expense reports have errors in them. This creates a ton of hidden costs, since the error must be corrected manually, which takes away from a finance team’s valuable time. With automated reporting, there’s no manual inputting of expense reports. This dramatically reduces the likelihood of an error occurring.
- Happier employees – Submitting expense requests and waiting for approval is an annoyance for both sides. But it can be particularly irksome for an employee who’s stuck waiting to see if they’ll get reimbursed or if their spending request is approved. This way, employees can be confident that they’ll be taken care of.
- Increased productivity – When you have an easy-to-use automated system, no one's time is wasted. Instead of spending valuable work hours on manual logging and processing, they can focus on the important tasks that actually require their expertise. This automated accounting increases productivity for both the employees making the expense request and the finance and accounting teams that have to deal with them.
- Better visibility over spending – Real-time spending tracking gives you the ability to either take a bird’s eye view of your entire organization’s spending or to zoom in on a single employee. Armed with this knowledge, your team can make informed financial decisions based on the remaining budget when using real-time accounting solutions.
- Faster expense request and approvals – With expense automation, the expense request is sent instantly and the manager can approve it in a flash. There’s far less time wasted waiting around for a response. There’s no paperwork, no spreadsheets, no duplication.
Ramp: Automating Into the Future
When you run a business, it’s vital that you’re constantly finding new ways to optimize your business process. Automating expense requests and approvals and instant accounting are just a few ways Ramp can help make your life easier and your business more efficient.
No more chasing after receipts or memos. Reach out to the experts at Ramp to make expense reports a thing of the past.
Close your books fast. Give your people back their time.
Business Insider. Why companies are wasting money if they don’t automate expense claims. https://www.businessinsider.com/why-companies-are-wasting-money-if-they-dont-automate-expense-claims-2017-9
GBTA. How Much Do Expense Reports Really Cost a Company? https://www.gbta.org/blog/how-much-do-expense-reports-really-cost-a-company/
ACFE. ACFE Report Estimates Organizations Worldwide Lose 5 Percent of Revenues to Fraud. https://www.acfe.com/press-release.aspx