Managing expenses is not a priority for the majority of small businesses. Too much to do - too little time. For most, the extent of their expense management system is simply stuffing business receipts in an envelope, saving them for a rainy day (or more likely for someone to process them on their behalf). Processing usually consists of filling in an Excel spreadsheet or expense report, before the same receipts are shipped off to ‘finance.’ Depending on the size of the business, this can range from the CEO to an in-house finance manager or even an external accountant.
The problem is that the hidden costs to inefficient expense management are significant. Managing expenses is a real-time suck, prone to error, and often the source of internal friction, e.g., when employees lose receipts, exceed expense policies, or when they are chasing reimbursement. In short, managing expenses is a pain for most small businesses.
The reason many small businesses persist with manual processes is primarily due to:
A lack of awareness that solutions exist
A lack of awareness of the hidden costs
It is only in recent years that a number of cloud/software as a service (SaaS) expense management systems, such a Rydoo (previously Xpenditure), have emerged. These solutions typically consist of a mobile expense management app (which can be used to capture the receipt) and an online dashboard where receipts are reported, processed, and approved. Going back a few years, smartphones were not as ubiquitous as they are now, and camera phones and OCR were simply not as powerful as they are now. So in many respects, the expense management space is a relatively new one.
In terms of hidden costs, given that expense management usually involves a number of different people, it was not always easy to measure/manage the extent of the cost. Similarly, the overall responsibility for expense management can be a little vague. However, as increasing numbers of businesses look to cut costs and operate more efficiently, awareness of the problems associated with manual expense management processes has grown.
Most of these apps follow a similar pattern. The user downloads the mobile expense management app, uses the smartphone camera to capture an image of the receipt, which is then uploaded to an online dashboard. The more sophisticated solutions use OCR readers to read receipts so manual intervention is kept to a bare minimum. The digitized receipt can then be reviewed, edited, reimbursed, rejected, or pushed into a preferred accountancy software package to name a few of the typical functions a solution offers.
Commercially, the return on investment from deploying a cloud-based expense management system is significant, which has further enhanced the appeal of businesses upgrading (naturally the magnitude of the savings is dependent on the number of active users generating business receipts and the quantity being produced). With median pricing for many solutions at around £10/active user/month, it is no surprise that the industry is growing rapidly particularly when set against the costs of legacy systems.
Once you have chosen your expense management system, the following represent some of the top tips you need to consider when implementing it:
As most expense management systems offer a free trial, it is recommended that as the key decision maker you download the app to your smartphone and see how easy it is to use. While most apps are primarily used to capture the image of the receipt, they can also be used to capture mileage to access reports, including the status of expenses already submitted.
Again, most providers offer free webinars where you can watch a real-time demo of the application in action, enabling you to also ask questions. Use this time to understand some of the power features that most of the leading expense management systems contain, such as mileage tracking, advanced reporting, and integrations with third parties such as accounting software solutions.
The next step is to invite some initial beta users. Depending on the size of your team, it may be an additional one or two initially. As salespeople typically generate travel-related expenses, they will typically benefit the most from an expense management system so will probably be the most receptive to trying out the new app.
One of the main bugbears employees have when it comes to expense management is the delay it can take them to get paid. They are essentially ‘out of pocket’ between the time they have paid for an expense and the time the reimbursement has hit their bank account. Given that leading expense management systems facilitate quicker turnaround times, it is important that those responsible for finance, reimburse employees in a much quicker timeframe than was previously the case.
Once the application has been rolled out, it is important to turn off legacy approaches, as well as to ensure that the broader feature set of the application is being utilized. Many expense management systems offer close integrations with everyone, from payroll administrators and financial services institutions to accounting software applications and VAT reclaim companies. Using these links will further reduce the time spent on managing expenses, enabling those most affected to redeploy their time on more appealing higher value added tasks.
In summary, the expense management system sector is heating up as greater numbers of businesses recognize that persisting with legacy approaches is no longer tenable. Our time is valuable, and taking a picture of a receipt and submitting it in real time is a whole lot more appealing than the way most businesses process expenses manually.