Taming the Expense Reporting Monster

by Isaac Saft

Finance teams need to find new ways to handle expense reporting, because the number of transactions is proliferating past the human capacity to handle it.

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Two related trends converged to make expense reporting a challenge for finance professionals. One is the consumerization of purchasing in the enterprise. The other is the drive to improve the employee experience. The trends will continue to grow across organizations. That means finance teams need to find new ways to handle expense reporting, because the number of transactions is proliferating past the human capacity to handle it. Adjusted policies and processes along with advanced technologies like AI will be the key to solving this problem.

First, it’s helpful to take a look at how we got here. In their daily lives, employees make low-hassle purchases on Amazon and other sites to get what they need as consumers, goods they receive in a short period of time. They’re used to the convenience and immediacy of those transactions as consumers — the right products and the right price. As purchasing became less centralized in companies, employees began taking a similar approach to buying the products they need for work.

And thanks to competition for top talent and employer sensitivity around the employee experience, which reflects directly on the brand in our connected society, there’s no going back to the old way of doing things. Previously, a procurement department might spend $1 million in 50 different transactions that averaged $20,000 per invoice. Today, employees might spend $1 million on supplies in 5,000 different transactions averaging $200. It’s virtually impossible for finance teams to keep up using manual accounting methods.

Improving Process and Policy Efficiency for Finance and Employees

The increase of transactions and the impracticality of demanding more details from employees for every purchase makes the level of effort it takes to review those transactions is unsustainable for finance teams that use traditional methods. They have to find a better way to keep up. Another complicating factor is the structured reporting requirements the finance team has to follow on a monthly, quarterly and annual basis. Those deadlines don’t move, even if expense reports are submitted just prior to a close.

Improving processes and policy efficiency is one part of the solution. Finance teams that use manual travel expense management processes can look for ways to reduce data entry requirements and change policies to eliminate the need to submit paper receipts, which often have incomplete or illegible information anyway. Teams that rely heavily on spreadsheets to manually enter in expense data can consider automated systems that make it simple for employees to enter and submit expenses and seamlessly process the data on the finance team side. It is one of the areas companies can find high hidden costs. It should be quick and easy for both parties.

Split between the operational control and the financial mandatory requirements. Deploy the best user friendly and easy operational process and solve the financial and tax compliance challenges with technology. “Consumer style spend” was designed and deployed to support consumers. Adopt the benefits and close the GAPs with technology. improving efficiency is to review policies and processes that might be cause delays in expense reimbursements. Take a look at how long employees have to submit expenses and how expense reports that are missing information are handled now. Automation is the ultimate goal, but in the meantime, it may be possible to change policies and improve processes in a way that speeds up reimbursement. This can increase employee satisfaction and streamline the workload for the finance team at the same time.

Another thing to keep in mind is that tax authorities have access to more data than ever before, plus more sophisticated analysis tools. Tax authorities ask questions about sales, corporate and employee benefits taxes. Finance teams that have complete data, solid processes and supporting technologies that produce predictable results are able to provide answers more easily than finance departments that rely heavily on manual processes.

This is one reason finance departments are racing toward digital transformation. Gartner reports that 97% of CFOs plan to accelerate adoption of digital technologies. Their objective is to convert data more quickly into insight so the CFO can guide the organization through rapidly changing business conditions and make the right decisions in times of uncertainty. But automation of core processes like expense reporting is a key component of that effort because it fulfills compliance obligations and frees finance professionals to take on higher level, more strategic work.

Using Advanced Technology to Meet the Challenge

Employee-driven spending, with the reporting headaches and tax compliance issues it brings to the table, is one of many challenges finance teams face. The solution will require comprehensive and trustworthy data from multiple sources. The invoice doesn’t tell the full story. It’s worth noting that this is not only necessary to solve the expense reporting issue but also essential to make the right business decisions in finance and every other department. With complete data and a platform that enables analytics and automation, finance departments can move toward a goal of eliminating expense reports altogether.

So, what will it take to create a more sustainable expense reporting process as companies work toward that goal? Finance needs technology that will provide visibility into employee-driven transactions. They’ll also need an up-to-date knowledge base of current tax rules, access to external data sources and historical data, and a way to enforce their own policies in the tax compliance process. AI and machine learning technologies, including Deep Learning and Natural Language Processing (NLP) capabilities, can help finance professionals extract, validate, add context and annotate transactions automatically.

Employee-driven, consumer-style spending is here to stay. The sheer volume of transactions is overwhelming finance teams, and manual processes are attracting greater scrutiny from tax authorities, who are less likely to question digitized processes that produce predictable results. There’s also a significant opportunity cost for companies that stick with outdated processes; small transactions consume outsized attention from finance teams, which keeps them from focusing on more meaningful work. All of this points to the need for greater levels of automation.

A 2019 EY report highlighted the importance of digital transformation for reporting purposes in finance, noting that 72% of finance leaders expect AI to have a significant impact on driving insight in the coming years. That time is now, and expense reporting in the age of employee-driven spending is an ideal place to start. Ultimately, people shouldn’t have to do expense reports — transactions should report themselves. When you put the right technology in place, you’ll be that much closer to making this a reality — and taming the expense report monster.

Isaac Saft is the CEO of Blue dot.