By Sam Fetchero on August 03, 2021

Posted in Expense Management

If you feel that managing company and employee expenses hasen’t really changed over the past few decades, you’re not alone. What started out as a tedious, manual process ….is still a tedious, manual process, just digitized.

For organizations who rely on spreadsheets, the end of the month looks something like this: filling out expense reports, emails back and forth with attachments and receipts, requests to fill in missing information, and constant reminders. Reconciliations, coding, and accruals hold up closing the books.

Others have used legacy expense software to try to fill this gap, which comes with a hefty price tag. Yet, solutions designed around the relic of the monthly expense report can still wreak havoc on the finance team’s efforts to manage expenses and close the books on time.

We’ve worked with hundreds of finance and accounting teams across a variety of industries and sizes and have identified 7 Deadly Sins” that hold them back from a smooth expense management process.

1. Sloth: Overdue Expenses

This sin is pervasive, and both individuals and organizations are guilty of it. Employees dread doing expense reports and often put off the torture. Receipts get lost and key details forgotten. Finance gets trapped in an endless cycle of hounding employees and managers. Manager reviews are cursory, rushed, and often serve as a rubber stamp.

What is the impact when your expense process is, in essence, a digital version of an antiquated, paper-based system?

  • Employees, managers, and the finance team get trapped in an endless cycle of reviewing and re-reviewing expense reports. It’s a tax on everyone.
  • When managers rubber-stamp-approve, you lose a point of control over expenses. Non-reimbursable spend and waste are going to get through.
  • Late reports drive last-minute work for the finance team during month-end close, including manual reconciliation and coding.
  • When expenses are late, the burden shifts to the finance team, who needs to estimate accruals and then reverse them.

2. Mistrust: Assuming the Worst

Many organizations take a carrot-and-stick approach to managing expenses. They reward employees who stay in line with quick reimbursement and swiftly bring the stick of enforcement with the threat of non-reimbursement—for example, by requiring the use of personal credit cards for business purchases.

The road to hell is paved with good intentions. Finance and accounting teams have a fiduciary duty to protect the financial interests of their organization, and understandably want to limit over-spend, waste, and abuse. However, when taken too far, they can overcorrect to an unfounded fear of fraud, which creates a culture of expecting the worst in people. This culture of punishment can:

  • Create a more complex process overall.
  • Put the financial burden on employees, who face interest charges, negative credit effects, and reduced purchasing power for daily living expenses. Our research found 70% of employees using personal cards for business expenses carry a balance, which means they’ll incur interest charges.
  • Delay an organization’s visibility into spend, providing no visibility until after the month.

3. Envy: Dreading Month-End

Month-end is a stressful time for finance teams, and expense management is often the most manual aspect of the month-end close. It’s wrangling all those late expense reports, manually reconciling the credit card statement, coding, correcting errors, and making accruals.

We surveyed 250 finance professionals and found that only 34% believed their month-end process is great. The other two-thirds admit it has room for improvement or is unacceptable. An inefficient month-end results in torture, including:

  • Labor-intensive work.
  • Errors introduced by tedious manual processes.
  • Late nights in the office and a delayed close.

 

Finance teams yearn for a smoother process and the ability to focus on higher-value work—not to mention the work-free evenings enjoyed by their colleagues. Hiring more people to deal with this issue is usually not a viable option.

4. Waste: Heedless Spending

Every dollar an organization spends is an investment that should drive a return for the company. Nobody wants to see money wasted.

Waste compounds when it continues to go undetected and becomes embedded in budgets that grow over time. This waste can be as simple as an out-of-pocket Zoom subscription that doesn’t leverage the company plan. Or it can be more systematic, such as vendor selection.

We asked finance professionals if they audit expenses, and about three-quarters have a manual audit process. Some don’t audit at all. Only a small percentage use software to audit all transactions. The impact of the inevitable waste obviously affects the bottom line, and downstream it can result in:

  • A higher risk of fraud due to lack of oversight.
  • Time spent manually auditing and analyzing to uncover this heedless spending.
  • Systematic issues, such as failure to use preferred vendors with negotiated rates and terms—or continuing to use excluded vendors.

5. Ignorance: Willful Blindness

This is the “see no evil, hear no evil, speak no evil” of expense management.

I’ve committed this sin. At a prior company, I managed a team of 7 people, all of whom traveled for work. I never knew where we would land versus our budget because I had no visibility into spend during the month, even though we had pricey expense software. By the time the monthly reports came in, it was too late. Whether we were over budget or under budget, I just threw my hands up in the air. Unfortunately, the blame always ended up on my finance counterpart.

When organizations don’t have the proper visibility into spending, it’s hard to hold departments and individuals accountable for their spending.

  • It can result in going over budget or under budget, which often can be just as bad.
  • It can manifest itself in urgent requests to the finance team, usually right at the end of the month when there is limited capacity and data.
  • Finance often unfairly takes the blame for all of this.

6. Wrath: Infuriating Fees and Service

We deal with frustrating fees and service almost daily in our personal lives, but nobody should have to experience it  while dealing with expense management software.

Most expense management solutions are expensive.  The price goes up as your business expands, and they’re difficult to change or cancel. Customer support is rarely good, if it’s offered at all. Having to explain your issue for the fifth time is enough to make anyone irate.

If you’re using expense management software and corporate credit cards, the fees can add up. On top of the license fees, there are often deployment charges, professional services fees, and a separate, ongoing charge for customer service, which can be offshore or email-only. And don’t forget the annual credit card fees. The impact of these fees is enough to get your blood boiling and can significantly affect your bottom line. Other impacts include:

  • Hidden or surprise fees, such as customization fees or support charges.
  • Being left hanging when support is unavailable or inadequate.
  • Waiting weeks or months for professional services to make changes to the software.

Once you’ve reached your limit and threaten to cancel, that’s when they drop the hammer, making it difficult by enforcing minimums and contracts. It would drive anyone to wrath.

7. Pride: Suffering the Status Quo

The ultimate sin, Pride, is tough to admit: Some feel proud of the homegrown, “free” systems they’ve hacked together. Every organization has that complicated spreadsheet only one person knows how to operate.

On the other side, you may have recommended an investment in pricey expense management software like Concur or Expensify, and it’s tough to acknowledge that it isn’t saving your organization as much time or money as you had hoped or promised.

We surveyed 250 finance professionals and found that 81% of organizations have an expense management process that is chaotic, unmanageable, or needs fixing. But only 7% of them said it needs fixing ASAP. It’s tough to acknowledge that change is needed. The impact of not admitting the flaws in your current system can keep your entire team in shackles, including:

  • Being stuck in a rut with the current method and unable to progress.
  • Being overly reliant on legacy knowledge(i.e., that Excel macro that only one person knows how to operate).
  • Adding extra risk to the system, whether it’s the risk of attrition or of something breaking.
  • Paying for ineffective solutions, or bearing the cost of your homegrown system that is about as “free” as a free puppy.

How Do You Absolve These Sins?

If you or your organization is committing one or more of these deadly sins, there is salvation available to all. And, no, it doesn’t involve paying indulgences to legacy expense management software providers.

We invite you to check out these resources to learn more about the 7 Deadly Sins and how you can move into the light of effortless expense management. These resources dig deeper into each sin, identify best practices, and shine a light on Center customers who have experienced expense management salvation:

On-Demand Webinar: The 7 Deadly Sins of Expense Management 

Making a switch to Center is quick, easy, and free. When you’re ready, we’d be happy to give you a personalized demonstration of how Center can help your organization.