Businesses often use spreadsheets as their go-to tool for expense management. This seems reasonable, considering that spreadsheets are a convenient and familiar way to organise information.
However, this arrangement only works when you have just a handful of employees submitting expense reports. When you get a surge in the inflow of expense reports, it becomes obvious that spreadsheets are not a pragmatic approach at all. They mean lost receipts, difficulty in rectifying errors, undetected fraudulent expenses, and sifting through copious amounts of paperwork—none of which sounds pleasant.
According to a study conducted by the Global Business Travel Association (GBTA), processing one expense report manually costs $58 on average. This means that if you are trying to use manual expense processing to control your spending, you are spending a ton of money to try to save money. And if your system doesn’t work, you end up losing even more money.
All things considered, limited adoption of technology is the primary barrier to effective T&E management. To maximize efficiency and save both time and money, automation is the way forward. This is where online expense management software enters the picture. From streamlining expense reporting and improving policy compliance rates to accelerating reimbursement, expense management software offers tons of benefits.
Here are some reasons why expense management software is better than spreadsheets:
Eliminating erroneous expense reports
According to the Global Business Travel Association, 19% of all expense reports contain errors and it takes 18 minutes on average to correct each one. That is not surprising when you imagine multiple employees manually adding their expense claims to the same spreadsheet—that will always make the process error-prone. This is why so many expense spreadsheets contain expensive errors, and even a careful finance team can only spot so many errors. For example, let’s consider formula errors. The finance team needs to verify the formulas consistently and check whether they are used in the right cells. One incorrect formula could potentially affect multiple spreadsheets, and fixing that can become a huge task.
Automation removes the need for manual data entry and meticulous manual supervision, which is the major time-consuming part of expense management. Online expense management software comes equipped with robust features like receipt scanning and direct integration with corporate credit/prepaid cards.
Receipt scanning simplifies expense creation by using technology to extract data from scanned receipts and create expenses automatically. Corporate credit cards and prepaid cards are an essential part of business travel. When they are connected to an expense management solution, the card transactions are fetched automatically and converted into expenses. The software sifts through the expenses added during a date range, gathers them into a report, and submits them to the approver with no need for expense information to be entered manually.
Time-saving and cost-effective
In many companies, employees enter their expense claims onto spreadsheets and mail them to the line managers and finance team for approval. The approvers spend a lot of time manually reviewing each expense and passing the spreadsheet from one approver to another. The excessive time spent in reviewing and approving these expense reports is expensive (in terms of work hours) and often leads to delayed reimbursements.
To avoid these limitations, firms are increasingly moving towards online expense reporting software. Firstly, these apps are cost-effective. Statistical data reveals that when a business switches to expense management software, it reduces the cost of processing a report by approximately 63%.
Since these applications are fully automated, it’s time-saving for all the stakeholders involved: submitters, approvers, and finance teams. Business travelers incur most travel expenses while they are on the road. Instead of needing to safeguard their receipts until they get back, employees can use an expense management mobile app to capture a picture of the receipt and create an expense right away. Once the expenses are gathered into a report and submitted, the line managers and finance team can quickly process the approval and reimbursement.
Improved policy compliance
It’s impossible to enforce expense policies effectively and ensure compliance using spreadsheets, because they’re not equipped to detect violations or set limits for an entity.
Spreadsheets also cannot track compliance in areas like per diems, mileage expenses, and travel booking requirements (such as booking in advance or booking with preferred vendors). Enforcing multiple expense policies for different departments or projects is not viable without adding even more sheets and more complication. Without effective compliance controls, manual expense processing can result in out-of-policy expenses being overlooked and employees getting reimbursed despite policy violations.
With an online expense management system in place, you can configure the software according to your firm’s expense policies—from booking with preferred vendors to expense limits, per diems, mileage expenses, and approval workflows. This prevents the misuse of funds and boosts policy compliance rates. If different departments or projects in your company have different spending limits and requirements, you can implement and enforce different policies for each one of them. A good expense management system helps control spend by notifying submitters of the expense limits and only accepting expenses that are within the policy. The out-of-policy expense claims are automatically detected and flagged, and line managers and other approvers are notified of policy violations as they happen.
Advanced expense fraud detection and prevention
Manual expense reporting opens the door to expense theft. For crafty employees, the low security level of spreadsheets makes them an easy target because it’s easy to overwrite or alter data after gaining expense approval. Detecting such changes is difficult and time-consuming — if the finance team suspects a fraudulent claim, it could cost the company more to identify and prove it than the value of the claim itself. Validating expenses is another challenge—employees could submit the same receipt twice or round up their mileage expenses to a higher amount, and these violations are likely to slip through the cracks and end up getting reimbursed.
The easiest way to mitigate expense fraud is by automating expense reporting. Expense management software can automatically detect fraudulent expenses by identifying duplicate receipts and out-of-policy expense claims, and notify the submitter and approver to resolve the violations. A system with GPS-supported mileage tracking can offer more accurate tracking of trip mileage instead of leaving you to rely on your employees’ estimated fuel reimbursement claims. Customized multi-level approval workflows allow employers to add an extra level of review before reimbursement to ensure transparency.
Transparency and visibility
Consolidated expense data helps in improving efficiency, identifying spend patterns, and recognizing areas that drive cost savings and areas that need improvement. However, it’s not easy to manually put together data from spreadsheets to generate quick inferences. Without reliable analytics, limited visibility causes decision-making to take a hit.
Automated expense management generates customizable analytical reports on trips, policy violations, reimbursements, and more with no additional effort. These systems provide real-time data to facilitate quick and intelligent decision-making. For example, with a few clicks you can view the top policy violators in your firm—this single insight could save thousands of dollars. These analytical reports can also help narrow down the best vendors and negotiate for better deals and discounts on bookings, rentals, and other products and services.
On the whole, expense management software gives the finance team some much-needed visibility into the minute details of the company’s expense claims, helps them monitor cash flow, and makes it easier to track the firm’s financial performance. These reports can also be used as proof of compliance during audits.
Integration with other software
Spreadsheets don’t integrate with other systems even remotely, which leads to data silos. This is undesirable since expense data is also used in other back office operations like accounting, sales, budgeting, and payroll.
To use this data with a spreadsheet-based expense system, your finance team would have to manually format and import the data into multiple other business systems. If any of those systems can use the data in spreadsheet form, it will still have to be individually formatted for the requirements of each system. Additionally, any modifications or additions made to an expense claim in a spreadsheet must be manually updated across all the systems that use the same data. That makes it very difficult to be sure if the information you’re using is up to date and correct.
To mitigate this silo problem, cloud-based expense management applications integrate with a wide variety of applications, enabling expense data to flow through the whole finance function. For example, when expense and accounting functions are integrated, as soon as an expense is reported and approved in the expense management system, it’s automatically updated in the accounting system. This saves your finance team a lot of time that would otherwise be spent in re-entering information. Expense management software also allows you to export data in different formats without data errors or loss. Integrating your expense management software with other applications offers the best insights from all of the systems with the least time spent in entering data.
Spreadsheets offer limited assurance on data storage and backup, which is a major security issue for businesses. Though spreadsheets offer password-based protection for worksheets and workbooks, cell locking, and hiding of formulae, the level of encryption and protection can be meddled with. Also, it’s difficult to prevent an employee with access to a confidential spreadsheet from overwriting or copying the data.
The level of security offered by cloud expense management software is significantly better when compared to spreadsheets. Cloud security includes carefully articulated policies, procedures, controls, and technology that work together to protect the data and infrastructure. These measures ensure the protection of data and your privacy, drive compliance, and help set authentication rules for users and devices.
Here’s your takeaway!
Using spreadsheets to handle something as crucial as business expenses is not safe or efficient. Manual expense processes are a pain for business travellers and finance teams alike, and they are expensive in terms of work hours when it comes to report generation, rectifying errors, and dealing with policy violations and fraudulent expenses.
An expense management system like Zoho Expense removes the need for manual data entry and repetitive paperwork. Your employees can quickly capture receipts and submit their expense reports on the go. Your travel and finance teams can focus on ensuring policy compliance, save time by minimizing their manual intervention, swiftly process reports to reimburse your employees, and maintain maximum spend visibility and data security. Try Zoho Expense for free today to streamline your expense management processes and improve your employee productivity and satisfaction.