Expense reports: Win at every cost
Sara Jaillet, Data Analyst for Philéas Gestion, reviews the steps and costs involved in processing expense reports, and shows you how to save time and money by optimizing your expense report management.
Sara Jaillet:
Our relationship with money is emotional.
When I started out in the world of work, one of my colleagues, wanting to teach me the tricks of the trade, proudly told me: "I never go to the canteen. As I live next door, I eat at home. So I don't spend a thing". His logic seemed implacable.
But as I watched him drive off to the supermarket (cost of transport), I realized that he was going to cook his food (cost of production) and clean his plates (cost of maintenance). His logic cracked in my eyes.
What touches our money touches our emotions and sends us back to our own conceptions of life. Why do we enjoy paying for restaurants with friends, while at the same time choking on a few cents' increase in petrol prices? Let's take the emotional weight out of it and approach the subject from a purely financial angle. Going out once a month for around €30 a night costs €360 a year. Five extra centimes per liter of fuel to cover 12,000 km at 5 l/100 represents an extra €30.
Add emotion back into the equation, and we'll immediately find a host of perfectly understandable reasons to deour ability to spend €360 on a leisure activity and our inability to add €30 a year for the car. Yet eliminating just one outing a year would balance the budget.
Neuroscience shows that we buy emotionally and justify our spending by reason1. A well-managed company is based on concrete, measured facts, not feelings2.
I spend nothing on expenses.
Surprising as it may seem, the field of expense accounts is not immune to an initial judgment based on intuition rather than facts. Most people spontaneously consider the cost of processing expense claims to be negligible. Some HR managers told me that the management cost was around €1 per invoice. Others assured me that it cost them zero euros, because they used Excel or had developed an in-house tool. The most concerned, aware of the time spent by accounting or HR, imagine at best a figure of a few euros.
Yet specialists claim that each expense claim costs the company between €32 and €56, i.e. around €80k a year for 150 claims a month.
Is expense management as opaque as the Panama Papers?
The entire expense management process involves several players who interact with each other and carry out numerous tasks. While it is intuitively complex to guess the total cost, it is possible to break down and measure each intervention at the finest level, using a project work breakdown structure (WBS). In this study, we will consider a breakdown into 4 main areas.
1. Entering or hunting for information
The very principle of expense management is that a company reimburses its employees for expenses incurred in the course of their work. To do this, an operator is tasked with data entry. Each form requires mandatory information to be entered, such as the date, nature of the expense, and the amount including VAT.
Supporting documents must be attached to the declaration. These are sometimes printed out, stapled to a summary document, sent by internal mail, or even deposited directly on the HR desk. All this takes time, which needs to be measured precisely. What employee hasn't spent ten minutes desperately looking for that cursed ticket that was stacked with important papers? And who hasn't gone out of their way to ask their manager for an explanation for a refused mileage allowance? Who hasn't endlessly searched his diary, emails and phone to find the guest list to write on the back of the restaurant bill?
Who hasn't finally given up on reimbursing an expense to avoid an overly complex or unsuitable process? If this situation exists, it's because data collection is a time-consuming process, accounting for 50-60% of the time spent on the overall process.
2. Validation: the needle in the haystack
The subject of expense claims is legally regulated, which is why employers can't afford to accept every reimbursement request with their eyes closed. These amounts are not subject to contributions. As a result, a company that cannot justify the reimbursement of an expense runs the risk of being fined for attempted concealment of salary or benefits in kind. According to the latest ACOSS report, almost 40% of the adjustments made concerned remuneration not subject to contributions.
What employee hasn't tried to make ends meet by increasing their mileage allowance? Or who hasn't taken advantage of a restaurant's complaisance to pour a bottle of wine over the meal? Yet an employer who reimburses a false expense claim is legally liable in a context where some studies estimate that one employee in three cheats on his or her tax returns to the tune of €730 a year3.
What's more, because they're so busy, 8 out of 10 managers arbitrate claims without really paying attention. This deceptive feeling of time-saving actually masks a significant cost, as undetected anomalies will cause the company to suffer a double penalty in the form of an adjustment on these amounts.
The verification function is therefore crucial, and its tasks cannot be rushed. Aware of this problem, some validators fall into the opposite trap and scrutinize each and every expense. But not all expenses are created equal: the reimbursement of a subway ticket without recoverable VAT does not carry the same risk as an invitation to a restaurant for 10 people. As a result, the time spent on verification loses all the benefit of the discovery of fraud.
Validation tasks account for 10-20% of the cost of complete processing.
3. Administration or Asterix's twelve tasks
Administrative processing must certify the correct application of company policy regarding expense claims, and comply with legal obligations.
Among all the operations to be carried out, we find the verification of entries, receipts, VAT, mileage allowances and other specific calculations, the management of luncheon vouchers, vehicles, vehicle registration, missions and assignments, expense advances and business cards. Explanations to be provided to validators and employees, production of declarative documents, export to accounting and DSN, data extraction for finance must also be taken into account. The list of tasks to be accomplished is long and needs to be measured precisely.
As for the supporting documents, they constitute a not inconsiderable part, as they have to be received, sorted, checked, recorded and finally stored for 6 years. Over this period, at a rate of 150 notes per month, your company will need to archive the equivalent of 216 reams of paper.
The administrative cost represents 25 to 40% of the total processing.
4. IT or 2001 Space Odyssey
All IT processing of any kind represents a financial burden for the company. Even an in-house solution, based on an old, amortized server, is exposed to the risks of hardware obsolescence, maintenance downtime and scalability.These costs are rarely measured, but they are potentially high.
As for the expense claim modules integrated into an HRIS, by definition they will remain generalists and not specialists in the field. However, only by taking charge of the entire processing chain will employers be able to make real savings, since any action that has an impact on time will have a significant impact on the overall cost of expense claim management.
As far as expert solution providers are concerned, their fees should be included in the final result.
IT can account for up to 15% of the total cost.
Need a quantum calculator?
For the sake of simplicity, we'll assume that your company reimburses 150 expense claims per month, and that each claim contains around ten expenses with supporting documents. In addition, we'll take into account an average net remuneration of €1,800, or a loaded hourly wage of €23.27. So every minute spent by an actor in the process will cost you 1/60 hour x €23.27 = €0.387 9.
Employee side
If the average time it takes you to enter an expense and process the receipt is measured at 3 minutes and 30 seconds, your costs will be worth 0.387 9 x 3.5 x 10 x 150 x 12 = €24,437.70/year.
To this must be added follow-up time, reminders, re-entries (around 20% of notes are rejected and have to be re-entered), requests for explanations, specific calculations and other special cases, which can double the cost of data entry alone.
Can you make savings?
An expert tool can help you save up to 50% of your time with data-entry aids such as mobile application photography of receipts, OCR (optical character recognition) for pre-filling forms, calculation of ceilings and mileage allowances, etc.
Validators
If your managers check each expense for an average of 1 minute, the cost to your company will be 0.387 9 x 1 x 10 x 150 x 12 = €6,982.20/year.
As we saw above, the particularity of the validation process is that it is measured not only in terms of time spent, but also in terms of the quality of the decision-making process.
Is there room for improvement?
Dashboards and tracking systems can provide partial support for arbitration, but some expert solutions use cutting-edge technologies to support managers by raising alerts. These check all expenses and highlight those that warrant more in-depth human verification. They significantly increase the quality of validation and save time for the company.
For managers
Calculating the amount of time spent by accounting and HR can only be accurately measured by exhaustively listing and timing each of the many tasks involved. That said, according to our calculations, 150 monthly notes cost around €25k a year.
Is there room for optimization?
A company will be looking for an expert tool that can automate what can be automated, comply with company policy, produce reports and interface with its HRIS (employee import, accounting export, etc.). Digitized supporting documents will be archived in a Probative Value Vault, which complies with the requirements of article A 102 B2 of the French Tax Code.
Conclusion
An expert expense management solution can save your company around ten euros per invoice, or around one hundred working days per year. In other words, not implementing an expert solution means wasting €1,410.75 per month. So, what are you waiting for?
Sources:
1: https://creg.ac-versailles.fr/l-emotion-et-le-comportement-du-consommateur
2: http://www.norme-iso-9001.com/lapproche-factuelle-pour-la-prise-de-decision/
3: https://www.lci.fr/emploi/notes-de-frais-pourquoi-autant-de-fraudes-2123350.html
Sponsored article. Expert contributors are authors independent of the appvizer editorial team. Their comments and positions are their own.
Article translated from French