We are all guilty of a few bad habits, both at home and at work. In the office, bad habits often manifest themselves in ways related to key systems and processes which can, in turn, undermine productivity. Below Darren Upson, VP of Small Business Europe at Soldo, talks CEO Today through the complexities of managing corporate expenses, with three key areas to focus on.
Managers can put measures in place to help individual team members work more efficiently, but company-wide habits are harder to break.
Expense management is a good example of a company process that is commonly marred by bad habits. Despite the fact that many key businesses processes have now been digitised and updated to be as efficient as possible, the typical expense management process is still very archaic. More often than not, employees are expected to pay with their own cash, hold on to receipts, complete a manual expense report, and wait to be reimbursed.
Unfortunately, not all employees are fastidious in their record-keeping: receipts get lost and spreadsheets are fudged. Employers are guilty of bad habits too, including not processing expense claims fast enough and leaving employees out of pocket. These bad habits can cost your business a significant amount in the long-run, but they can also be overcome with the right attitude and support.
Here are three key areas to focus on.
Empower your employees to spend
In start-ups and SMEs, it is unlikely that each employee will have a company card. So, what tends to happen is that the cards that are available are passed around and shared without much oversight. This makes it much easier for the cards to be taken advantage of and many of the supporting receipts end up lost.
According to Soldo’s recent survey of 2,500 UK employees, staff make unauthorised and inflated expense claims on a variety of things. This includes inflating the cost of taxi rides, exaggerating the number of miles driven, or buying an extra round of drinks for co-workers and claiming the money back.
Why do employees make these claims? It’s hard to say exactly on a case-by-case basis. However, more often than not, bad expenses habits are caused by flaws in the company’s expense management system. One of these flaws is simply not making it easier for employees to spend company money correctly. If they are forced to spend out of their own pockets and put in a claim for reimbursement, this leaves more room for error or deliberate ‘rounding-up’.
Part of empowering your employees to spend is therefore to give them, where appropriate, their own company cards. Another part is making sure they know what they can and can’t use their cards for. According to Soldo’s survey, 40 percent of UK employees said that having tighter spending rules or a monthly limit on their company card would influence them to spend more responsibly.
In particular, using pre-paid cards instead of credit cards can help businesses eliminate overspending and, as a result, drastically reduce the need to reimburse employees. It’s also not a bad idea to create bespoke budgets, limits and rules for each card holder, depending on their position and seniority within the business.
Reimburse staff for expenses efficiently
Our research found that nearly two thirds (63%) of employees feel they are left out of pocket, to varying extents, due to poor reimbursement processes. It can take weeks or even months for employees to be reimbursed. Sometimes, they’re simply not reimbursed at all, which is unacceptable.
This is a damaging habit because employees, if forced to rely on their own wages, are discouraged from spending, which doesn’t benefit anyone. In fact, it has serious HR implications, lowers morale and diminishes trust. This is especially true for younger employees and graduates, many of whom do not have the disposable income to spend on small expenses and wait for reimbursement.
Automate and digitise the expenses process
An archaic reporting process will only discourage employees from claiming expenses on small things to begin with. It can also work in reverse: if employees know that reporting is very opaque, it can make it more tempting for some to inflate expenses. Outdated, manual processes are a huge drain on time and can be inaccurate. By automating the process, you not only improve productivity – you avoid human error too.
The ultimate consequence of all of these bad habits is that small expenses are much more likely to go unreported, which leads to bad accounting, and in turn, cash flow problems for the business. As a small business owner or finance director, to make important financial decisions you need to know exactly when money is coming in and going out of the business, from the minutiae to the broader picture.
Implementing a clear and structured expenses procedure for employees to follow is the only way to foster better habits. Digitising the spend reporting process makes keeping track of expenses and reimbursement more consistent and efficient, moving the responsibility away from the employee towards the finance team.