Expense reports: Win at every cost
Sara Jaillet, Data Analyst for Philéas Gestion, reviews the steps and costs involved in processing expense claims, and shows you how to save time and money by optimising the management of your expense claims.
Sara Jaillet:
Our relationship with money is an emotional one.
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 anything". His logic seemed implacable to me.
But as I watched him drive off to the supermarket (cost of transport), I realised 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, but at the same time choke on a few centimes increase in petrol prices? Let's take the emotional weight out of it and look at the subject from a purely financial angle. Going out once a month at around €30 a night costs €360 a year. An extra five centimes per litre of fuel to cover 12,000 km at 5 l/100 represents an extra €30.
Add emotion back into the equation and you'll immediately find a host of perfectly understandable reasons why we can't afford to pay more.our 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. But a well-run business is based on concrete, measured facts, not feelings2.
I don't spend anything on expenses.
Surprising as it may seem, the field of expense accounts is not immune to an initial judgement 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 cost of managing expense claims was around €1 per claim. Others assured me that it cost them zero euros, because they used Excel or had developed an in-house tool. Those most concerned, aware of the time spent by the accounting or HR departments, imagine at best a figure of a few euros.
Yet specialists claim that each expense claim costs the company between €32 and €56, or around €80k a year for 150 claims a month.
Is expense management as opaque as the Panama Papers?
The entire expense claim management process involves a number of 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 look at a breakdown into 4 main areas.
1. Entering or hunting for information
The very principle of expense claim management is that a company reimburses its employees for expenses incurred in a professional capacity. To do this, an operator will be responsible for data entry. Each form requires mandatory information to be filled in, such as the date, the nature of the expenses, and the amounts 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 left directly on the HR desk. All this represents a time commitment that needs to be measured precisely. What employee hasn't spent ten minutes desperately looking for that cursed ticket that was stacked up with the important papers? And who hasn't made a special trip to ask their manager for an explanation for a refused mileage allowance? Who hasn't endlessly searched their 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 inappropriate process? If this situation exists, it's because data collection is a time-consuming process that accounts for 50-60% of the time spent on the overall process.
2. Validation or the needle in the haystack
The subject of expense claims is regulated by law, which is why employers cannot afford to accept every claim for reimbursement 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. The latest ACOSS report states that almost 40% of the adjustments made concerned pay 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 leniency to pour a bottle of wine over their meal? But an employer who reimburses a false expense claim is legally liable, at a time when some studies estimate that one in three employees cheats on their tax returns to the tune of €730 a year3.
What's more, because they are very busy, 8 out of 10 managers arbitrate claims without really paying attention. This deceptive feeling of time-saving actually masks a significant cost, because undetected anomalies will cause the company to suffer a double penalty in the form of an adjustment on these amounts.
The audit function is therefore crucial, and its tasks cannot be rushed. Aware of this problem, some validators fall into the opposite trap and scrutinise every item of expenditure in minute detail. However, not all expenses are equal: the reimbursement of a metro ticket without recoverable VAT does not carry the same risk as an invitation to a restaurant for 10 people. So the time spent on checking will lose all the benefit of discovering fraud.
Validation tasks account for 10 to 20% of the cost of complete processing.
3. Administration or the twelve labours of Asterix
Administrative processing must certify the correct application of company policy on expense claims and comply with legal obligations.
The operations to be carried out include checking entries, receipts, VAT, mileage allowances and other specific calculations, managing luncheon vouchers, vehicles, vehicle registration, missions and assignments, expense advances and business cards. The explanations to be provided to validators and employees, the production of declaratory documents, export to accounting and DSN, and data extraction for finance must also be taken into account. The list of all the tasks to be carried out is long and needs to be measured precisely.
As for the supporting documents, they make up a not inconsiderable part, because 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 complete processing.
4. IT or 2001: A Space Odyssey
All IT processing of any kind represents a financial burden for the company. Even an in-house solution, based on an old server that has already been written off, 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 report 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, because any action that has an impact on time will have a significant impact on the overall cost of expense claim management.
As far as the publishers of expert solutions 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 will take into account an average net salary of €1,800, or a loaded hourly wage of €23.27. So every minute spent by someone involved in the process will cost you 1/60 hour x €23.27 = €0.387 9.
Employees
If the average time taken by you to enter an expense and process the receipt is measured at 3 minutes and 30 seconds, your cost will be 0.387 9 x 3.5 x 10 x 150 x 12 = €24,437.70/year.
To this must be added the time taken for follow-up, 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 the help of data-entry aids such as the ability to photograph receipts from the mobile application, optical character recognition (OCR) for pre-filling forms, calculating 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 just in terms of time spent, but in terms of the quality of the decision-making.
Is there room for improvement?
Dashboards and monitoring systems can provide partial assistance with 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 improve the quality of validation and save the company time.
For managers
Calculating the amount of time spent by accounting and HR can only be accurately measured by listing exhaustively and timing each of the many tasks. That said, according to our calculations, 150 monthly notes cost around €25k a year.
Is it possible to optimise?
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.). Digitised supporting documents will be archived in a Probative Value Vault, which applies the conditions required by 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 a hundred working days a year. In other words, not implementing an expert solution means wasting €1,410.75 a 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. The expert contributors are authors independent of the appvizer editorial team. Their comments and positions are their own.
Article translated from French