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How Much Is That Paper Expense Report Really Costing Your Organization?

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By Bill Vergantino, President and CEO of ExpenseWatch

As confidence in the economy continues to increase, companies are starting to anticipate a boost in revenues and as such expect spending more to support growth. As we’ve said in previous articles, these growth periods are often accompanied by internal process bottlenecks and challenges as an organization strives to keep up with increased workloads.

How your company manages spending is a great example of where these challenges can arise, especially if your organization is still using paper-based processes to facilitate all areas of spending. When more people spend and travel, more purchase requests, invoices and expense reports are being sent through the organization for approvals and payments. As the paper flow increases, approvals bog down and processing times are extended causing frustration throughout the organization. It is at this point most organizations start to look for solutions to automate and streamline these processes.

We often talk about how an automated system to manage company spending saves time and money, but what does that really mean? How much does it really cost your company to manually process an expense report, purchase request or payable invoice? The answer is, it can be significant!

According to Paystream Advisors, a technology analyst firm, it costs an organization on average $26.63 to manually process an expense report. When there is some degree of automation, the cost drops to $17.31. With a fully automated expense management system that cost falls to $6.85. Aberdeen Group, another technology analyst firm, reports slightly different costs and savings: $20.65 to manually process an expense report, down to $12.51 for a fully automated system. This equates to a savings of $8 to $20 per expense report processed.

What does that mean for your business? On average, our customers’ employees submit 1.5 expense reports per month. For a company with 100 expense reports submitted each month, the resulting cost savings can range from $800 – $2000 per month. Annualized, that can add up to significant dollars for an organization: Almost $10,000 – $24,000 per year. Obviously the more expense reports your organization handles, the greater the opportunity to save through automation.

But cost isn’t the only factor to consider. Automation also significantly reduces expense report processing time at every step of the way. First, submitters are able to create reports much more quickly as online and mobile systems automate many of the ways you can add expense items to a report. The time saved in creating an expense report can be spent in driving new business instead of making sure a reimbursement occurs.

Routing reports for approval is another area where automation makes a huge difference. According to Paystream, the most common method people use to submit expense reports remains extremely manual, with the majority using interoffice mail, electronic mail or traditional snail mail options. In this era of automation, it is hard to believe that 69 percent of those surveyed for the TEM report are still mailing paper receipts to managers and the Accounts Payable department.

Approvals can be accomplished much more quickly. Our customers repeatedly tell us approval times are reduced from weeks, to days or even hours. Frustrations are reduced and eliminated throughout the organization when employees get reimbursed faster. The AP department isn’t chasing managers for approvals or employees for lost receipts, or wasting time recoding misfiled expense items.

In fact, Aberdeen reports in its TEM survey that after implementing an automated expense management system, respondents say they are better able to enforce travel policy (44%), have lowered processing costs (41%), improved visibility into spending (40%), improved employee satisfaction (39%), while reimbursing employees much quicker (36%). Also of note is how an automated expense management system helps improve an organizations ability to detect and prevent fraud (15%).

It’s a bit harder to fully evaluate costs of manually processing purchase requests through to invoice payments, largely because most companies don’t capture that information. In fact, Paystream Advisors in its 2014 Invoice Workflow Automation Benchmark reported nearly half of the companies surveyed say they don’t measure costs, with the rest citing costs between $5 and $15 to manually process invoices.

The costs are actually higher when you take into account payment delays resulting in missed discounts and weak supplier relations. Only 29 percent of companies surveyed in the IWA Benchmark regularly capture early payment discounts with the biggest reason for missed discounts being problems with routing (68%) and lengthy approval cycles (58%).

Implementing an automated workflow system alleviates many of these problems; again saving organizations both time and money. As items are routed electronically the system can trigger notifications to approvers and they can process spending requests right away from any location. Purchasing agents and AP personnel will be able to facilitate more approval processes with the same bandwidth so the avoidance of hiring additional personnel to keep up with increased workloads affords another significant savings opportunity. You can completely eliminate the need for interoffice mail or waiting for approvers to return to the office to review and approve transactions. Faster approvals mean you can avoid payment penalties and cash in on discounts.

Increased visibility provides greater working capital management. You have a much better real-time view into pending and potential changes in cash flows and can make better decisions about slowing or increasing spending to support business growth. You have a clear audit trail for every action taken on an invoice, purchase request or expense report allowing for quicker inquiries into the data as needed. Finally integration with accounting and ERP systems eliminate the need to manually re-key information, which ensures data integrity.

The way to gain strategic advantages while growing your organization may not always be increasing sales, finding new markets, and expanding product offerings. As you can see, the strategy to improve business processes can be just as powerful because you lower operational costs, improve employee morale and gain greater visibility into spending. For more information about automating your company spending processes, fill in the form on the right and one of our experts will reach out to your shortly.

Sources: Paystream Advisors 2015 Travel Expense Management Report and 2014 Invoice Workflow Automation Report; Various Aberdeen Group Travel Expense Management Reports.

(Posted 7-24-15)

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