How to make a business case and ROI calculation for Expense Management apps & software

At present, your company may still be reporting expenses manually by copying data from physical receipts and invoices into either a spreadsheet or a bookkeeping program. As a matter of fact a lot of companies still do, as a study by Unit4 found that employees spend a third of their time on administrative- and other repetitive tasks. So you’re definitely not alone.

You’re probably well aware that there are automated solutions to this cumbersome and relatively expensive form of expense management. And this would be the way to go, if it was up to you. But how do you convince your colleagues and your superiors of moving on to automated expense management software?

First of all, by researching your options and setting up a business case. In this article, we’ll list the most important research, arguments and calculations to aid your business case in favour of expense management software.

Jump to:

How to set up a business case?
Mission statement of your business case
Researching your business case
Calculating the ROI of expense management software
The benefits of expense management software listed
Have a look at Klippa as your solution

How to set up a business case?

If you want to convince your colleagues with a proven plan, it is important to have all the data at hand. Eventually, you’ll make your case via a document, spreadsheet or preferably a slide deck or presentation. To make a compelling argument in your presentation, you must be able counter any hesitation that arises in your colleagues, but mostly you’ll need to gather as much information in favour of your argument.

To write a convincing case in favour of expense management software, you need to cover the following segments:

Mission statement of your business case

Shortly write down what it is exactly that your company needs. What would be the ideal solution for your particular business? What goal do you aim to fulfil with this business case? Involve your team and ask them what they see as the biggest challenges with the current procedures. Try to speak with different stakeholders and identify organizational pain points.

In this instance, that would be a way to replace the manual work of clogging your briefcase with receipts and manually entering receipt products and prices into a program with an automated workflow. Indicate what the value of such a mission would be, both financially and practically. Once you have this clear, you will have a clear focus for the required research.

“I aim to at least halve the amount of time spent on the reporting and processing of expenses at our company.”

Researching your business case

You’ll need to expand upon the factors that will boost your argument. Thorough research is therefore instrumental to your case. It should at least cover the present expense processing situation at your company, what the steps and the numbers in that current process are, why you should digitalize the process, and finally to calculate what the current form of processing costs.

Then you’ll need to investigate the solutions offered by the numerous parties each offering specific pros and cons for different markets, different numbers and different prices. This involves looking into which offering parties, such as Klippa, may provide the best service for your particular niche. Make sure you find out how much an automated solution will set you back in terms of investment, but more importantly, what it will gain your company in the long run.

Arguably the most important part of your business case, and the research for it, is a projection of the ROI. Calculating what your business will gain financially is what will ensure the conviction of your colleagues over investing in an expense management solution.

Lastly, you’ll need to combine that information into a clear and concise business case that can be presented to the DMU at your company. You’ll need to have a good insight into what each colleague or superior prefers, what their motivations are, and what their minimal requirements are.

So let’s take a look at each step:

What are the steps in the current process?

First of all, look into the current manner of expense processing at your company. Think about each step you need to take when reporting an expense as a regular employee, as part of the finance team, and as the authorizing party.

You’ll need to contact a number of parties in your company regarding the processing and authorization process. A highly recommended way of doing this is to send them a survey asking a number of effective questions.

Here is a list of focus questions you can provide for this part of the investigation:

• What steps do you currently need to take in your expense workflow?
• Who is involved in this workflow? (Think of reporting the expense, managing expenses and authorization.)
• How much time do you spend on average per reported expense?
• What supposed safety issues does the current process have? Is there room for, sometimes incidental, fraud?
• What’s the biggest challenge you encounter in the expense workflow?

Once you have this information, it can be a boon to present it as visually as possible. So try to capture the info in flowcharts and graphs. A visual representation and simplification will bring to light conclusions that might otherwise be overlooked. Here’s an example to give you an idea of what this might look like.

What are the current company numbers?

It’s important to be aware of the metrics in the expense process. Metrics, the numbers involved in the process, will be decisive in selecting the correct solution. You need these metrics to calculate the all-important ROI of expense management software. Of course, you cannot collect this data out of thin air. You’ll need to confer with your colleagues at the finance department to ensure correct data.

Try to gather the most accurate data you can possibly gather. Diligence is an important factor in how your business case will look to the decision makers. Here is an overview of the data you can gather:

• How many expenses does your company process on a specific time basis (weekly, monthly, yearly)?
• What is the average time spent on reporting, authorizing and processing an expense?
• What is the average amount of time spent by each individual (employee, approver, finance colleague) in the process per expense?
• How many FTEs are involved per expense in the current process?
• Consult HR about the average salaries of employees, authorizing employees, and the finance department.
• If this applies to your company: How much time does it take to process a physical expense report as opposed to one reported digitally?
• What is the average time it takes for an expense to be redeemed?

Again, try to capture this segment of your research in comprehensible graphs and tables; not only for your own overview, but also to keep your colleagues interested. Such a visual representation might look as follows:

Explore the market

The central goal of your business case is switching to expense management software, so you’ll have to explore the available options and audit them. They each have their own perks, profits and pricing, which means that you will have to collect the information you need from the different parties. Try to at least uncover the following data:

• Cost of using the software. This might differ per provider amount, so try to find what would be applicable to your company. Pricing often depends on a set amount per user, amount of processed expenses and setup fee.
• Average time it takes the software to process an expense, so you can calculate the time and FTEs saved in combination with your current process.
• Average cost per processed expense. This might be difficult to pin down, but if your company processes thousands of expenses per month, you might find that certain parties will offer their service for a relatively lower sum the higher the number of expenses is.

You can choose to scour the websites of software providers for this data or there might be an option to have a pre-emptive call with the provider to gather accurate information.

Make sure to choose a couple of candidates for your company, not simply one. This both ensures your colleagues that you’ve thoroughly researched the options, and allows you to have several irons in the fire.

Again, make sure to provide a simple overview of the pros and cons per provider, so that your colleagues can easily compare them with each other. You can easily use this overview for your final ROI calculation, which will conclude your business case.

Calculating the ROI of expense management software

Although you can garner ROI calculation under the research section of your business case, it is perhaps the most important part. The DMU at your office will want to know what’s in it for the company. It is with the ROI that you will build the most convincing case.

First, compare the metrics of your current expenses process with those offered by the software provider. As we’re looking at saving FTEs in the process, perhaps it is best to use the time metric per hour and the duration per month. Eventually, you’ll work towards annual savings for your company.

This should give you a short list of three numbers that represents time saved. Then look at the average salary per hour for the involved employees. It’s part of your company numbers, but if you didn’t confer with HR, you could try to discover online what salary is expected with certain functions. Don’t think too hard on this number, but also make sure not to overdo it. You don’t want your colleagues to be distracted by it. The point is that your business case will save your company money regardless of the height of this number.

So for clarity, let’s take a look at some example numbers first. We’re looking at an example company with the following amount of involved employees:

Then, we’ll look at example numbers after comparison with a software provider such as Klippa. For practical purposes, we’ll use European currency in our example calculations, but the calculations themselves will be the same with different currencies.

So with these numbers, you’ll be able to make a reasonable calculation of the savings involved in the chosen software as follows:

For a clear and convincing sum of total annual savings, you’ll now simply need to add up:

This is already a significant sum to present to your colleagues. But of course, the provider will require your company to pay for using their software. So in the following, final example calculation we’ll use a setup fee of €2.500 and a yearly fee per user of €48. This will result in the following calculation for what your company will need to invest at first:

Now you have a clear picture of what your investment is, you can start calculating the actual annual savings you make. This makes for the final result of our ROI calculations as follows:

With the ROI percentage, you calculate how many times higher your savings are than your costs. In essence, there are two ROIs you can calculate with this: the ROI for the first year of use and the annual ROI after the first year. For the example calculation, this leads to the following:

To make the numbers more impressive, you might want to calculate the ROI for a period of five years.

There you have it. Your ROI for expense management software apps & software over a five-year period is a whopping 555%. This percentage represents a return on investment that is sure to convince your colleagues.

For your business case, you have now done the lion’s share of the work. All you need to do now is gather all practical data discussed above in a clear and concise slide deck that is clear in its intentions for your colleagues. In your presentation, it will be a strong feat to end on a list of benefits. We’ll discuss these now, as the benefits are more extensive than simply the financial side.

Benefits of Expense Management software listed

In our calculations, we may have simplified the financial profits of using expense management software, but there are other profits that come into play. For instance, did you know that 19% of all expense reports contain errors? These errors take time, and thus FTEs, as well to correct. Software usually offers automated processing that is way less prone to errors than humans are in manually transferring data. With software this accuracy often lies near 95% or closer to 100%.

With this in mind, let’s look at the benefits of expense management software listed:

• Cheaper
  This becomes clear from your previous research and calculations. So it’s important to highlight that this is the prime benefit. When highlighting this benefit, be as specific as you can be, based on the earlier presented calculations.
  
• Fraud prevention
  The software makes sure that double entries are blocked, and image-tampering on receipts are detected and blocked as well. Your company will no longer lose money on fraudulent reports or simply erroneous reports.
  
• Immediate insight into expenses
  Finance colleagues don’t need to provide monthly or yearly overviews any more. Reported and processed expenses are automatically gathered into clear overviews and dashboards. This provides actionable insight on the spot.
  
• Reduces errors
  As mentioned above, we humans tend to mistype or misclick a lot of times when manually entering data into a programme. This can always happen, but with automated software, this will be a near faultless process.
  
• Time better spent
  Instead of taking a couple of hours per month to report expenses, employees can now spend their time and energy on generating actual value for your company. Make sure you mention the number of hours that can be saved and let your audience imagine what they can do with that extra time!
  
• Improves employee satisfaction
  This ties in with time better spent. Research has shown that employees are not a fan of manually reporting expenses, so they will definitely look forward to having another tedious task outsourced to automated software.
  
• Experience at software provider
  A software provider such as Klippa has more than 5 years of experience in expense management with their SpendControl solution. This means that you can be sure that the software provider you choose, will offer you the best possible solution.

So that concludes your business case. You’ve listed all the financial and practical benefits required to convince your colleagues. Once you’ve convinced them and you have a final go at searching for an expense management software provider, it’s time to start the conversation with the different providers. What better place to start than here at Klippa.

See, for example, one of our latest blogs, explaining the concept of a fully customized expense management solution. This will definitely serve all your needs!

Have a look at Klippa as your solution

If this article convinced you to go for the Klippa solution, then you’ve chosen wisely. Make sure to plan a product demo with one of our experts or simply contact us at [email protected] for any information you need.