Juggling travel plans and expense reports, with its manual data entry, misplaced receipts, and the constant threat of expense fraud, is no small feat regardless of your team size.
Thankfully, it doesn’t need to be time-consuming or dreadful. The use of expense management software offers finance departments a lifeline to turn the chores of paper expense reports, reimbursement processes, and time-consuming approvals into a breeze.
In this blog, we take a comprehensive dive into Travel and Expense Management (T&E). By the end of it, you will have a better understanding of the common challenges, and how you can do it better by selecting the right expense software for T&E.
What is Travel and Expense Management?
Travel and expense management refers to policies and procedures for managing business travel expenses, including booking travel and accommodations, submitting expense reports, and reimbursing employees for out-of-pocket expenses.
Managing travel expenses involves the use of strategies, corporate travel management tools, and guidelines to control costs while enforcing compliance with internal policies and tax regulations.
Proper T&E management helps companies gain visibility into their travel spend, avoid expense fraud, make data-driven decisions to cut unnecessary costs, and simplify travel and expense processes for both employees and administrators.
Challenges of T&E Management
Travel and expense management consists of many challenges with a direct effect on financial integrity, operational efficiency, and employee satisfaction within your business. Understanding the specifics of these challenges, their effects and the intricacies involved offers valuable insights into the complexities of managing T&E effectively.
Manual Process Inefficiencies
Manual data entry and paper-based processes are extremely time-consuming and exposed to human error, leading to potential inaccuracies in travel expense reports. These inefficiencies can result in delayed T&E reimbursements, creating a bottleneck that affects employee satisfaction and operational efficiency.
Lack of Spending Visibility
Without a clear view of T&E spending, companies struggle to identify trends, manage budgets effectively, or negotiate better rates with vendors. This lack of visibility can also interfere with compliance with financial regulations such as the Sarbanes-Oxley Act (SOX) or Audit Directive 2014/56/EU, which require companies to maintain accurate financial records.
Expense Fraud
Expense fraud can take many forms, from inflated or fictitious expenses to duplicate expense claims and personal spending disguised as business expenses. Such fraudulent activities not only lead to direct financial losses but also raise compliance and legal concerns, impacting a company’s reputation and integrity.
Compliance with International Regulations
For businesses operating globally, managing T&E becomes even more challenging due to the need to comply with a variety of international tax laws and regulations, such as VAT recovery rules in Europe or the Foreign Corrupt Practices Act (FCPA) in the U.S. Ensuring compliance across different jurisdictions adds complexity to T&E management.
Complexity of Multi-Entity Accounting
Organizations with multiple business units or subsidiaries face the challenge of consolidating T&E expenses across different entities. Each entity might use different currencies, follow varying tax laws, and operate under separate internal policies, complicating the consolidation and reconciliation processes within multi-entity accounting.
Unauthorized Spending
Unauthorized spending can include non-compliant hotel bookings, luxury travel options, or entertainment expenses that exceed company limits. Identifying and controlling these expenses requires detailed policy definitions and a monitoring system to detect policy violations.
Inadequate T&E Systems
Many organizations rely on T&E tools that are not fully integrated with their other financial systems, such as ERP or HR software. This lack of integration can lead to isolated data and inefficiencies in reconciling expenses with broader financial records. Furthermore, some travel expense management systems may not offer the flexibility to adapt to company-specific policies or the scalability to grow with the business.
Resistance to Policy Changes
Implementing new policies or systems often meets with resistance from employees who are accustomed to existing procedures. This resistance can stem from a lack of understanding of the benefits, fear of increased workload, or simply the discomfort of change. Overcoming this resistance is crucial for the successful adoption of more efficient T&E management practices.
Understanding the challenges of business travel and expense management allows you to evaluate the complexity and the impact of these issues on your operations. By recognizing the specific pain points, you can better prepare to address them in your T&E management strategies.
Benefits of Effective Travel and Expense Management
Adopting a more efficient approach to managing travel expenses is crucial for businesses looking to optimize operations and enhance financial performance. Here are the key advantages of refining your travel and expense management strategy:
- Cost Savings: Implementing effective management strategies can significantly reduce unnecessary costs. Strategic planning and oversight lead to more economical choices and prevent budget overruns.
- Time Efficiency: Streamlining the process of submitting, approving, and reimbursing travel expenses saves valuable time for both employees and the finance department. Reducing the time spent on these administrative tasks enhances productivity across the organization.
- Enhanced Policy Compliance: A clear and effectively communicated travel and expense policy minimizes the risk of overspending and non-compliance, reducing the risk of financial discrepancies.
- Improved Visibility and Control: Gaining a comprehensive overview of travel expenses and employee spending patterns allows for better financial control and decision-making.
- Employee Satisfaction: Simplifying the travel and expense reporting process and ensuring timely T&E reimbursement enhances employee satisfaction and morale. When employees feel their time and efforts are respected it fosters a positive work culture and loyalty to the company.
- Risk Management: Effective management of travel and expenses also includes the safety and well-being of traveling employees. By having contingency plans in place, companies can better mitigate risks associated with business travel.
- Sustainability Efforts: Efficient T&E management systems can contribute to a company’s sustainability goals. This aligns with growing corporate responsibility goals and stakeholder expectations for sustainability.
Best Practices for Managing Travel Expenses
When dealing with business travel and expense management, adopting strategic practices can improve operational efficiency, reduce costs, and ensure regulatory compliance. Let’s delve into more practical, detailed insights that can be particularly valuable for businesses seeking to optimize their travel and expense processes.
Let’s dive into more practical tips on how you can further optimize your travel and expense processes.
Establish Clear Expense Policies
The foundation of effective T&E management is a clear, comprehensive expense policy. Your policy should detail what is reimbursable, set daily limits for various expense categories (like meals, lodging, and transportation), and outline the approval process.
It’s important to ensure that the policy is easily accessible to all employees and that they understand it. Regularly updating the policy to reflect changes in travel costs, business priorities, and tax laws is also essential.
Partner with Specific Travel Vendors
Negotiating business rates with specific airlines, hotel chains, and car rental services can lead to substantial savings and perks. This strategy not only locks in lower rates but can also secure benefits such as free Wi-Fi, breakfast, late check-out at hotels, and complimentary upgrades or priority boarding on flights.
Provide Company Credit Cards with Spending Limits
Issuing business credit cards for operational budgets can simplify travel expense tracking and increase cost control. With spending limits and custom restrictions, you can regulate spending while providing flexibility. This practice also helps in consolidating expense data, making it easier to identify cost-saving opportunities.
Moreover, selecting credit cards that offer travel perks can enhance the travel experience for employees while benefiting your company. Look for cards that provide rewards points, travel insurance, no foreign transaction fees, or other travel perks.
Integrate Expense Management Software
Expense management software can simplify T&E processes by automating expense processing tasks such as report generation, approval workflows, and reimbursements. This software utilizes technology like AI and Optical Character Recognition (OCR) to reduce manual input and protect your organization from fraud.
Opt for software that offers comprehensive features, such as real-time travel and expense reporting, receipt scanning application, integrated mileage tracking, synchronization with credit cards and direct integration with your accounting software.
Regularly Review and Analyze Expense Data
Regular analysis of expense data can reveal trends, pinpoint areas of overspending, and identify opportunities for additional savings or policy adjustments. This analysis should cover vendor usage, compliance rates, and expense types. Utilizing this data effectively can help in renegotiating contracts with suppliers or adjusting policies to better align with actual spending patterns.
Selecting the Right Expense Management Software
Automated expense management is not just a convenience but a necessity for keeping your business finances transparent, controlled, and compliant. The right software can ensure that your company’s travel expenses are managed efficiently and effectively.
Let’s dive into the technical functionalities and specific benefits of each must-have feature within expense management software:
Automated Receipt Capture
Receipt capture reduces manual data entry, minimizes errors, and accelerates the travel and expense reporting process. The following feature utilizes OCR technology to extract data from receipts captured using a smartphone camera. Then, AI automatically populates expense entries with extracted information such as date, amount, vendor, and expense category.
Multi-Level Approval Flows
Automated approvals guarantee compliance with company policies by applying custom business rules and involving relevant personnel in the approval process. With most software, users can set different thresholds for expense amounts that can allow automatic approvals or require high-level clearance from C-level executives.
Mileage Tracking
The in-app mileage reporting automates mileage claims by employing map integration or GPS technology to accurately track mileage for business travel. Users can start and end a trip within the app, and the software calculates the distance and applies the current mileage rate to determine reimbursement amounts.
Multi-Currency Support
Automatic currency conversion simplifies travel and expense reporting for international travel and ensures accurate financial records across global operations. This feature allows users to record expenses in any currency, which are then automatically converted into the business’s base currency at the current exchange rate.
Real-Time Expense Visibility
Accurate and instant statistics on your company spending offer instant insight into financial commitments and spending patterns, enabling proactive budget management and financial planning. Expense dashboards and built-in analytics provide a live overview of incurred expenses, approvals pending, and budget utilization with filters that enable quick access to specific data points.
Travel and Expense Reporting
Automated expense reporting facilitates trend analysis, policy compliance monitoring, and strategic decision-making by providing comprehensive expense insights. Look for a solution that generates detailed reports based on collected expense data, customizable by various parameters like period, department, expense type, etc.
Moreover, ensure it supports export in multiple formats, like XLSX and PDF for further analysis and booking.
Business Credit Cards
Physical and virtual corporate credit cards streamline reconciliation, enhance transaction visibility, and reduce fraudulent expense claims. Consider software that includes company credit cards in its offering or links all credit card transactions directly to the expense management system, automatically matching transactions to reported expenses.
By focusing on these technical functionalities and their direct benefits, you can better assess the potential impact of each feature on your travel and expense management processes, leading to more informed software selection decisions.
Manage Your Travel Expenses with Klippa SpendControl
Managing business travel expenses can be tedious, but doesn’t have to be. Forget about the frustrations associated with T&E management by entrusting your travel expense processing to Klippa SpendControl. Submit, approve, and manage all business travel expenses with our OCR-powered pre-accounting solution. Reduce the hours-long process into several clicks.
Klippa SpendControl offers numerous features that will enhance your expense management in no time:
- Expense management and invoice processing in one centralized solution
- Complete cost control with business expense cards
- Expense submission, processing, and approval via web or mobile app
- Fully customizable approval management with smart business rules
- Compliance with tax and data privacy regulations
- Multi-currency support for international transactions
- Built-in duplicate and fraud detection
- Mileage tracking through Google Maps integration for travel reimbursement
- Intuitive expense dashboard for centralized financial control
- Integration possibilities with accounting and ERP software, like Xero, NetSuite, SAP, and many more
Are you ready to simplify your travel and expense management? Schedule a free demo to see our solution in action, or contact our SpendControl specialists for more details.