Three Reasons Why Manual Expense Management Kills Policy Compliance

We all know why companies plan out corporate travel expense policies. They provide clear do’s and don’ts to business travelers, which saves organizations money by reducing excessive and wasteful spending.

But as with all rules, spend policies are only effective if they are adhered to. To make sure spend rules are followed and transactions remain compliant, organizations need to ensure that their spend policies are not just easy to understand and mind but also challenging to circumvent. 

That’s why the first step to ensuring spend compliance is to create a comprehensive travel and entertainment expense policy. 

While forward-thinking organizations are moving towards shorter-length policies, others still have compliance encyclopedias that people will only skim. 

And if a policy is too long, it can be difficult (if not impossible) to remember which purchases are within policy in real-time—especially while actively making on-the-go T&E purchases. In addition, overly long policies can often be restrictive, making it more onerous for employees to stay compliant.

Related: 7 Steps for Creating a Travel and Expense Policy Your Employees Love (Well, Almost)

Even if a policy is clear and well communicated to employees, a scout’s honor code isn’t good enough. Enforcement is necessary, and for a good reason. While most employees won’t knowingly make purchases outside of corporate guidelines, a sizeable number (anywhere from 20–40% of business travelers) abuse spend policies. 

Therefore, protocols and safeguards need to be put in place to make it easier to prevent these expenses from being incurred, submitted, and approved. For any company that relies on manual expense management solutions, enforcing expense policy compliance is, at best, incredibly time-consuming and impossible.

For companies without automated spend solutions, the only way that spend compliance can be verified and enforced without dramatically slowing down reimbursements is by manually auditing expense claims after they happen. 

However, even if only a fraction of all claims are audited, the review process can cost the company valuable time and resources. Not to mention it still leaves organizations exposed to significant non-compliant spend risk. Unless a company checks every transaction, they’re still at risk for non-compliant spending and fraud.

Related: The Pitfalls of Manual Expense Reporting

Of course, that’s just the tip of the iceberg.
Here are some of the most significant issues with manual reporting and how automated spend solutions can help improve organizational efficiency, reduce wasteful spending, and ensure compliant transactions.

1. Pre-approval

Pre-approvals for flight and accommodation bookings can significantly impact an organization’s ability to maintain compliance with travel policies. For companies with manual travel booking and expense submission processes, this can be a time-consuming task that can be easily bypassed and can also raise prices during the approval process.

Also, once the purchase has been made and submitted by the traveler, the company’s hands are somewhat tied in terms of its ability to block or restrict reimbursements, making out-of-policy spend almost impossible to curtail.

Expense management software, especially with corporate cards and travel agencies/online booking tools, can help enforce pre-approvals for purchases. 

Travel policies are loaded into both booking tools and expense solutions, ensuring that approvers will only receive pre-approval requests within policy. This approach can help ensure that the two biggest drags on manual spend management– flights and lodging for T&E–are always in compliance with policy.

2. Expense entry

When expenses are entered manually into a spreadsheet, users are able to enter whatever amount they choose for a given purchase. For example, even if a company’s lunch policy is $20 per person, it’s possible to submit an expense for $25, $30, or any other amount. 

This may be a legitimate expense, backed with a receipt from the restaurant, but it’s still out of policy. Regardless of whether the traveler is aware of the limit or simply trying to get away with it, the end result is the same. In the vast majority of cases, the employer won’t notice and has no choice but to absorb the additional cost, driving down profits.

Related: Could Your Organization Be Exposed to Expense Fraud?

An automated spend management solution can help by incorporating existing T&E policy into spend systems via a set of automated 24/7 business rules. These rules will help automatically enforce spend parameters for each expense type (e.g., food, air, lodging, ground transportation, etc.) before determining whether to to prevent the expense from being submitted or whether to flag it as out of policy. 

So whenever the next business traveler attempts to enter a $30 lunch receipt, the automated system can prevent them from doing so using a hard stop, or flag the transaction as non-compliant (but still let the traveler eat their lunch) using a soft stop. 

Both of these automated options help tremendously with policy enforcement, and also keep employees honest by regularly reminding them of their company’s spend parameters.
And that’s just two options. With a sophisticated spend management solution, organizations can customize rulesets to be as nuanced and granular as they want.

3. Expense approval

Even though the onus is on business travelers to comply with expense policies, once the expenses have been submitted, the burden is on the approver(s) to ensure they are verified and valid before forwarding approved claims for reimbursement.

An approver may have a dozen or more reports that require expense approval on a frequent basis. These reports may come from several countries, or be for different roles, which may impact the way spend policies apply. 

If it’s unrealistic to expect individuals to know every facet of the corporate expense policy as it applies to them, it’s highly unlikely that an approver will be able to recall the nuances of the policy as they apply to multiple people. 
Approvers are also unlikely to have the time to refer back to corporate T&E policy guidelines to verify the validity of each transaction. As a result, many non-compliant expenses will inadvertently pass through the approval process.

A key benefit of automated expense solutions is that they allow organizations to enforce spend compliance at the point of entry, which can make an approver’s job much easier. 

And if an expense triggers a soft stop notice, it’s automatically flagged to the approver so they can make an immediate, real-time decision. 
In other words, no more back-and-forth and no more second-guessing when it comes to spend approvals.

Related: Improve Your Travel and Expense Policy to Retain Key Employees

Don’t make spend compliance harder than it has to be

While 100% spend policy compliance isn’t realistically achievable for most organizations, it’s still the goal. And any organization that wants to maximize profitability isn’t doing that at all by relying on manual expense submission and approval processes.

Maybe it’s time to consider implementing an automated spend management solution instead.