Concerned with the Bottom Line? Consider Expense Management Automation

by P Jain - Date: 2007-01-09 - Word Count: 1127 Share This!

According to the Aberdeen Group, "Employee-initiated travel and entertainment (T&E) can account for one in five operational dollars a company spends (with even higher percentages at service firms)." Following is a discussion of expense management automation (EMA) as a part of total cost management (TCM).   Expense reimbursement mixed in manual paper-based procedures, lack policy enforcement resulting in lengthy and costly process cycles with no reporting or analysis capability. However, times have changed, and the tough economic conditions of the past few years have forced organizations to curb expenses and scrutinize travel policies. As a result, business T&E expenses are virtually untapped areas for process automation and cost savings in all companies.

Organizations all over the world are cutting direct costs, which make up 30-60% of most companies overall expenditures. Employee-initiated expenses, such as T&E contribute up to 20% to these costs. However, traditional expense management systems are time consuming, labor intensive, and lack a policy enforcement mechanism. They also require significant staff resources, including managers and accounting personnel.

Over the last decade companies have invested in electronic enterprise resource planning (ERP), building a sophisticated TCM infrastructure or better manage direct and indirect costs. However, little attention paid to automating and optimizing employee-initiated expenses. According to the Aberdeen Group, "EMA offers as much opportunity, if not more, as e-procurement in reining in costs."

Understanding Expenses

 Many leading global companies with the most sophisticated ERP systems can provide detail such as the exact quantity, location and price of the smallest component of a commodity in their products supply chain. However, these systems fail to track how much employees spend on hotels, where they stay, and/or how much they pay per night.

According to the Aberdeen Group survey, despite million-dollar travel budgets and 100% manual auditing of all expense reports for policy compliance, in most companies support of the T&E functions for employees is non-existent or neglected. For example, top sales executives could spend hours each week preparing expense forms, finding receipts, and sending the paper packet (via overnight mail) to a manager for approval. Any problem with the report means several rounds of phone calls, which wastes employee and administration time. Additionally, if any out-of-policy expenses identified, managers usually view them with indifference. According to Aberdeen Group, many companies use employee reimbursement as a loophole to circumvent the accounting department, policies, and/or systems.

Overall, manual expense reporting has proven to be an inefficient, frustrating, and expensive process for all involved - an area ripe for automation.

The Power of EMA

As is true with any automated process, EMA is about enhancing collaboration, streamlining processes, controlling costs, and enhancing the information exchange within and across organizational boundaries. EMA helps companies focus on the bottom line and reduce costs by quickly and consistently collecting expense information, enforcing company policies, and gaining efficiency. The automation of expense management is no different than automating any internal process, and considered as a strategic tool in TCM.Besides the manual method, there are other EMA methods, available in the marketplace, including outsourcing and licensed software. However the most cost-effective method is a 100% Web-Based application service provider like iEmployee.Web-Based EMA solution provider target companies that push the envelope in business  process automation and supply chain efficiencies using the Internet. "The companies that have embraced Web Based EMA solutions are reaping significant rewards ... and are also prepared themselves for when the market begins to grow again, as they can do more with fewer A/P employees.

Many companies promised that expense management process could simply be addressed using financial or sophisticated ERP system modules. However, according to the analysts, many best-practice companies have found themselves turning to Web-Based providers for ease-of-use and ease-of-implementation. Solution provider like iEmployee are addressing and solving real business issues, and the companies deploying Web-Based solutions are gaining significant and rapid business value -value that translates into business advantages that were unattainable before the advent of Internet technology. Key advantage of Web-based EMA:

Quick to implement and easy-to-use No Need to purchase equipment No requirement for new software No Special support needed from your information technology (IT) staff. Pay-per-use Low Start-up costs Rapid return of investment (ROI)

Other FunctionsEMA improves expense policy compliance by examining expense items for designed compliance issues. It proactively identifies expenses with missing information, flag out-of-line expenses, and let organizations configure policy compliance specific to company rules.

In addition, EMA solution providers such as iEmployee, ADP, Gelco, and others include features such as automatic workflow and approval processes that accept credit card purchase feeds, as well as disbursement of payments to different accounts, payment notifications, currency conversion, reporting, and data security. Employees can prove what they spent without receipts because any or all company charge credit card transactions from online bills added to expense reports. Employees also need to add out-of-pocket cash expenses and issued a tracking number. The employees put a number on an envelope, send the receipt to accounting, which then marks off receipts received, and approve expenses.

Making Decisions

When choosing an EMA solution, one needs to decide among Web-Based, client/Server, and/or outsourcing models. While each of these options has unique benefits, the selection criteria vary from one organization to another.iEmployee, for example is a Web-Based Solution provider offering a 100% Web-Based Expense management solution along with time and attendance and HR/Benefits. All the functions (timesheet, HR/benefits, time off, expense management, overtime calculation, etc.) within iEmployee come in a single package with a single user interface and a common database to avoid duplicate entries and improve ease of use. All needed is an internet connection and browser. Users can access iEmployee at any time, anywhere in the world.

ADP provides expense management solution using client/server technology. ADP offers an integrated expense solution with other functions such as time and attendance, payroll and HR/Benefits. While ADP offers a complete solution, each of these packages are different solutions with different databases and a different look and feel. This approach could be useful for companies with a strong IT background and enough IT staff to manage it.

Gelco, on other hand, has a different approach to its expense management solution. Gelco provides complete outsourcing of expense management which not just software but the work force to handle the expenses. This approach could be more useful for large companies that wish to outsource the entire expense management function.

EMA yields Quick ROIWhatever options chosen; in today economic environment, EMA is a viable means for companies to achieve their bottom-line goals. Deploying  a Web-Based, client/server or outsourced expense management system allow companies to eliminate paperwork inefficiencies. EMA solutions provide policy compliance and approval mechanisms that are missing in some of today have most sophisticated ERP systems. Best of all, some of the Web-Based solutions require no IT or implementation investment, and ROI can be realized immediately.



Employee Expense Management Software

Online Time and Attendance Management

Human Resource Workforce Management

Related Tags: management, expense, line, the, with, automation, concerned, bottom, consider

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