Whether you’re dealing with remote or on-site teams, employee expense reimbursement is something you’d most likely have to deal with for your business. To put it simply, expense reimbursement is the process of repaying employees who have used out-of-pocket expenses to pay for business-related purchases.
Some of the most common employee expenses include transportation costs, meals, client entertainment, office expenses, digital marketing and ad spend, as well as software subscriptions. Typically, companies would have a corporate expense policy in place that clearly defines the purchases that qualify as reimbursable expenses.
The reimbursement process may have already been around for a long time, but it has presented multiple issues along the way that can negatively affect both employees and founders in the long run.
In this article, we unpack the negative effects of slow expense reimbursement, different ways you can simplify this process, and how Aspire can be the solution you’re looking for.
While expense management software is slowly infiltrating the way businesses operate in today’s digital age, many companies still rely on manual data entry for their corporate expense reimbursements. This troublesome process of chasing invoices and physical data capture can be time-consuming manual work for finance teams and other employees.
What’s more, manual data entry is also an error-prone business process, which will eventually result in more time lost to correct these mistakes. For accounting and finance departments, this could have been valuable time spent on higher-value tasks and growing their business.
Employees may not always have the funds to cover business purchases at any given time. What may seem like a minimal software subscription fee or client lunch may not come cheap for your staff. According to a study conducted by virtual payment technology specialist Conferma, it showed that more than a third of their employees have experienced cash flow issues as a result of paying for work-related expenses.
When an employee offsets a corporate expense using their funds, they could be putting off personal payments until they are reimbursed, which could limit an employee’s line of credit and lead to cash flow problems.
As a founder, take the time to reevaluate your expense reimbursement process and check if it is putting your employees at a disadvantage. Remember: your employees’ jobs shouldn’t be draining their personal resources.
On top of cash flow issues, high financial stress may also lead to a lack of workplace productivity for your team members. The traditional expense reimbursement process puts employees in difficult positions, especially with the financial burden weighing on the back of their minds.
The same Conferma study also revealed that 38% of their staff felt stressed by the inefficient reimbursement processes, which have affected their productivity.
The expense reimbursement process is often associated with bad employee experience due to vague expense policies. At the end of the day, no one wants to have back-and-forth conversations with their finance team or manager on expense reporting and risk rocking the boat.
This can frustrate and confuse employees on what qualifies as a reimbursable company expense, and frustrate managers and executive members when dealing with missing receipts or incomplete expense reports. Either way, unclear expense policies are no fun for both parties.
Start by creating a comprehensive corporate expense policy that clearly specifies which company expenses qualify for reimbursement and those that are non-allowable. This firm set of rules should include everything there is to know about expense limits, submission deadlines, when employees can expect a payment, and everything else in between.
When in doubt, both employees and managers can refer to this policy as means of clarification on all things expense-related. Ultimately, this helps maintain transparency across teams and prevents potential disputes along the way.
Unsure on how to begin? Here’s a resource that can help you get started on building your corporate card expense policy.
Issuing corporate credit cards is an effective way to track employee sending and monitor compliance efficiently. When issued with corporate cards across the board, spend visibility significantly increases, which then provides finance teams with a detailed overview of how money is moving throughout the organisation.
Essentially, what this does is eliminates the reimbursement process altogether and allows employees to directly make company purchases with set spending limits, without forking out out-of-pocket expenses.
While finance teams may consider issuing prepaid debit cards, company credit cards have been proven to be more efficient for teams. Not only are credit cards more globally recognised, but it also helps companies boost their credit scores and gain attractive incentives such as rebates and mileage.
Automating your processes through software can do wonders for your employee reimbursement. Expense management software can help finance teams ditch paper reports as they make use of smart reporting tools that provide accurate and real-time data on all corporate spending. This also allows potential problem areas to be immediately visible, prompting finance teams to take action with no delay.
With fewer delays and simpler processes, employees can recover reimbursable expenses much quicker than outdated expenses reimbursement processes, ultimately improving employee satisfaction.
If you want to learn more about expense management software and its benefits, here’s a quick read that will take you through all there is to know.
Ready to streamline your employee expense reimbursement process for your startup? Let us help you get started.
With the Aspire Business Account, startup founders can gain access to a plethora of features that will help simplify the way you manage your business finances. Virtual corporate cards, accounting integrations, automated bill payments, expense reimbursement has never been this simple.