Are you aware of how much manual expense reporting can cost you and your company? Many people believe that doing their own expense reporting manually can actually save them money, but what they don’t realize is that in return they are trading in valuable time that could be dedicated to more productive projects.
How much is that time worth? Well, according to a report by The Aberdeen Group the cost of expense management for small and mid-sized businesses is, on average, $35.02 per expense report. So, once that is taken into account, is your manual process providing you a positive ROI?
To help you answer that question and to examine what could make manual expense reporting so expensive, we’ve put together a guide discussing this concern. Let’s jump into what we’ve determined.
Direct Costs of Manual Expense Reporting
Managing your own business expense tracking is a time-consuming task that, when done manually, leaves room for human errors and confusion which can have a real financial impact on your business. As your company grows larger, this inefficiency will just continue to grow and has potential to turn into a large financial issue. For example, if we look at the average cost per report mentioned earlier, $35.02 per manual report, we can see how this would affect a business.
Say we use the following formula:
(average cost per manual expense report) x (# of employees) x (# of reports)
So, for a company with 100 employees who submit one report per month we get
$35.02 x 100*1 = $3,502
In this example, this company pays $35.02 per report or $3,502 per month ($42,024 per year)! You can see how a small $35.02 can snowball into a massive financial figure. However, this is the cost of an inefficient expense management process. Automation would aid companies who are looking to reach new heights and save money.
Hidden Costs of Business Expense Management
On top of the direct costs associated with manual expense reporting, there are also various unseen costs that many people may forget to take into account. These hidden costs have just as strong an impact on one’s business as direct financial costs do.
Unproductive Usage of Time
Doing expense reports manually when you could be doing something more important with your time results in an unproductive use of one’s time. If you spend 20 minutes per report, then a company with 100 employees who submit one report a month per employee would waste 400 hours a year. In a larger company, the problem of wasted time only grows worse.
Humans aren’t perfect and are susceptible to making errors. These small, simple mistakes can total up into a big financial concern because time is money. Having to go back and fix simple mistakes can increase the amount of unproductive time, and thus wasted money, that is being accumulated.
Fees and Interest Rates
Another factor to consider is the cost associated with paying for expenses with credit cards This payment method not only requires manual expense reconciliations at the end of the month but can also be quite costly. When your employees use credit card your company can incur additional fees, especially when the expenses are not paid back within 30 days. In that case, you’ll likely get both transaction fees and also interest rate fees. Multiplying all these fees per employee that is paying for expenses can add up to quite a surprising total each month.
Again, humans are not perfect. This is even more prevalent when it comes to expense fraud. When employees are given the power to process expenses, some people might include purchases that are not compliant or attempt to claim a larger expense than they are owed. The dividing line between what is or is not included as a legitimate business expense is difficult to define, especially with the rise of remote working, and companies are losing money as a result. Having a tool to automatically enforce your company's expense policies can help tackle this issue.
Business Expense Tracking Solutions
Thankfully, your company doesn’t have to rely on manual expense reporting. Modern solutions like Brink’s Business Expense Cards offer simple, effective solutions for expense management. If manual expense management is a drain on your bottom line, visit our Business Expense Card page or contact us today!