Eliminate reimbursements for a seamless spending experience

Just as the fax machine and typewriter have gracefully made way for email and cloud-based document sharing, it is an exciting time for businesses to embrace the efficiencies of the digital age, moving away from the ‘we have always done it this way’ approach. 

While some businesses may still be navigating through outdated employee expense processes, the arrival of innovative spend management solutions is transforming these challenges into opportunities. This transformation is enhancing employee productivity along with boosting their morale, paving the way for a positive work environment.

This blog cuts through the complexities of employee expense reimbursements, explores the challenges linked to traditional reimbursement methods, and discusses modern and efficient solutions to handling business expenses.

Understanding expense reimbursement

Expense reimbursement is a standard practice in businesses, enabling employees to reclaim business costs incurred while performing their job duties. 

Business expenses include a range of costs, such as travel expenses, meals during business meetings, or even office supplies purchased out of pocket. 

The primary purpose of expense reimbursement is to ensure that employees are compensated for out-of-pocket expenses incurred on behalf of the company within a reasonable period. This practice helps promote fairness and encourages staff to perform official duties without financial hesitation.

Typically, the reimbursement process begins with an employee spending hours preparing a detailed report of their expenses, which includes details like date, amount, and other important information. Then, they must manually arrange and attach all the receipts collected during the expense period. 

This expense report is then submitted to the finance department for verification. This stage can be time-consuming, often involving back-and-forth communication between the employees and your finance team for clarifications or additional details. Once approved by a designated authority within your company, usually a manager or finance team member, the reimbursement amount is paid to the employee. The payment can be made either through direct deposit, cheque, or as part of their payroll.

Examples of common expense reimbursements

Understanding the types of expenses your employees may need to be reimbursed for can help streamline your expense management process. Here are some common categories of employee expenses:

1. Travel expenses

These are costs incurred by employees while travelling for business purposes. Business travel costs can include flights, train tickets, car rentals, and fuel. Employees travelling for business purposes may also need to be reimbursed for parking fees and toll charges. Consider implementing clear guidelines on reimbursable travel expenses to manage costs effectively.

2. Meals

When employees are away from the office for business meetings or travel, meal expenses can occur. These might include costs for breakfast, lunch, and dinner. You may find it beneficial to set daily meal allowances or per diem rates to simplify the expense management process and avoid excessive spending.

3. Accommodation

Accommodation expenses arise when employees need to stay overnight for business purposes. These can include hotel stays or other lodging costs. Businesses can achieve better control over these expenses by negotiating corporate rates with preferred hotels or using travel management systems.

4. Office supplies

Employees occasionally purchase office supplies such as stationery, printer cartridges, and other materials required for their job, especially in a remote work setup. While these expenses are usually minor, maintaining a straightforward expense policy is the best way to manage these costs without burdening your employees.

5. Business-related expenditures

Other business-related expenditures include conference fees, membership dues for professional organisations, and costs associated with client entertainment. To avoid confusion and ensure compliance, set clear formal policies on what qualifies as business expenses.

Why manual reimbursements do not work anymore?

As businesses evolve, relying on manual expense management processes can become increasingly inefficient and problematic. Here are the reasons why you might find it beneficial to consider modernising your employee expense management:

• Long processes: Reimbursements require significant time and effort from both employees and the finance team. Employees must meticulously compile expense reports, gather receipts, and input transaction data. The finance team, on the other hand, must review and approve these reports, which can be a time-consuming task. This diverts valuable resources away from core business activities and leads to decreased productivity.
• Repayment delays: One of the most common issues with manual processes is the delay in reimbursing employees. When reports have to be manually reviewed and approved, it might lead to significant waiting times before employees receive their repayments. These delays can cause frustration and financial strain for employees, which in turn can affect morale and job satisfaction. 
• Risk of fraud: Manual processes often lack fundamental controls, making them prone to human error, overspending, and misuse of funds. Without automated checks and balances, mistakes can go unnoticed, leading to financial discrepancies. Additionally, the absence of real-time tracking and reporting increases the risk of fraudulent activities. 
• Lack of control: Manual reimbursement processes offer limited visibility into company-wide spending, which can hinder real-time decision-making and budget optimisation. Without a centralised system to track and analyse expenses, it becomes a challenge to identify spending patterns, control costs, and allocate budgets effectively. 

Hidden costs of reimbursements

While the direct costs of employee expense reimbursements are evident, there are several hidden costs that can significantly impact your business. Understanding these can help you better manage and potentially reduce these expenses.

• Financial stress: Delays in processing employee reimbursement requests can cause financial stress for your employees. When employees have to wait for weeks or even months to get reimbursed, it can strain their personal finances and impact their overall well-being. 

• Lowered productivity: The administrative burden of managing employee expense reimbursements can affect employee productivity and morale. When employees and finance teams are bogged down by time-consuming reimbursement processes, it can lead to frustration and decreased job satisfaction. Over time, this can result in lower productivity and higher turnover rates as employees seek work environments with more efficient and employee-friendly processes.

How can expense management software streamline your business expense process?

In the face of the challenges posed by manual employee expense management, companies are turning to corporate cards and expense management software. This modern solution offers several advantages that can significantly streamline your business expense process:

• Complete visibility: Corporate cards, when integrated with expense management software, provide full visibility into company expenses. This makes tracking and reporting more efficient, allowing you to gain real-time insights into spending patterns. With detailed reports readily accessible, you can make informed decisions and optimise your budget effectively.
• Scanning and automatic receipt matching: One of the key features of expense management software is automatic receipt matching and expense categorisation. This eliminates the need for manual data entry, lowering the risk of errors and freeing up valuable time for your employees. 

• Mobile apps for easy expense reporting: Many expense management solutions come with mobile apps, making it easy for employees to report and track expenses in real-time. This reporting capability enhances efficiency, as employees no longer need to wait until they return to the office to complete their expense reports.
• Pre-approved limits and approval workflow: Corporate cards with pre-approved limits and streamlined approval workflows enhance control and efficiency. Businesses can set spending limits for every card based on your company's policies, ensuring expenses remain within budget. This enhances efficiency and ensures compliance with your company's expense policy.

Automate your expense management with Alaan

Managing employee expenses can be a complex and time-consuming process, but it does not have to be. With us at Alaan, you can automate your expense management and eliminate the need for reimbursements altogether.

At Alaan, we offer a comprehensive spend management solution powered by smart corporate cards. We provide both virtual and physical corporate cards that empower your employees to make necessary business purchases while providing you with complete visibility and control over these expenses. 

Our cards can be customised with pre-approved spending limits, ensuring that expenses remain within budget and are only used for authorised transactions.​ 

By integrating the accompanying expense management software with your accounting software, you can easily monitor spending patterns and ensure policy compliance. This integration provides an efficient and accurate method to track all qualifying expenses and transactions, ensuring all necessary information is readily available for VAT and Corporate Tax filings to ensure compliance with UAE’s tax laws.

One of the standout features of our solution is automatic receipt matching and expense categorisation, which eliminates the need for manual data entry. Powered with OCR technology, the system automatically extracts important information from receipts and invoices, further streamlining the process.

Get in touch with our team to learn more about our solution.

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