7 Reasons Why The Era of Expense Reports Is Over
Guest post by Jeppe Rindom, CEO and co-founder at Pleo
It’s that day of the month…expense reports are due. We all know the (boring) drill which involves gathering physical receipts, filling out forms and getting approval from your manager. You then wait to be reimbursed.
It’s now the norm to chat with someone on the other side of the world (for free); or use amazing apps like Google Photos that recognize any object in a photo, as it’s taken. Yet here we are, filling out expense report forms in 2017…
After a number of frustrating years spent compiling expense reports and chasing missing receipts as both CFO and as an employee, I thought there had to be a better way.
Before anyone could successfully solve the expense reporting and spending problem, there were two major prerequisites that needed to be fulfilled:
- The need for a simple, widely accepted payment method for everyone, everywhere: Employees need to be equipped with a simple payment method that is accepted everywhere in the world. This will improve productivity, get rid of shared cards and help finance teams better understand the origin of each transaction
- Enabling a real-time transaction overview: This guarantees peace of mind when giving more cards to employees, managers and finance departments so they can control each employee’s spending and see company-related expenses in real-time
In the past few years, a new wave of technology and societal developments have finally responded to these needs. And that’s the reason Niccolo and I eventually founded Pleo three years ago. These are the 7 trends we see driving this industry change:
1. Technology enabling an overview of real-time company spending
Wide acceptance of card payments coupled with modern web technologies powered by fintech companies is finally enabling real-time transaction overviews.
When I was CFO at Tradeshift we had two common problems related to delayed overview of expenses. Firstly, it was extremely cumbersome to reconcile expenses made with shared company cards (who bought what? who has the receipt? etc.). The second, and perhaps even bigger problem, was with the other expenses that originated from personal payment cards. These purchases resulted in the dreaded process of collecting receipts, expense report forms, endless approvals and delayed reimbursements.
In contrast, at Pleo, our managers see every transaction our team does, in real-time. This improves the process of matching receipts. Employees get a mobile notification asking them to take a picture of the receipt, matching receipts to transactions on the spot.
I can immediately see that an employee has bought lunch whilst visiting clients. In the past, I wouldn’t have had this context and would waste time chasing up the expense.
2. Ubiquitous acceptance of card payments
Business merchants accept payment card payments across the organisation. The payment card was built 40 years ago to support us when travelling. Today, they are being used for just about anything, from buying advertising, to ordering software subscriptions and even paying for shared office space, such as the likes of WeWork.
In fact, ECB research shows that payment card transactions grew from 12B EUR in 2000 to 60B EUR in 2016.
This means that you can’t possibly eliminate expense reports without providing a reliable payment method for employees. We’ve reached this point with Pleo, by offering business payment cards through Mastercard, a global, widely accepted payment network.
Data shows that modern companies now do up to 75% of all their spending via company payment cards, and this will only increase as e-commerce continues to evolve. This is a great enabler for speed, delegation, and traceability of business payments.
3. Employees are demanding efficient and modern work processes
A recent study shows that only 28% of millennials feel that their current organizations are making “full use” of their skills. Moreover, revenue is up by 150% for companies with engaged employees versus competitors with low engagement levels.
To anyone used to instantly gratifying experiences on platforms like Instagram and Snapchat, what could be more boring than filling out expense forms or waiting to get hold of the company card.
Moreover, the rise of cloud-based SaaS applications and b2b e-commerce means that employees are now responsible for a much wider spectrum of company purchases. So without a streamlined process for company spending, they feel trapped and extremely inefficient.
4. Increased need for transparency and trust in a modern workplace
Employees now expect greater transparency in the workplace. Indeed, a recent study by TINYpulse found that management transparency is actually the top factor when determining employee happiness.
In the video below you can see an example of how a seemingly tiny change in internal financial processes helped Planday’s employees save a huge amount of time and effort. They went from traditional expense reporting to using a modern company spending solution.
5. Modern cloud-based business software enables higher degree of interoperability and automation
Practically every major cloud-based business software provides an open API. This is significant because when you use a cloud-based accounting solution with a widely adopted open API (Xero for example), you’re setting your business up for success and future growth.
The more interoperable the services you use are, the more accurate and timely the information at your disposal will be. No more error-prone manual data entry, no more CSVs data transfers, manual uploading of receipts and so on… And the more you can rely on those services to help you do work that is really important, the more you trust and adopt them. It’s a virtuous cycle that keeps generating value.
A relevant example of this interoperability of services is a new UK based company called Flux. It promises to connect merchants and forward-thinking fintech services to automatically fetch receipts after purchases, and automatically deliver them in banking and company spending applications.
6. Smartphones enabling timely notifications and simple capture and storage of receipts
Providing proof of purchases for business expenses has traditionally been a frustrating process. Collecting physical receipts, scanning them, matching them with transactions is not just a cumbersome process, but extremely error prone. Statistics suggest that around 19% of traditional expense reports contain errors. This can result in internal fraud cases or even fines from the tax authorities.
Now that everyone in the developed world owns a smartphone, we can finally enable real-time purchase notifications and subsequent quality receipt capture moments.
7. HMRC acceptance of digital storage of receipts
Finally, without smart and fast acceptance of digitally stored receipts by tax authorities, all of the above would become redundant.
In the UK, HM Revenues & Customs (HMRC) is on the front foot when it comes to using technology advancements. They have been accepting digital copies of receipts for over a decade, paving the way for true technology disruption.
The perfect storm is here – say goodbye to expense reports!
All the crucial elements are in place to completely get rid of the legacy expense reporting process once and for all. All of this is possible today.
We’re about to witness a massive shift towards an elimination of expense reports over the next 5 years. Early adopters will reap great rewards, enabling them to make fast, business-critical purchases, and in the process allowing them to attract and retain top talent by empowering employees.
Finance departments will also be able to connect the new company spending solutions to the accounting systems and eliminate huge amounts of error-prone and manual work.
I’m personally hugely excited about this!
This content is brought to you by Pleo – your company payment card solution that connects to Xero and automates your expense reports.
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Source: Xero Blog
