Qorbis Logo

How to Successfully Navigate The Challenge of Employee Expenses

A Qorbis report

Households across the U.S are facing increasing pressure as the cost of living crisis threatens to give way to a full-blown recession. It’s a worrying time for individuals and businesses, but Americans are known for their ingenuity and resilience, so much so that historically, economic downturns are often periods of significant innovation.

One such innovation that’s trending globally is the digitization of business processes, and expenses in particular. Expenses are a notoriously tricky but essential part of most businesses and digitizing them is a way to lower costs, improve cash flow, and importantly, keep workers happy.

We believe every business should have access to better digital expense management, which is why our as-a-service, cloud-based approach is such a game-changer. Our clients benefit from all the advantages of a digital solution but avoid the significant investments that are associated with traditional IT-based versions.

Please feel free to reach out to discuss how we can help you and your staff benefit from the latest in corporate spending and expense management.

Stephen Williams
CEO & Co-Founder of Qorbis
Successfully navigating the challenge of employee expenses

Soaring costs for businesses and individuals are highlighting the shortcomings of traditional pay-and-claim reimbursement models, with a new breed of digital expense management systems stepping in to fill the gap.

Expense management is a notoriously challenging aspect of business operations. Add in the current cost of living crisis and finding a solution that effectively balances the interests of both employer and employee becomes more of a priority than ever.

20%

The predicted increase in the cost of the same basket of groceries compared with 2021

Businesses are facing the fallout from rising costs and supply chain issues, further challenging finance teams to not only balance costs and expenses against profits effectively but also maintain proper records in case of audits or inquiries from tax authorities. All this before considering the month-end shock of a flurry of higher-than-predicted expense claims awaiting reimbursement in times of lower-than-predicted cash flow.

50%

The predicted increase in business travel airfares in 2023 since 2021.

Inflationary pressure has significantly affected costs across the board, with the U.S. rates reaching a 40-year record high in 2023. Food prices, transportation expenses, and healthcare costs are putting a squeeze on the standard of living for many - making lengthy waits to be reimbursed for payments made on behalf of their employer a stress point for even the most conscientious employees.

$697b

The value of the business travel market worldwide, with the United States being the country with the highest rate of business travel spending, with each costing an average of almost $1300.

It’s clear that in these difficult times, it’s more imperative than ever for organizations to find ways to support their workforce that are not only innovative and compassionate - but efficient enough to be cost-effective.

The age of expense reimbursement is over

Gone are the days of traditional reimbursements being an accepted and functional method of expense management.

Seventy-two percent of employees between the ages of 18 and 34 are expected to pay work-related expenses out-of-pocket and submit for reimbursement. For an entry-level employee making $35,000 a year, a $1,000 airline ticket is more than a third of their monthly salary before taxes. That’s a burden no one should be asked to take on. This style of reimbursement also negatively impacts businesses. It it hinders the type of real-time cash flow visibility that is required for effective decision-making and growth.

The problems with a pay-and-claim reimbursement model are numerous:

  • The burden of a personal bankroll. Expecting employees to front up cash when they have it is a tough ask. Expecting them to front up cash when they don’t is near disastrous. In many companies, one of the greatest sources of frustration is the expense approval process. What was frustration in the best of times can become a dire struggle during challenging economic times, when the cost of living is soaring. For employees who need to pay out of pocket for work-related expenses, the time between submitting a claim and being reimbursed can feel like forever. The average business takes a little less than two weeks to complete the reimbursement process for each claim. Others, however, can take a month or longer. With basic outgoings like groceries and electricity bills increasing so significantly, it’s easy to see how even a few work expenses can burst someone’s budget - particularly for more junior employees.
  • Dissatisfied = unproductive. It’s a given that employee empowerment encourages employee satisfaction which in turn promotes productivity and results. Zenger Folkman “found that only 4% of employees are willing to give extra effort when empowerment is low, but 67% are willing when empowerment is high,” in a study cited by The Wharton School. Employees dissatisfied with bearing the burden of company expenses are not likely to perform to a high standard. Conversely, one of the most effective ways to empower employees is to show trust in them - but giving them the financial freedom to spend where necessary can be a decision fraught with problems like overspending and even fraud. The most successful balance comes with expense management systems that have frameworks built-in - so that an employee can make purchases with a corporate card, but not on certain categories selected by their employer. And transparent guidelines on what staff can and can’t spend on are a must.
  • A drain on resources. Slow expense processing is a drain not only on staff, but on finance departments and the company as a whole, too. In fact, research shows that the average expense claim takes more than 45 minutes to process - including 30 minutes for an employee to find a receipt and fill in the necessary paperwork, another 5 minutes to get manager approval, and a further 10 minutes for finance to process and pay the claim. Add in multiple expenses across multiple team members and the result is a significant chunk of time lost in paperwork - even more so when human error means expense processing takes even longer than usual.
  • A lack of control. Expense reimbursement processes are often susceptible to fraud or inaccurate claims and especially if submitted at month end, can be highly unpredictable. This lack of control can wreak havoc on company cash flows and make budgeting and financial planning far more challenging than a real-time expense management model. For instance, the time taken to process reimbursement claims might create a "float" period, during which the money owed to employees is still in the company's accounts. During this time, the funds could be utilized for other purposes, but when the reimbursement is processed, it leaves the company's cash flow temporarily depleted. Worse still, if a business doesn't have sufficient cash reserves to cover reimbursement claims, it may need to rely on external financing or credit lines leading to additional interest expenses and financial strain in the long run.
Digital expense management solutions: A win for employers and employees

Digitization is changing the way we communicate, how we bank - and now, how businesses can effectively manage expenses. Digital money management models with corporate spending cards like those offered by Qorbis offer significant advantages to both employers and employees, including improved cash flow, efficient expense processing, and complete control over spending.

  • Improved cash flow. Corporate cards that can be linked to a business account with funds ringfenced for expenses take away the surprise of month-end reimbursement forms, giving finance teams real-time visibility of transactions across cards. Managers can track spending as it happens, enabling them to make informed decisions, identify overspending, and enforce budget controls effectively, and finance teams are better able to balance business cash flows.
  • Digital receipt capture. Manual expense reporting is prone to errors, such as incorrect calculations or lost receipts. Receipts can quickly and easily be captured on the go via an app such as Qorbis, minimizing these errors by automatically calculating expenses and storing electronic receipts securely in the cloud.
  • Spending controls. Corporate cards linked to a digital expense management system put employers back in control over employee spending. Setting dollar amounts and spending category limits is easy and instant - as is freezing a card when necessary. This not only reduces expense fraud and employee compliance with expense policies but empowers staff through complete transparency.
  • Automated integration with existing accounting software. Digital expense management systems seamlessly integrate with accounting software, ERP (Enterprise Resource Planning) systems, and other financial tools. This integration streamlines the flow of data and eliminates
  • Time and money savings. Digital expense management systems automate the process of capturing, submitting, and processing expense reports. This saves time for employees who no longer need to manually fill out paper forms and attach physical receipts. It also reduces the administrative burden on finance teams, as the system can handle the entire expense management workflow.
  • Fewer delays and errors. In addition to reducing the time it takes to reimburse employees, the expense management systems also improve accounting accuracy. Employees often make data-entry errors when submitting a claim manually, which can be further compounded when finance staff transcribe the information into spreadsheets. Expense management software can flag errors and duplicate entries and prevent overpayment, or notify managers if the dollar figure seems too high.
  • Enhanced analytics and reporting. Digital solutions provide in-depth analytics and reporting features, providing insights that help businesses identify spending patterns, evaluate expense categories, and make data-driven decisions to optimize expenses.
  • Increased compliance. Companies can use expense management software to keep on the right side of compliance with local, state and federal tax agencies. Businesses can categorize expenses into various categories, such as office, travel and mileage and tag them accordingly.
Talk to us today and book a demo to see how Qorbis expense management solutions can benefit both your business and your workforce.
cross