Today’s CFOs have a lot on their plate. But when it comes to managing business expenses, the biggest hurdle CFOs face is that most organisations still use outdated manual, disparate systems, often with spreadsheets as the primary tool for data entry and reporting.
Employee expense fraud is higher than CFO’s might think, with recent research indicating that as high as 42 per cent of surveyed Australians admitted to fraudulent travel claims.
Considering your company immune is wishful thinking – now is a good time to re-evaluate how manual processes contribute to the difficulty staying on top of business expenses and spotting fraudulent patterns.
Let’s take a look at the 7 key challenges that CFOs need to keep an eye on in business expense management.
While most business expense policies are mandated, in reality non-compliance is widely accepted in most organisations. This could be because unenforced policies at the point of purchase are impossible to police and even more costly in human intervention to wind back once the policy has been bypassed. Ask yourself the following questions: What is your company’s process for catching duplicate expense claims? Can you be sure that expenses are being incurred within corporate guidelines? Who is checking the transaction against the approved suppliers list? How many people in your team are cross checking that these align when expense claims are submitted? Does your company have a process in place to identify and catch fraudulent behaviour?
2. Poor Reporting
Trend analysis is valuable in identifying the drivers of spend and understanding the levers that can be pulled to manage uncontrolled spend. Using spreadsheets to manage business expenses is not only rife for errors but also means being unable to report on scenario-based business expenses. Systems of records such as ERP software only allow you to capture small details on business expenses, which also makes it harder to make actionable decisions and curtail spiralling business expenses.
3. Unclear Expense Policies
Managing unclear or poorly understood expense policies is a drain on staff resources and time, and leads to ineffective decision making. It can also have a direct impact on business costs, as the general rule will be to let exceptions pass rather than enforce policies. With disconnected accounting and reconciling processes, it’s difficult to reconcile bookings with expenses without taking a manual approach.
4. Delayed Expenses
It will take an excessive length of time for employees to submit expense reports through non-integrated systems, delaying payment and impact cash flow and forecasting processes. Additionally, it can impact client satisfaction in situations where on-charging of expenses happens long after the purchase has occurred.
5. Resource Management
Lack of automation for business expense management will inevitably mean retaining a sufficiently large administration function to review and process expense claims. This is especially true for companies experiencing high growth rates – as the business grows, so too will business expenses.
6. Failed Audits
An acute challenge for a CFO is failing an audit in line with governance frameworks. Not having the appropriate business expense processes and procedures in place will have direct implications for governance and risk management. One fraudulent or sloppy team member can make your company liable for millions of dollars in fines and penalties.
7. Compliance with Tax Regimes
Tax compliance represents a large burden of time for finance teams. Ensuring that goods and services tax (GST) and fringe benefits tax (FBT) are accurate is essential to avoid repercussions with the ATO. A manual process means the finance teams must audit receipts and manually reconcile data. The different reporting schedules for GST (monthly) and FBT (quarterly) also represent a reporting burden.
Having trouble managing compliance and controlling business expense costs with an overworked finance team? Read our eBook for CFOs on managing business expenses to understand how an automated business expense system can help solve your key challenges.