How Expense Compliance Can Boost Business Confidence

4 July 2024 | 15 Shares

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Maintaining financial compliance at a legal level is as natural for Finance professionals as breathing. But for other employees, remaining compliant with internal policies such as expense claims or spending might be less easy. Failure to fully comply in either instance can significantly raise an organisation’s costs, whether from the imposition of fines or financial penalties from external governing bodies, or from uncontrolled spending by members of staff.

Considering Internal Compliance

If we take the former case as a given – preserving legal practice, maintaining operational reputation and credibility – then we can consider the issue of spend control as an important place where Finance departments can ensure that costs are carefully monitored and controlled right across the company. While, in many cases, it’s a general unawareness of existing spend policies that leads to out-of-scope spending, there are additional factors that can exacerbate the situation. Usually, it’s a combination of unclear guidance plus one or more of the following that leads to non-compliant behaviour that skews the Finance Department’s financial planning:

Ambiguous policies
Where guidance is either generally unclear or at least unclear in edge cases where employees have to interpret policy at the point of spend;

Old policies
Outdated rules that don’t reflect the current reality the employees experience;

‘Protest spend’

Where staff register what they deem to be unfair policies by claiming what they think they should be entitled to.

Regardless of the reasons for the misspend, any anomalous expense claims add to costs, create friction between employees and Finance, and decrease the Finance Department’s overall ability to plan and create coherent business strategies.

The Inherent Complexities

Any business with more than a few staff or one that trades or travels overseas will need specific information on what does and doesn’t apply to expense claims. Plus, of course, there will be differences in policy depending on the different types of personnel. Unpicking these intricacies, although potentially time-consuming, is an investment that pays dividends in the longer term.

Source: Rydoo

As a first step, Finance professionals can consult the wealth of materials online that are there to inform and educate regarding expenses and tax, per diem and mileage in any countries where staff might visit for work, or in which a company operates. If nothing else, such resources will show that there are levels of complexity involved in formulating a comprehensive expenses policy of which they might not have been aware.

The Digital Advantage

The advantage of digitising spend management where possible is that software can handle some of the more complex calculations required to apply a robust policy framework, plus keep policies up-to-date as and when laws and rules change geographically or internally. In fact, when technology is brought to bear, there are numerous direct and ancillary benefits for the business, many of which we covered in a previous article on this subject. These include the existence of a body of data that can be leveraged to create insights into spending patterns, highlight potential fraud and show how policies can be optimised for the business’s and the employees’ mutual benefit. At the point of spending by end-users, too, software can navigate the complexities of multi-tier, international claims policies and present clear guidance to the employee on what’s compliant and what isn’t.

Software at Work

Smart algorithms like the one Rydoo’s Smart Audit Module uses can highlight issues around conflicting expense claims (per diem and meal claims made on the same day, for example), out-of-policy claims (tobacco and alcohol), and attempted fraud (fake invoices or amended receipts). Not only does the Smart Audit Module software cut down on manual processing, but it can spot many issues around non-compliant claims automatically without staff needing to comb through paperwork after the fact, item by item.

A data-driven approach to expense management helps finance teams identify from where costs may be habitually emanating and pinpoint individuals or departments where lower-cost alternatives might apply – the negotiation of bulk discount rates with specific vendors or hotel chains, for example. The type of ‘digital sleuthing’ required would, in other circumstances, need a significant resource investment, whereas the application of dedicated expense insights algorithms will keep staff compliant with policy continually and without error.

Source: Rydoo

Calculating the Benefits

Managing expenses and spending not only saves the business money by reducing the number of outgoings but also saves the often high costs of having qualified Finance staff undertaking manual work: chasing receipts, querying claims and piecing together paper trails.

Employees outside the department are also better informed as to what claims they can make, and have those claims processed faster with less of an admin burden each month. The more compliant they are with expense policy, the faster and more easily their claims will be settled. Armed with clearly stated policies and data from claims and reimbursement, departments can keep policies up-to-date and make sure there are no real or perceived injustices in how expenses are settled each month.

To learn more about how the benefits accrue and how automated expense management systems lighten the load for the busy Finance section, reach out to a Rydoo specialist to find out more or start a free trial of its software platform.