The Overlooked Costs of Inefficient Expense Reporting

Expense reports can be a burden to employers, accounting teams, and employees, especially if they travel often for work. Four in ten business travelers say they would rather have a performance review (41%), weekly meetings on Monday at 8am (40%), a flight delayed by an hour (40%), or a full day of virtual meetings (40%) than have to complete their expense reports, according to American Express' 2023 Expense Management Trendex¹ which polled 1,000 business travelers and 300 business travel expense processors in 2022.

Additionally, global business travel spending is forecasted to grow to nearly $1.8 trillion by 2027, says the Global Business Travel Association (GBTA) in their 2023 GBTA Business Travel  Index™ Outlook, which surveyed 4,700 business travelers in 2023. That’s $1.8 trillion worth of potential expense reports.

Inefficient expense report processes can add to employee frustrations and come with hard and soft costs that often go undiscussed. Hard costs from ineffective reporting processes can range from poor visibility of company expenses to expense report fraud. In contrast, soft costs can range from employee dissatisfaction to decreased employee well-being.

Much of these overlooked costs stem from manual reporting that can result in human error and incomplete, duplicate, or late expense reports, leading to time misspent on approving and verifying expense reports. Simplifying expense reporting tools can help avoid these costs. But first, it can be helpful to know the problems you’d be helping avoid.

The Hard Costs of Inefficient Expense Reporting

The lack of transparency and the tediousness of manual expense report processes can create a window for fraudulent or non-compliant expense reports to sneak in. Without proper monitoring and control, businesses may unknowingly violate expense policies and tax regulations.

Manual processes could also mean limited visibility into company spending, resulting in inaccurate financial projections or unreliable budgets that can hinder decision-making. A few of the hard costs that could hit your business stand out: lost time, possible legal expenses, and reimbursement fraud.

The cost of fraudulent expenses. In their 2024 Report to the Nations, which analyzed over 1,900 cases worldwide, the Association of Certified Fraud Examiners (ACFE) highlighted that expense reimbursement schemes result in an average loss of $251,000 for companies and go undetected for 18 months on average. According to the ACFE, these schemes fall into four main buckets: mischaracterized expenses, overstated expenses, fictitious expenses, and multiple reimbursements.

The cost of non-compliance. Non-compliant expenses can result in the loss of employees as well as potential legal fees. Fraudulent expenses may also lead to regulatory penalties and liabilities, particularly if they violate the Foreign Corrupt Practices Act (FCPA). Expenses for meetings and conventions, international travel, meals, and auto expenses can be under scrutiny for potential FCPA violations, and, according to Stanford, the average monthly cost for FCPA-related investigation is $1,590,475.

The cost of lost time. Time equals money in business, and poor expense management can cost companies valuable time. According to American Express' 2023 Expense Management Trendex¹, 65% of travel expense processors take at least one hour to review one monthly expense report. Additionally, 59% say saving time would be the greatest benefit of an autonomous expense report management system.

The Soft Costs of Inefficient Expense Reporting

What employers may not see in their financial reports is stressed-out business travelers who avoid submitting expense reports and discontented expense managers who spend time chasing reports or requesting corrections. Emburse's 2023 Spend Management Report surveyed over 500 finance professionals and found that the time it takes to reconcile, review, and approve reports and errors in the report were among the top five pain points in expense management.

These common frustrations may lead business travelers and expense managers to experience higher frustration and lower job satisfaction. Since workplace mental health and well-being are a priority for many employees, it could be useful for companies to seek ways to make employees' lives easier.

The cost of employee dissatisfaction. American Express' 2023 Expense Management Trendex¹ found that six in ten business travelers say their least favorite part of business travel is completing and submitting their expenses. The tedium associated with expense reporting, frustration with manual data entry, and reimbursement delays are all potential contributors to employees' dissatisfaction with the practice.

The cost of lost productivity. According to American Express' 2023 Expense Management Trendex¹, 76% of business travelers spend at least 30 minutes on their monthly travel expense reports. If there's an error and they need to resubmit, that’s even more time spent correcting reports than could be spent meeting with clients and closing deals. For expense managers, the time spent requesting corrections and re-reviewing reports could be better used as well, potentially to forecast or analyze trends.

The cost of employee stress. Results from American Express' 2023 Expense Management Trendex¹ found that 76% of business travelers say business travel would be less stressful if managing expenses were less of a hassle. This is key to note, as the University of Cambridge highlights how job stress could lead to poor decision-making, low morale, high absenteeism, poor performance, and increased anxiety.

The Takeaway

Companies can consider adding new solutions to help soften – or even eliminate – manual expense reporting. Automating expense management can help organizations avoid compliance risks, reduce time spent filing, approving, and correcting reports, and reduce employee stress.

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1. https://www.americanexpress.com/en-us/newsroom/articles/innovation/american-express- expands-relationship-with-microsoft-to-driv.html

METHODOLOGY: AMERICAN EXPRESS EXPENSE MANAGEMENT TRENDEX

The Morning Consult poll was conducted between December 16 - December 20, 2022 among a sample of 1,000 Business Travelers (defined as employed adults who have traveled for business at least once in the past 12 months and submit their own expense reports) and 300 Business Travel Expense Processors (defined as employed adults who work in the finance department at a company with at least 50 employees, manager level or above, and review travel expenses). The surveys were conducted online. Results from the survey of Business Travelers have a margin of error of plus or minus 3 percentage points and results from the survey of Travel Expense Processors have a margin of error of plus or minus 6 percentage points.