Finance teams need to be able to take action in real-time without delay, thus enforcing employees to be more compliant with company policies.
There’s no denying that all businesses are looking to cut or save costs in today’s times. An easy way for companies to do so is by curbing expense fraud while reimbursing employees for business expenses.
A report by ACFE Report to the nation states that “poor internal control contributes to fraud within an organization.”
Weak internal control can be due to loose expense policies, unclear reimbursement procedures, and poor company policy enforcement. This not only hampers your business’s financial health but also opens up a Pandora’s box of expense fraud. When employees know that fraudulent behavior will go without consequence, this encourages them to continue to do so. On the other hand, it can also cause you to run into trouble with the IRS for non-compliant expense reimbursements.
This is where automation comes into the picture. In today’s times, where everything is automated, businesses can ensure policy compliance, streamline business expenses, and curb expense fraud.
Take, for instance, an automated expense management software. It helps to seamlessly auto-populate expenses from receipts and allows finance teams to gain complete control to custom-make. It also enforces policies in real-time and flags all potential duplicate bill submissions or potential expense fraud, and more.
In this article, we will discuss policy compliance in an expense management process. We will also discuss how a robust policy engine in an expense management software can help companies achieve greater compliance from their employees.
Business expense management and compliance in 2020
The nature of expenses for a business can shift based on its needs. In today’s times, business expenses are not confined to a salesperson or a traveling employee of an organization.
A recent example is shifting the workstation from a regular office to a home office due to the pandemic. With travel coming to a halt, businesses today mostly incur WFH-related expenses as one of their most significant costs.
The new expenses count as business expenses, and companies can claim them as tax deductions and save costs. To do that, they have to ensure that employees submit their expense reports as per their accountable plan. They also have to ensure there are no gaps in their expense management process that can allow room for fictitious claims and fraud.
To ensure employee compliance, businesses have to create, update, and implement a firm company business expense policy. In doing so, it can:
- Allow finance teams to communicate their expense regulations with employees
- Reduce miscommunication and confusion between internal departments
- Help businesses stay out of trouble with legal authorities
- Eliminate chances of potential fraud and financial risks
Four ways a real-time policy engine can help streamline business expenses
Most businesses depending on the traditional process for expense report compliance, often fail. This is because expense policy compliance is more than just crafting an expense policy and distributing it amongst employees.
Companies can quickly achieve their compliance goals with the help of an expense management software. With its robust real-time policy-check engine, the software can easily do all the heavy-lifting for finance teams and employees alike.
Here’s how finance teams can boost compliance in 4 ways :
1. Configure company expense policies into the system
Every company has its own set of unique expense policy rules. An expense management software provides finance teams the flexibility to configure their custom policies into the system, no matter how complex. Also, by configuring your current policies into the system, employees can be aware of company policies, procedures, and workflows, at all times.
Additionally, Finance teams can:
- Automate approval workflows based on company hierarchy
- Create policies based on the type of expense, e.g., mileage, per diem, trip request, advance cash, etc.
- Set up policies for employees based on departments, levels, projects, categories, etc.
2. Define spend limits based on custom categories
Without AI software, both employees and finance teams have to keep all the expense rules and limits in mind. This can make it easy for employees to forget or confuse certain expense limits with another. It can also become easy for errors to slip through and unintentional violations to occur as well.
With an automated solution, finance teams can set a limit for each type of expense. For example, finance teams can set different allowable meal rates for employees of different levels. Also, if an employee tries to report an expense that exceeds their allowable limit, the system automatically detects and brings it to the user’s attention. This ensures no policy violated expenses get through at the source of expense creation itself.
3. Determine actions in case of policy violations
Often, finance teams go back and forth with employees explaining rules and making corrections. This can take up time and cause delays. Employees can also violate policies if they are unaware of the consequences.
But with a real-time policy engine, it can take immediate action when a policy violation occurs. Finance teams can determine the actions to be taken as minor or critical violations.
- In the case of a minor offense, such as an expense report exceeding allowable cost by a few dollars, the finance team can set the software to flag it to the employee before submission. The employee can then choose to correct the report or provide valid justifications for the violation before submission.
- In case of critical violations, such as an expense exceeding ten times the allowable amount, the issue can be raised directly to the employee’s manager.
- The software can also auto-flag policy violations if it goes against company policies such as a holiday expense, alcohol bills, duplicate bills, etc.
The real-time automatic action enables employees to be more careful while reporting expenses. The real-time policy enforcement also makes it easy for finance teams to focus on what’s important by eliminating manual policy checks. All this, thus, contributes to increasing compliance within the organization.
4. Keep up with the latest policy updates
As companies grow, new types of expenses crop up, and external rates such as the IRS allowable mileage rate or per diem rate change annually. The finance team must keep up with the changes and update their company policies accordingly.
With an expense management system, finance teams can seamlessly update their policies within the software itself. Once the finance team implements the new changes, the software automatically enforces the new regulations. This allows the company to keep its policies as per legal rules and comply with legal authorities.
Benefits of having real-time policy checks
As discussed, a robust policy engine in an expense management software empowers finance teams to have greater control over their entire expense management process. The policy engine can also increase employee compliance and allow companies to reap the benefits of having a strong policy check engine.
Increase transparency within an organization
Once the finance team sets up their company expense policy within the software, it enforces the policies immediately. Employees can view if their expenses are within the parameters of the allowable expense category or limit while creating their reports. In case their expenses exceed the limit, they can review their expense reports and correct the issue.
Sometimes, employees can unintentionally forget to attach proof of expenses such as receipts. The software auto-flags the missing receipts in real-time so that the finance team receives an accountable expense report. Finance teams can also send reminders to employees from within the software to ensure complaint expense submissions.
Employees can also view the company’s allowable per diem or mileage limit without going through the entire policy handbook. For example, in the case of WFH related expenses such as WiFi-bills, the finance team can limit how much employees can claim for such expenses.
Enforcing company policies through an expense management software creates room for trust and transparency within the organization. It also encourages employees to comply with company policies.
Reduce reimbursement turnaround time
Due to a broken expense management process, an employee can miss out on their reimbursement. Delays in reimbursement can be due to:
- Employee submitting an incomplete expense report with missing documentation or reports violating company expense policies
- Late submission of an expense report due to confusion in the policy or approval workflows
- Finance team chasing employees for corrections or missing reports, receipts, bills, etc
Finance teams can curb unnecessary delays in reimbursing their employees. The policy engine enforces the company policies and performs checks in real-time, i.e., when employees create their expense reports. For example, it checks for:
- The amount in an expense report to ensure it is within the limit
- Type of expense and if it is under reimbursable items
- Receipts to provide proper documentation
- Detection of duplicate or fake expense claims
The real-time policy check feature in an automated expense management software helps eliminate any potential fraud or error from the source of the expense reporting process itself. This ensures the finance team always receives clean and verified expense reports. This, in turn, reduces human intervention and can reduce the reimbursement turnaround time drastically.
Finance teams can stay audit-ready
One of the biggest challenges for finance teams with expense reporting is ensuring they meet the stringent deadline. But if they are still relying on spreadsheets to keep track of expenses, it is apparent that closing books on time and staying audit-ready can be a struggle.
The robust policy engine in an expense management software enables finance teams to stay accountable and ready for tax season. The software also allows the finance team to close books on-time by:
- Reducing the need for manual policy checks
- Ensuring there is no policy violation correction after submission
- Making sure the numbers in an expense report tally with the receipts
- Flagging duplicate or fraudulent expense claims
- Eliminating the need for human intervention so that finance teams can focus on more critical tasks
Increase compliance by turning to an expense management software
The nature of business and business expenses is evolving. For businesses, compliance is crucial for both internal and external matters. Also, if companies want their finance teams to be productive and functional, manually maintaining and checking regulatory compliance isn’t enough.
Almost all employees now incur business expenses in an organization. Thus, it can be a struggle for the finance team to keep up with hundreds of expense reports and ensure 100% compliance at the same time.
As technology continues to evolve, tools like an expense management software can enhance and boost finance teams’ productivity.
- The robust policy check engine within the software can do all the heavy lifting, freeing finance teams for more intuitive work.
- The finance team can automate policy checking across expenses by configuring their current policies within the software.
- The policy engine performs real-time audit checks on employee expense reports curbing potential fraud and error in the process.
- The real-time policy check can encourage an employee to be more compliant with company rules and policies.
With such tools, the finance team can mitigate violations in real-time. Finance teams can also take action in real-time without delay, thus enforcing employees to be more compliant with company policies. The bottom line being, an automated solution empowers finance teams to increase productivity, efficiency and stay on top of policy violations.