How do you justify investing in an Expense Management system?

Lars from Acubiz have insights he wants to share

An investment in digital tools to support process optimization calls for resources related to implementation, purchase and maintenance. As a decision maker, you need to be able to demonstrate a positive ROI on a given investment. According to the latest Paystream Advisors report on travel – and expense management (Paystream Advisors: 2018 Travel & Expense Management Report), the top 3 barriers for investing in an expense management solution is:

  1. Current processes work
  2. We don’t believe that there will be a positive ROI
  3. Lack of management support

Spending time with potential customers we hear this on a regular basis. That’s why I will give a little input about the benefits that comes with a fully automated Expense Management process, and how you demonstrate a positive ROI on the investment needed. Finally, I will also explain, how you’ll become a super hero in your organization, if you go “all in” on Expense Management.

“Time is money”

A classic citation that we have heard numerous times. Maybe you’ve heard your parents, your former managers or other good people tell you not to “waste your time”. The term can be discussed endlessly, but in terms of Expense Management, time really is money. Time savings is the dominating benefit, when you need to evaluate a potential ROI related to a solution investment.

Your current processes around employee expenses, mileage and time registration is probably working today. To keep these things under control is important to any type of business. Research reveals that employee travel costs and general expenses is the second largest item of expenditure after salary expenditure. Most businesses know this and have a process in place to administer these expenses.

The question is, however, whether this process is fully optimized? I say no, it isn’t! The beforementioned report from Paystream Advisors uncover that 37% of all businesses still handles expenses, mileage tracking etc. manually. This is, for example, done by handing over receipts physically or by e-mail to the accounting department and filling in Excel sheets with information. Furthermore, research in the area also reveals that, out of the remaining 63% of businesses that utilizes a dedicated expense tool today, more than half still have their employees submit certain expenses manually. In other words, in these cases the process is only partly automated.

Focus on the whole process

From my point of view, the 3 barriers are connected. Many businesses get blocked on the fact that their expense process already works and doesn’t recognize that it can be significantly optimized. That is probably also why some have a hard time to believe that an investment can be sound. And if you can’t show a solid case for returning the invested amount, then you’ll have a hard time securing management support to move ahead.

Let make one thing totally clear. By implementing a full digitization of the whole Expense Management process, it is possible to realize significant gains. Your employees will save a lot of time handling expenses and outlays. You’ll increase compliance to company expense rules, reduce expense and mileage fraud, reduce errors and simplify bookkeeping and reporting as well as  increase insight into spent patterns of your organization. All of this with massive savings as a result.

Savings calculated in hours also need to be realized in some way. One way is to take direct efficiency savings into the books in terms of cutting costs. However, most of our customers converts the benefits into increased productivity.

Let me give a few examples:

  • A large consultancy business uses Acubiz Expense Management Service. Easier administration of travel expenses releases time with the consultants. Time that they convert to billable hours.
  • A Nordic wholesale business uses Acubiz Expense Management Service. Faster handling of expenses and receipts gives their sales people more time to do business.
  • A global retail business uses Acubiz Expense Management Service. Digital management of expense receipts across geographical areas lowers the administrative workload in the finance function. The time saving is used on tasks that improves the financial performance of the company instead.

The main components of the ROI calculation

On the savings side you have the following components to factor in, when you set up an ROI scenario:

Time: The heaviest weighing factor. You need to find out (or estimate) the current time spend for managing expenses, outlays and mileage in your organization. You need to look across users, approvers and the finance function. From our experience we know that a fully implemented Acubiz solution saves our customers 66 % or more of their time spent on handling travel expenses.

Errors: Errors always happen in manual processes. Manual registering and handling of expenses and receipts between users, approvers and the finance function will undeniably cause error in the process. Manual control and correction of errors will lead to extra processing time and thereby increased costs.

Fraud: Fraud with expense receipts and mileage logging is a real challenge for many businesses. However, it is only few who’s aware of the magnitude of this problem. I’ve written a separate article on this topic, because we are strongly committed to assist our customers in stamping out this issue. Fraud in this category can be a costly affair.

Policy compliance: Well defined rules and policies around employee – and travel expenses are important to keep the costs under control. And then you’ll have to make sure that your organization comply with these rules. Research show that a fully automated expense process increases the policy compliance rate. The Acubiz solution has features built in that, through robotics technology, make it possible to carry out automatic controlling procedures according to policies.

Process intelligence and insight: By this I mean that a “state of the art” expense solution will provide options for adding additional intelligent features, that can assist you in further optimizing the process. For example, will an Acubiz solution make it possible to automate the process around foreign VAT refund. This is a time consuming and cumbersome process to carry out manually, which is why many companies actually miss out on these refunds. For businesses with activity and travel across countries, the refund amount can quickly accumulate. In several cases, we have seen that our Cash Back service can pay for the running costs of our expense solution. Also, running a digital expense solution will let you accumulate data, that will give you deep insight into the spend patterns of your business.

On the investment side, you basically have two components to factor in:

Running costs: The costs for purchase and ongoing maintenance of the solution.
Implementation costs: The costs for implementation of the solution.

In addition to that it can be argued, that there can be costs associated with running-in a new process that your organization will need to adapt to. But if you choose the right system, I promise you that this won’t be a challenge.

How to setup the ROI scenario?

It can be somewhat complex in terms of the components on the benefit side. Therefore, I recommend that you start by basing the calculation on the time benefits, that can be realized by digitizing the expense process. This is, as mentioned, by far the heaviest weighing factor.
You can then calculate your annual costs for handling expenses on a user level through this method:

Time consumption per user (hours per month) x internal cost (EUR per hour) x no. of users x 12

You can continue according to this method for approvers and for users in the finance department. When you got the total sum, in other words your current cost, you can then factor in a time saving of at least 66%. Then you just need the price and annual running costs to calculate your ROI.

The other components on the benefit side can then be built into the calculation, but these can typically be a little more difficult to estimate. I recommend that you reach out to us, if you wish to go deeper in these areas and get input more input on how to expand your ROI calculation.

To help you get started, we have developed a calculation tool that estimates your savings potential. The calculation is based on information about your employees (users, approvers and the finance function), the number of transactions, the time consumption for expense handling and your internal costs.

Want to be a superhero?

Finally, I will also mention that a fully digital Expense Management solution will make your employees across the whole organization happier. Both daily users and the finance function. Believe me, life will be much easier for them! This is hard to account for in money, but I am truly convinced that it will have a notable positive effect on employee productivity. Put in another way, you will become a superhero on all levels, if you optimize this process in your business.

Lars de Nully
CEO & Founder