It’s hard to overstate how much the pandemic upended how businesses function and engage with their customers. Almost overnight, companies had to figure out how to transition to remote work and to serve customers who you could no longer meet in person.
While the challenges companies faced had plenty of nuances based on their industry and size, the answer for many was the same: increased digitization. A report by McKinsey & Company found that the pandemic accelerated the global economy’s shift to digital by five years. That shift is manifest in everything from an increasingly work-from-anywhere workforce to the accelerated use of bots and automation to answer customer questions.
Though there is little argument that the pandemic accelerated investments in digitization, it would be wrong to think that it’s the only reason companies have moved so aggressively to embrace digital tools. Indeed, companies have been steadily digitizing their operations for as long as technology innovation has progressed – which is to say for a very long time.
One area where businesses have focused their digitization efforts is in expense management, the systems and tools used to process, pay and audit employee expense like travel and entertainment. In fact, a recent survey found that 47 percent of all businesses use dedicated expense software, up from 35 percent in 2019.
The Benefits of Expense Digitization
One way to understand why so many companies are exploring digitization is by highlighting the inefficiencies, costs and frustration involved with manual, paper-based expense management. Consider the common process that is triggered when an employee returns from a business trip and submits a stack of paper receipts and an expense report.
On the employer side, someone has to go through and vet all of those expenses to make sure they adhere to the company’s expense policy. This takes time and effort and can sometimes lead to mistakes as information is transferred from one form to another. On the employee side, the time required to recoup legitimate business expenses does little beyond generate frustration.
Expense digitization removes many of these problems and inefficiencies by jettisoning paper forms and manual processes. Among the most pronounced benefits are:
Lower expense processing costs By one estimate, the average cost to process an employee expense report is $58. By contrast, digitization introduces automation, which has the benefit of improving both the speed and the accuracy of processing. It also can slash the cost to below $10.
Improved cash flow The increased velocity of expense processing naturally delights employees because they get reimbursed for the personal funds they spent on behalf of the company quickly. But the speed of reimbursement possible with digitization also helps companies manage their cash flow better.
Reduce expense violations A big part of the job of those who review and approveemployee expenses is making sure each purchase falls within a company’s expense policy. That job is much easier (and faster) when software incorporates controls that automatically reject or even prevent unauthorized expenses. One increasingly popular tool to do this is through the use of virtual cards. Virtual cards can be issued to employees, who can use them only for specific expenses over a defined period of time (employers can customize how virtual cards can be used).
How to Begin the Digitization Journey
Any company that has pursued some level of digitization knows that the journey can sometimes be a bit bumpy. Successful implementation of new digital tools involves good choices and consistent communication with the employees who will use it.
Here’s how to start:
Select expense management software There are plenty of choices available, but finding the right one for your company means asking good questions. How will the software integrate with existing digital solutions you use? Can the system be configured to address the workflows you follow? Is the software user-friendly? Do other companies in your industry and that are about your size use the software you’re considering?
Following the rules Your company already has rules governing employee expenses. Make sure the software you choose is able to incorporate those rules.
Train and educate Even the best, most user-friendly digital expense software won’t be embraced and used by employees without a little help. Take the time to educate employees and managers about how to use the software and emphasize how it both makes their lives easier and improves the prospects of the company.
