Any organization – big or small – requires their employees to travel for business meetings and field/site work – especially for sales and marketing. Travel & Entertainment expenses are typically one of the biggest operational overheads, after salaries and rent. Despite the advent of virtual communications, there’s no substitute for physical, face-to-face meetings in many cases. Meeting face-to-face and engaging with customers’ in-person is a valuable tool for growing a brand, making business travel a necessity for any organization.
According to GBTA (Global Business Travel Association), business travel will witness a CAGR (Compound Annual Growth Rate) of 5.8% over the next few years with global business travel spend reaching $1.6 trillion by 2020. The scenario in India is no different. Business travel spend in the country is one of the highest in the world and expected to grow by a CAGR of 12% through 2020. With more personal and direct sales strategies, business travel expenses are likely to also see a significant bump in business entertainment and travel related expenses. According to a recent global survey by GBTA with business travelers, only 44% of them said they had to follow a concrete travel policy, while 21% of travelers stated that they don’t have any restrictions on their policies. By managing & enforcing travel expense policies across an organization, these expenses can be managed and optimized to a great extent, directly impacting the organization’s bottom-line.
What challenges can organizations face if they do not have well-defined travel & expense policies?
Whether team members are prudent in their spending & try to keep expenditure low or are less careful is irrelevant. An expense framework is essential because it encourages discipline and accountability. Benchmarking gives even the most well-meaning employee a framework within which to spend. With no expense policy in place to monitor, control, and most importantly analyze spends, optimizing business expenditure becomes impossible. From an organizational perspective, the HR and finance departments will have no insights on the accuracy of expenses & will not be able to check whether funds are being used wisely. No expense policy in place can create opportunities for fraud, from minor infractions to major misappropriation of funds. Clearly defined policies ensure that employees from the same level in the hierarchy, or from similar job functions stay confident that their expenses are not being approved arbitrarily, thereby eliminating unhealthy comparisons.
Variety of Frauds/Dark Purchasing prevalent in organizations:
Organizations of all sizes and types are vulnerable to expense fraud. Common T&E fraud activities occur at various stages of the travel booking, expense reporting and reimbursement cycle. Some of the common fraud schemes are:
Ticket exchange schemes:
an employee purchases an airline/train ticket for a trip and later exchanges it for a lower-priced ticket, pocketing the difference.
Mischaracterized expenses:
an employee falsely claims a personal expense as a business expense or attempts to circumvent spending limits by deliberately miscategorizing an expense.
Overstated expenses:
an employee falsifies the amount of an item or a trip, which is especially common when claims don’t follow a multilevel approval process.
Multiple reimbursements:
an employee claims for the same trip on different expense reports over time, sometimes to multiple approvers.
Fictitious expenses:
an employee fabricates false expenses and generates false receipts.
It is worth noting that 18 months is the median length of time it takes to detect fraudulent activity, and that in more than 25 percent of cases, fraud is discovered by accident. Visibility is the most important factor for any business to exert tighter controls, drive compliance and reduce the risk of fraud.
Given the enormous potential for fraud and the scope and magnitude of T&E fraud schemes, businesses must seek a smart business expense management solution that enforces their Business T&E policies, creates tight control systems across the enterprise, provides real-time access to data and offers sophisticated reporting and analysis.
Advantages of Expense Policies:
- Moving to an automated Business Expense Management Solution helps control travel costs by allowing organizations to integrate policies into the expense management process, benefitting not just employees to file and monitor their claims but also managers by helping them detect policy violations and adjust policies based on insightful spend reports.
- When in doubt, approvers can add their comments to reports and seek clarifications from employees instantly. This also makes on-the-fly approvals easy, in case there is a requirement of incurring additional expenses, procuring a service through a new vendor, etc.
- Automated approval routing, based on a company’s workflow and approval hierarchies
- Automated expense management solutions offer detailed insights into violations, most frequent violators, category-wise spending etc. This can help finance and HR management teams to improve policies over time, identify preferred vendors and drive cost efficiencies
- The ability to aggregate all travel and expense data for policy compliance analysis in a seamless, central solution.
- Advanced reporting and analytics enable an organization to track spend by traveler, business unit, category of spend, vendor, location and other key variables in order to track patterns and identify suspect expenses
How can Zento help?
Zento Business Expense Management Solution can help organizations automate & streamline the expense management process & save on expense management costs as well as prevent frauds with a fully configurable expense policy in place. Zento can be customized considering the unique needs & workflows of every individual organization. Some of the core features are Asset Tracking, Advance payment request handling & easy integration with major ERPs, HRMS and Accounting softwares. Zento is an All-In-One solution for smarter management of your Business Travel Expenses by bringing all your business expenses on one platform & allowing stakeholders to track & manage them online, from any mobile or desktop device. Get in touch with us to learn more about Zento and how it can help you manage corporate expenses.
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- How Expense Management Solution Helps Businesses to Manage Expenses Efficiently & Avoid Frauds - July 5, 2019
