According to the Global Business Travel Association, organizations process an average of 51,000 expense reports every year. Unfortunately, due to poor internal practices, finance teams spend about 3,000 hours correcting errors made on these reports. What’s more, each correction costs an additional US$52.
To run a mission-driven organization smoothly (and to keep administrative costs low), financial diligence is essential, especially in this age of decentralized and autonomous team spending.
Here are four things to consider when tracking team spending.
1. Secure user access management
When it comes to tracking team spending, fraud is one of the biggest areas of leakage for organizations. To solve this, smart user access management is critical.
In many cases, team members may submit false expense reports or use company funds for personal reasons. According to the Association of Certified Fraud Examiners (ACFE), weak internal controls are responsible for nearly half of all fraud cases.
So, how do we solve this problem? Issuing corporate credit cards can cause a headache because there’s no clear way to control spend and monitor purchases. There’s also no quick way to assign new cards to users quickly, or retract cards for team members exiting the organization.
With a prepaid spending card program, though, administrators can quickly load up a new card for team members and set spending limits depending on the level of seniority. What’s more, team members have to request that funds be added to their card, and the finance team can approve or reject requests before any money is committed.
2. Clear finance and accounting audit trails
A robust audit trail is important because it can be used to track and trace all team spending, as well as verify different purchases and transactions. An audit trail also helps you detect unauthorized transactions, errors, and rogue spending.
Because prepaid spending cards are used just like credit cards, information such as the vendor, the purchase date, and cost of the items are automatically tracked at the point of sale, and in real time. Cardholders can upload their receipts right away, too, so it’s accounted for if they lose the paper copy. This makes it easy to track purchases, reduce errors, and improve reporting.
3. Organized and well-documented paperwork
Expense reimbursements and month-end expense reports are a thing of the past. Instead, team members who are spending corporate funds need to purchase quickly using pre-approved funds.
Once approved, though, it can be easy for purchases to fall off the financial radar until it comes time to reconcile. To solve this, organizations need operational processes in place that allow team members to work in real time, and to document everything. Paper documents should no longer exist in the procure-to-pay cycle, and expenses should be filed at the time of the purchase, rather than at the month end.
This saves teams from filing lengthy expense reports and having to request reimbursements altogether, and it saves the finance department from having to go through everything manually with a fine-toothed comb. Now, the finance and operations departments have time to focus on more strategic goals.
4. Visible and centrally-controlled spending limits
One of the biggest benefits of prepaid spending cards is centralized control. While you’re giving team members the freedom to make their own purchases, finance and operations teams still maintain control.
The finance team needs to approve and load money onto the card so the cardholder can use the card to make purchases. They can also set spending limits on each card and get real-time insights so they know exactly who is spending how much, and what they are purchasing. This kind of transparency makes it easy to spot rogue spending and bring budgets back under control.
Tracking employee spending: a recap
Managing and tracking employee spending in real time is crucial not only for financial success, but for the success of each and every team member.
Carefully tracking employee spending helps to reduce fraud and improve transparent reporting. It also gives key internal stakeholders the control they need to reduce overspending and ensure a positive cash flow position.
Here are some best practices to keep in mind:
- Secure user access management by issuing pre-loaded cards to individuals so they only spend the amount that’s on the card.
- Keep a thorough audit trail to monitor and verify transactions.
- Reduce the amount of paperwork and improve reporting by using built-in features such as receipt capture and reconciliation tools.
- Maintain visibility and control control by approving and limiting the amount of funds loaded onto each card.