Staff Expenses Kill Company Productivity
The handling and control of staff expenses drains business productivity – employees spend valuable time collating and submitting claims and receipts; line managers and payroll teams spend equal amounts of time, if not more, reviewing, approving and making payment for claims.
Financial Directors are also losing money through un-reclaimed VAT – a symptom of rushed claim submission, poor receipt handling and lack of attention to detail from line managers and payroll.
A survey of employed workers*, carried out in June 2016 by Selenity (formerly Software Europe), shows that Financial Directors are missing opportunities to increase productivity and save money for their businesses. In this article, Adam Bamford, Expedite Services Manager at Selenity, explains the research findings.
In our survey, 68% of respondents claimed expenses from their employers. 16% made a claim after every purchase, 5% claimed weekly, 28% monthly, and 51% claimed quarterly or ‘longer’ [this includes those people who don’t claim at all]. The emphasis seems to be on storing up claims for at least monthly reimbursement, which could be argued makes the task more cumbersome for employees, line managers and payroll at month-end.
Strangely, the time taken for employees in our survey to complete expenses is surprising low – despite 60% still using paper systems, the majority [71%] claim it takes 20-minutes or less per month to submit a claim. However, scale this to a company of say 100 people [and assuming 68% of people make claims ‘as per our survey’], Financial Directors are seeing their businesses lose around 22 hours of team productivity per month! A further 14% of respondents suggested submitting claims took 20-40 minutes per month, 5 per cent suggested it took 40 –60 minutes and 10 per cent put the figure at one hour or more.
This loss of productivity is further exacerbated by the time taken for line managers to review and approve claims, and for payroll to manage and make reimbursement payments. Checking that a receipt is both compliant with company policy and HMRC can take time, especially if you’re having to manually carry out these checks.
Electronic vs paper
Only 40% of respondents used an electronic system for submitting receipts which would suggest Financial Directors are missing another opportunity to cut down on lost productivity in their teams. In our own experience, many of our prospects are still using paper-based processes or Excel as makeshift claims forms. That’s cumbersome for employees, but for line managers and payroll, it generates an enormous volume of work [opening and reviewing claims, checking and validating receipts, saving and storing forms, printing and filing forms; and providing status updates to employees].
Despite the majority of respondents spending less than 20-minutes per claim, which seems quite ‘hasty’, they still aimed to get their claims right first time [65 per cent]; a further 50 per cent suggested they are concerned about VAT and business compliance and aim to ensure receipts have the right information. This dedication is perhaps explained by the 60 per cent of respondents that also see submitting expenses receipts as necessary to get reimbursed!
Of course, with less than 20-minutes spent making each claim, errors are more than likely despite employees’ best efforts. Payroll teams will need to spend extra time checking claims, validating receipts and making sure they’re approved correctly and potentially returning claims to employees for additional crucial information for accurate and compliant claims.
The survey has uncovered some interesting statistics and areas for Financial Directors to focus on in order to reduce the time spent on claims submission. For example, Financial Directors should be focusing on the 18-29 olds in their businesses; this age group was least likely to take their time and get receipts right the first time; the 45-59 age group were mostly likely. 18-29 year olds were also least likely to make sure their receipts have the correct information, and 45-59 year olds mostly likely. Lack of commitment to getting claims right the first time makes extra workload for line managers and the payroll team and, of course, increases the chances of lost VAT recovery.
We also found that nearly 73 per cent of employees surveyed submit expense claims and receipts either in the office or whilst working remotely. The remaining respondents chose to manage their receipts at home. This reflects our own experience – in our customer base we see most receipts and claims being submitted at 4pm on Friday afternoon [because at that time most employees will have accrued all of their receipts for the week].
With our customers, using an electronic system, we’re enabling self-service, i.e. the self-submission of claims with limited input from payroll. In other businesses not using our software, we see much more evidence of employees contacting payroll much earlier in the day to collect forms, complete and submit them before end of play [which creates more interruptions to the payroll team].
Employee friendly FDs
Financial Directors may also find themselves under pressure from their HR teams as employees surveyed pointed the figure at less than satisfactory reimbursement timescales. 12 per cent said reimbursement was never handled efficiently and quickly, 29 per cent said sometimes, 24 per cent said often - leaving only 36 per cent happy with the speed of reimbursement.
What’s the answer?
Firstly, Financial Directors should be encouraging employees to scan and submit receipts to an open, active claim after each purchase ensuring that the only task remaining is to submit the claim for review and approval, but this can only happen if companies use an electronic system.
We recommend that claims are submitted as often as possible to keep cash flowing and to ensure costs aren’t racking up in secret. Some of our clients use weekly payments, with some outsourced clients choosing daily payments – to help reduce the considerable manpower taken to check each receipt in a reasonable time frame and make payment in a timely manner.
Again, when it comes to reducing reimbursement timescales, an electronic expenses system or outsourced service might help FDs win favour with their employees and will certainly reduce the burden on the payroll team trying to ‘keep pace’. If FDs are facing pressure to process and pay claims more quickly, they might be forced to consider using an outsourced service, which can offer validation within 48-hours and next day payment to employees. Outsourcing your receipt validation process means you can guarantee accurate validation that’s quick and efficient, helping to free up time internally for other more important tasks.
In any case, it also important to deliver internal education on what a compliant receipt looks like and what validation checks need to be carried out to prevent an incorrect claim being authorised.
Through our research we’re seeing that businesses are losing productivity – both in terms of employees spending considerable time submitting claims, but also through line managers and payroll processing claims. Where possible, Financial Directors should look to digitise their expenses process to make it quicker and more efficient, and even consider outsourcing the entire process to ensure employees and payroll are able to focus on their core activities.
*Selenity surveyed 102 employed workers during June 2016.