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Why do expense reports exist?

Why do expense reports exist?

author two

Michael Sindicich

author two

TJ Lawless, CPA

7 Jun 2024
6 minute read
Expense management

There’s no escaping business expenses: employees across businesses of all sizes have to spend and manage various types of transactions that are essential to business operations.

These can include travel-related costs like airfares, accommodation, meals, entertainment, and car rentals, as well as other non-travel business-related purchases such as office supplies, team events, and work-from-home stipends.

Expenses, of course, are inherent to conducting business and advancing organisational objectives. To manage them, accounting and finance teams create policies that define how employees should spend, depending on their role in the business.

When employees do spend company money, they incur expenses on a corporate card or front the spend on behalf of their employer. They then seek approval for these expenses and request reimbursements from the company for any out-of-pocket spend. Such requests are typically consolidated into a document known as an expense report.

An expense report is a collection of transactions an employee groups together that details specific business expenditures, including pertinent information such as the amount, date, receipt, and purpose of each expense. This reporting mechanism serves to monitor corporate card spend, manage out-of-pocket expenses, and provide a systematic way for employees, managers, accounting and finance teams to submit, review, approve, and report on employee spend.

The problem with traditional expense reports

The process of managing and processing traditional expense reports has always been flawed. There are several reasons for this:

  • Employee frustration and delays. In the traditional expense reporting process, employees must gather information from several disparate systems, which can prove tedious and aggravating. It can result in delays in claim submissions. It also generates challenges and inefficiencies for managers and admins who are tasked with reviewing the reports and enforcing company policy in a timely fashion.
  • Inaccuracies and errors. The dread of expensing often results in common discrepancies such as missing or invalid receipts, calculation errors, and instances of out-of-policy or excessive spending. These inaccuracies can lead to inflated costs, the misclassification of personal expenses as business-related, or the submission of duplicate claims.
  • Absence of automation and oversight. Manual processing and coding of expense reports increases the likelihood of errors. Minimising these errors requires automated expense reporting solutions that incorporate features such as credit card integration, customisable policy enforcement, automated compliance checks, and electronic receipt attachment.
  • Overlooked insights and potential cost savings. In the absence of an effective, automated expense reporting system, companies risk neglecting valuable data and insights crucial for recognising expenditure patterns, anomalies, and avenues for cost reduction.

The primary shortcomings of the expense reporting process arise from the possibility of human error, insufficient automation and oversight, employee dissatisfaction, and overlooked chances for data-driven decision-making.

There’s a better way to control employee spend

The expense management space has been dominated by vendors like SAP Concur, Expensify, and Emburse, all of which require an employee to batch transactions in an expense report. But here’s the thing: the concept of an expense report is arbitrary. It arose out of historical practices, at a time when it was deemed impractical to require employees to submit individual transactions. It goes without saying that managers and administrators have more pressing tasks than reviewing expense transactions one by one. Incongruent workflows, coupled with technical limitations, led to a flawed process. Though expense reports were intended to streamline procedures, they include a giant obstacle: unrelated transactions being grouped together. As a result, managers and administrators must spend precious time and effort deciphering how to apply policies and accurately account for the transactions. Here’s the good news: the time and effort to do that is no longer necessary.

Expensing the Navan way

Navan provides a superior process that significantly reduces the time between a transaction’s occurrence and its submission, review, approval, and accounting within a company’s ERP system. That process typically takes weeks or months; Navan can accomplish it within days.

One reason is that Navan enables employees to effortlessly submit transactions individually. Our solution intelligently groups transactions to assess employee spending in accordance with company policies, considering factors such as individual amounts, timeframes (daily, weekly, monthly, annually), vendors, and whether travel is involved.

This adaptable batching of transactions, coupled with proactive policy enforcement, empowers managers and administrators to review exceptions as they occur. No longer do they have to search through every single transaction within each expense report, nor do it weeks or months after the spend has occurred. Navan’s employee-friendly mobile and Web submission processes encourage employees to provide accurate information promptly, thereby enhancing accountability and simplifying administrative tasks.

For CFOs and finance managers, an even bigger win comes with Navan’s real-time visibility into spend. Gone are the days of waiting for month’s end to see what funds have been spent. Navan’s dashboards enable finance team members to uncover potential issues before they turn into problems, and they deliver insights that result in more accurate forecasting.

The benefits of integrating travel

Navan Travel further enhances the efficiency of Navan’s policies, reducing the time required for review and approval. In addition, Navan’s travel management solution offers the most competitive inventory, coupled with a consumer-grade shopping experience for the traveller. The combination generally leads to a hard-cost savings of 10–20% on flight and hotel inventory and often cuts the time to book and manage trips for employees by a whopping 90%. However, even without integrating a managed travel solution, transitioning to Navan’s expense-only approach represents an improvement over traditional expense report processes.

What an integrated corporate card programme can do

Implementing a corporate card programme accelerates the submission process, resulting in quicker accounting for transactions while maximising potential rebates. However, even in a reimbursement-only scenario, transitioning from a traditional expense report process improves the time it takes to post transactions, by enabling employees to easily submit expenses as they are incurred.

Here’s the bottom line

When Forrester studied the Navan solution, they found an abundance of savings opportunities in both money and time. With a company of 2,000 people generating 2,000 expense reports annually, Forrester analysts determined that accounting and finance teams could save eight hours per week, with an increased operational efficiency worth almost $227,000. The benefits continued on the travel side, where Forrester found travel managers could save eight hours per week and employees could shave off 45 minutes per trip booking and travel plan change — efficiencies valued at $178,000. Hard-cost savings abounded as well, with more than $806,000 saved in travel spend over three years. Beyond the numbers, Forrester identified other benefits, such as faster insights and greater agility, increased compliance with the travel platform and policy, improved duty of care, and an improved employee experience.

These are just some of the reasons Navan has grown to more than 10,000 customers globally — companies of all sizes and across all types of industries that have switched from both legacy solutions and modern alternatives out of frustration and a realisation that a superior solution exists. Navan is that solution. We’ve proven time and again to companies just how game-changing the right T&E platform can be — and we can do the same for you.

Ready to start using Navan today? Get up and running in just 5 minutes.

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