Are Employee Expenses an HR Issue?

Employee expenditure claims are frequently regarded as a solely financial matter. However, expenses can have a direct impact on human resources. Why is that? 

They're a company-wide procedure that impacts everyone, generates interpersonal conflict and puts significant financial hardship on employees. At the very least, they add to teams' workload, which usually results in increased stress.

Here's why enhancing employee expenditure management should be a top priority for HR, as well as how to get started.

Why Are Employee Expenses a Human Resources Issue?

1. They Make Employees Work In An Unpleasant Admin

The average time it takes to process an expense claim is 20 minutes:

• The claimant will take five minutes, 

• Their manager will also take five minutes, and 

• The finance team will take ten minutes.

And that is 20 minutes for each item, not per report. If there are any inaccuracies or missing data, the timeframe will be significantly extended.

2. They're also a waste of time for the finance team

Even though finance teams are in charge of developing and enforcing spending policies and procedures, they aren't particularly fond of them. Ask any accountant why the end-of-year closing period is so difficult, and they'll tell you it's because they have to chase down receipts and correct mistakes.

Expense claims could be overhauled (or removed entirely) to relieve your finance team of a lot of worries.

3. They put a financial strain on members of the team

Expense reports are based on an inequitable system. We require employees to pay for business expenses with their own money and then wait to be reimbursed. It's essentially a no-interest loan.

According to one study, being out of pocket makes a third of workers feel "financially unstable." These are business expenses; thus, they should never affect employees' financial well-being.

4. They cause a rift amongst teams

The claimant (employee), the approver (their manager), and the processor are all involved in expense claims (finance). For more traditional firms, you'll need a long email chain including all of these parties or a series of in- and out-trays to move the claim along.

To get through this back-and-forth, clear communication and empathy are required, and it frequently results in disputes and misunderstandings.

Employee Expenses: Best Practices for a More Productive Workforce

Here are four best practices that will solve the majority of your problems.

1. No more paper expense reports

Usually, the biggest administrative problems come from the fact that organisations still depend on paper.

The only reason we do that is that that's how expenses have always been handled.

Consider the few actions that each assertion entails:

1. First, employees must locate, print, and complete an expenditure report template.

2. They must also scan and transmit these documents and paper receipts or deposit them physically in the filing system.

3. Finance must then enter the same information onto their own software.

4. The entire process is redone if anything is inaccurate or missing. Also, the information is frequently incorrect or missing.

It's bad enough that you have to deal with just one expense report. However, paper is a major roadblock if you're processing dozens or hundreds of documents per month.

Operational improvements make a huge difference if you want to help your teams feel respected and happy. Hence, reducing paperwork is a significant achievement.

One should make expense claims in digital format. 

2. Use Expense Apps on Your Phone Instead

A smartphone app can readily replace the same paper-based method. You collect the same data, including receipts, but faster and with fewer mistakes.

The rationale is simple: rather than waiting until the end of the month to file claims, employees can submit them right away. They simply enter their purchases in the app and take a photo of their receipt as soon as they make them. They won't have to worry about it after that.

This has several advantages:

• The data is more likely to be accurate, and the app guides customers through the process.

• They immediately submit the receipt, preventing it from being misplaced or damaged.

• The claim is entirely electronic.

• It takes less than a minute for each claim to be processed.

This is how you can reduce the administrative burden on all employees. As a bonus, you now have a more efficient company.

3. Reimburse employees as soon as possible.

Finance can make reimbursement payments sooner due to claims being submitted in real-time. This relieves some of the financial pressure on employees. However, some team members may have to wait up to two months for payment, which is simply unacceptable.

Instead of waiting until the end of the month to file a claim and then waiting for finance to conduct the "expense run," claims are processed immediately, and reimbursements can be made more regularly.

4. Stay away from out-of-pocket expenses at all costs.

Finally, the best strategy is to avoid making employee expense claims in the first place. This does not imply that you should eliminate all of your spendings; after all, money is spent for a cause.

Instead, encourage finance teams to develop new ways to spend money that aren't dependent on the employee's personal funds. This could imply greater use of company cards, dedicated employee expense cards, or a preference for invoices paid directly by the company. This responsibility falls on the finance team, but HR can be the catalyst to promote change.

Of course, there will always be instances where cost claims are required. However, these should be regarded as the exception rather than the rule. HR teams can also compel finance to identify better solutions for employees based on the ideals of justice and trust.

HR departments today have a lot on their plates. Whether you're concerned about remote working conditions, perks, career advancement, or simply paying employees on time, the goal is the same: to keep employees happy and content at work.

This brings us back to the article's main point: faulty processes are an HR issue. They're an HR concern if they negatively influence morale and productivity. And if they cause financial hardship for employees, they're unquestionably an HR concern.

Source: Personio