Expense Reimbursements: How It Is Hurting the Business Bottom Line

Expense reimbursements are common in this business world. They provide organizations with a degree of control over staff purchases as they can select whether to reimburse an expense instead of giving them business credit cards. It has been observed that 1.7 billion dollars are the amount that the United States workers lend their employers per month via expenses.

But the control is apparent. Until the charge is fraudulent or illegal, finance ends up subjecting a reimbursement after a great deal of back and forth. This method generates confusion among staff unfamiliar with all the ins and outs of the buying policy and resentment among the ones who are frequently asked to give interest-free loans to the business.

Although expense reimbursement cause annoyance and friction, it’s normally thought that the procedure works fine enough. But many employees disagree on this matter. Not only do the reimbursements generate ineffectiveness across the company, but they also harm your staff experience.

Where Lies the Problem

Staff needs to make purchases quickly so that they leverage their personal credit cards and receive reimbursement after the fact. It enables workers to purchase items in real-time and the organization to preserve cash. But the issues that arise from the comfortable and innocuous method are many.

Fronting Money Becomes a Financial Burden on Staff

Whether it is straight out of the college or mid-class guardian, workers may not have funds to be able to front the cash for corporate purchases. The staff looks at their work as sources of income and not as drains on private resources. Making a payment for corporate purchases minimizes a worker’s personal line of credit, signifying that they may have to hold off on making the vehicle payment or visiting the doctor unless they get reimbursed.

As the senior executives have business cards, it’s the lowest-paid workers who are asked to front money. Outdated expense reimbursements hurt employees unreasonably with student debt, financial or familial commitments, and socioeconomic backgrounds. For such workers, paying for the client’s meal or software subscription could be a hassle. Hence, the finance team needs to think about how the methods may affect the people in various positions across the organization.

Reimbursements Are Time-consuming

Expense reports generate tons of monotonous and time-consuming manual work for staff and finance departments. Workers need to spend their valuable time filling out expense reports, collecting receipts, and entering the transaction data. An employer must revise and approve these requests, and then it is sent off to the finance team.

The finance department needs to spend time processing the claims and reconciling transactions before they can start issuing reimbursements. So, employees have to wait longer to get their cashback that may further worsen the financial burden. It has been observed that 3 in 6 employees have experience cash flow problems to slow reimbursement. Moreover, the staff’s time throughout the entire procedure could be spent better on more strategic and critical projects for the organization

Purchasing Policies Are Confusing Making Staff Ineligible for Expense Reimbursements

To cover each possible scenario, several business purchasing policies are extremely complicated, unspecific, and even conflicting. On the other side, a few organizations lack detailed policies and simply depend on staff to use their judgment to match the finance department. In both these cases, workers may unwittingly spend out-of-policy and be unable to get reimbursed, signifying that they are at a financial loss for trying to do their work.

Whereas, in a few cases, expense reimbursements are used to penalize staff retroactively. It’s a paradigm, which has existed in business for decades but does not belong in the modern age. Rather than reprimanding staff after they have committed the wrong, the finance team must allow procedures that ensure workers adhere to the policy.

Reimbursements Are a Source of Resentment

The expense reimbursement model places staff in a tricky place. The staff must provide an interest-free loan or fight with their manager/finance department and take the risk. The back and forth communications about the incomplete expense report, lost receipts, and policy guidelines are no fun.

The major issue with the reimbursement model is the poor experience it generates for the staff. Your personnel are trying to perform their best to succeed on behalf of the business, and the method causes excessive strain, annoyance, and resentment. Depending on reimbursement, draw off the finance team from the rest of the workers, generating roadblocks instead of alignment.

Be Proactive

Many problems with the reimbursement policy stem from reactivity. As expense reports are submitted after purchases are made, the finance department remains unaware of what has been spent and cannot correct the out-of-policy expenses before it is late. It places a burden on workers to pay out of their pocket for corporate expenses and keeps the finance in an uneasy state of either issuing or denying reimbursements. 

Hence, by implementing a robust expense tracking solution for businesses and allowing preapprovals, the finance department can provide staff access to business money while maintaining control overspending.