Most business owners understand that expense reports are tedious. They don’t necessarily recognize how much those paper receipts and digital entries are costing their bottom line. The expense reports go beyond losing an hour here and there bugging employees for lost receipts or spending a couple of afternoons reconciling numbers at the close of the month.
When companies add up all the hidden costs – lost time, neglected inaccuracies, deferred financial realities – manual expense management becomes one of those unspoken expense black holes no one monitors to preventative means. But that’s part of the issue. Companies monitor revenue like a hawk, scrutinize significant expenses, but somehow the expense reporting process flies under the radar.
What’s Manual Expense Reporting Really Like?
Here’s what manual expense reporting looks like today: An employee takes a client out for lunch, pays with their personal credit card and shoves the receipt in their wallet. A week later, they (hopefully) find it, remember what the lunch was for, and complete an expense report form. That expense report goes to a manager who reviews it (if they have time) before sending it to finance, where someone enters each expense manually before reviewing compliance with company policy before sending through reimbursement.
That’s a lot of hands for a single lunch receipt. According to the Association of Certified Fraud Examiners, it takes an average of 20 minutes for employees to complete an expense report and another 18 minutes for finance teams to process them. For 50 employees submitting expenses weekly, that’s more than 30 hours per week in labor all for one lunch receipt. And to make matters worse, most of those minutes are accounted for by competent employees who could have otherwise spent their time helping the company generate revenue.
Yet these minutes are difficult to factually determine against a budget line. No one thinks we’re spending $40,000 a year on manual expense report processing because it gets diffused through departments and job roles that need people to function. But once you figure out what these hours cost (salary, benefits, opportunity cost), it adds up quickly.
When Tallying Costs Inaccurate It’s Dispersed by Group Effort
Manual data entry means human error. Human error means downstream effects. Someone misses a digit in a phone number; a decimal point is added; an expense is miscategorized. Most mistakes are honest since people are busy, rushed, and have other jobs on their plate.
But this is where it gets costly. Wrong numbers mean your financial numbers are wrong. A company may forecast $8,000 in expenses last quarter for travel, only to realize it was $12,000. This means their budget forecast for next quarter starts on a negative foot. Once companies implement expense management automation software, they acknowledge they were underestimating certain categories because manual tracking failed to flag specific transactions or was miscategorizing them regularly.
Fraud exists – whether people want to talk about it or not; it exists. According to the Association of Certified Fraud Examiners, expense reimbursement fraud equals billions lost annually. When every expense requires manual entry review, it’s unlikely anyone will catch this sophisticated fraudulent data gathering. This inflated mileage; this personal dinner as business – but manual efforts absorb them into legitimate expenses unnoticed.
The Policy Problem
Most companies have policies around expenses. Most employees know vague guidelines about those policies. But the gap between those guidelines creates constant tension. Was this hotel more than $200 per night? Was this Uber absolutely necessary? Did this meal exceed the per diem?
Manual processes mean policy enforcement is highly inconsistent – one manager approved this while another would question it; one employee gets away with gray-area spending while another with legitimate spending faces scrutiny. This isn’t just unfair; compliance risks exist. For example, if your company experiences a tax audit – not following policy across the board becomes a liability.
Then when policies change, someone changes the template and emails staff that things are different now. Meanwhile, half the company still operates under the old template while finance scrambles to decide which expenses belong under which set of policies because things aren’t black and white; they’re gray. It creates a false sense of administrative normalcy against policy change internal facilitation.
The Opportunity Cost
But perhaps the greatest cost of manual expense management is what it prevents you from seeing. When expense-related data sits in crumpled receipts, multiple spreadsheets and someone’s desk drawer, you lose real-time visibility into when money might be going off-course.
Expenses weren’t completed in a timely manner three weeks ago; three weeks later, it’s too late because finances lock in at the end of each period. Employees must wait longer for reimbursements means they’re less likely to fill out templates next time; no one realizes expenses are going up until it’s too late; an entire department’s travel expenses skyrocket in one quarter and no one notices until halfway through when revenue is already compromised.
When you can’t see what’s happening in real-time over money, it makes you operate with a half-functioning brain; maybe regional sales teams are spending way too much on client entertainment – and that revenue isn’t turning into closable deals; maybe travel expenses skyrocket for one department but fall into others – no one recognizes until budget discussions because they’ve been busy forecasting based on incorrect numbers.
This delayed visibility allows delayed cash flow insights. When companies fall behind because manual report submissions have piles collecting dust without being processed, employees become frustrated because companies aren’t in as good as cash-to-cash situations as executives believe.
The Scaling Nightmare
At 20 employees, anything annoying about manual expense management becomes unbearable at 100 for the same reasons that inefficiencies (that could easily be repaired) become untenable when systems become unworkable and a determined option for everyone involved solves best without human assistance with tedium.
At 100 employees, all those systems that suck become unsustainable when uncertain if extra eyes should ease burdens – hiring more people to handle volume doesn’t make sense; it means paying people extra to do work that shouldn’t be done manually by people.
Growing businesses hit the wall hard – they expand with new teams, new initiatives and new departments, but they don’t pay attention to expense management and it blinks under a watchful eye. Once approval and reimbursements lag behind because it’s paperwork,
Employee satisfaction lags; financial reporting becomes less accurate with investors looking for clearer details every quarter; administrative burdens pile on faster than revenue ever will.
What Manual Expense Management Costs You
Companies spend thousands managing manual expense hours. With labor costs, misinformation and misallocation of resources compounded by potential fraud risk, poor visibility of dollars moving in real-time projections diverted from management instead of passive oversight combined with preventive passive employee frustrations – manual reporting systems could be costing businesses 5-10% of the total budgeted volume on expenses.
This means if a company has $500,000 annually in expenses to be reimbursed, excess costs upwards of $50,000 exist annually in hidden fees – and that’s not even mentioning opportunity costs. What could your finance team do if they weren’t drowning in unnecessary spreadsheets? What decisions could be better made if real-time technology facilitated efficient decisions? What could real-time numbers do for your monthly book-closing session’s speed?
The irony is that most business owners would never allow this level of efficiency to occur within their value generation system or customer service efforts on their part. They’d immediately seek solutions if production was this slow or customer service was this wrong – but because everything about expense management goes unseen behind the curtain until someone suddenly figures out what’s it’s costing never allows anything else but tedium to almost transcend purpose until the curtain is lifted one day and everything changes over night thus rendering your most obnoxious expense report possibility now unavoidable.
