Automated Expense Reporting

One of the tasks of the accounts payable staff is to check carefully all of the expenses reported in an employee’s expense report to ensure that all expenses are valid and have the correct supporting documentation. This can be a major task if there are many expense reports. This will be the case if a company is a large one or has a large proportion of personnel who travel, which is common if a company is in the consulting or sales fields.

An improvement concept that nearly eliminates the expense report review work of the accounts payable staff is to create a “smart” computer program that walks an employee through the expense reporting process, flagging problem expenses as soon as they are entered and requiring back-up receipts for only selected items. The system is highly customized, since the review rules will vary by company. For example, one company may have a policy of requiring back-up for all meals, while another company may automatically hand out a per diem meals payment and will not care about meal receipts. Such variations in expense reporting policies will inevitably result in an automated expense reporting system that is closely tailored to each company’s needs; such a system should probably be programmed in-house, which is a very expensive undertaking. Due to the high level of expense, this concept will only pay for itself if it offsets a great deal of accounts payable work, so there should be a very large number of expense reports being submitted before anyone tries to implement the concept.

The logical flow of automated expense reporting is noted in the following processing steps:

  1. The user accesses an on-line expense reporting form that is linked to the central expense reporting software and database.
  2. The user enters expenses by date and category.
  3. The software reviews all expenses as entered and flags those that are not allowable. It rejects these and notifies the user, along with an explanation.
  4. The software reviews all remaining expenses and decides which items require a back-up receipt.
  5. The user prints out a transmittal form detailing all required receipts and also containing a unique transmittal number linked to the expense report just entered into the computer system.
  6. Upon completion by the user, the electronic expense report is routed by e-mail to the user’s supervisor, who electronically approves or rejects the report. If rejected, the supervisor can note the problem on the expense report, which is then routed back to the user for resubmission.
  7. The user attaches all receipts to the transmittal form and mails it to the accounts payable department.
  8. When the accounts payable department receives the transmittal form and receipts, it verifies that all receipts are included and that the expense report has been approved by the supervisor, and then approves the entire package.
  9. Upon approval by the accounts payable staff, the expense report is immediately paid by wire transfer to the bank account of the user.
  10. The transmittal form and receipts are filed.

Though there appear to be more steps in the automated process than in the traditional one, the extra steps are automatic or much simpler. The overall result is far less manual processing time, as well as a significant reduction in the time needed before an employee is paid.

The solution just noted is for an automated employee expense reporting system that is entirely custom programmed. However, many organizations do not process a sufficient number of employee expense reports to justify the cost of all the programming time required to create the system. For these companies, a good alternative is to purchase an automated expense reporting software package. These packages are entirely self-contained and do an effective job of processing employee expense reports, but they do no provide direct linkages to the rest of a company’s accounting system. For this, a custom-designed interface module is still required. A Web-based expense reporting package is especially useful, since employees in outlying locations or who are traveling can use the system at any location where they can access the Internet; moreover, it requires no software installation on anyone’s computer. Also, Web-based software can be updated easily, whereas client-server systems require updates on individual user computers. Further, if someone steals an employee’s computer, there will be no time or expense information stored on it, since this information is submitted directly through the Internet to a different storage location. Examples of such packages are made by Concur Technologies, Extensity, IBM, Oracle, and SAP.