Why employee expenses are going rogue and how to stop it in your startup

In the current market downturn, startups are looking to tighten their belts. There’s no more obvious place to start than some of the more, shall we say, expendable employee expenses.

Can that work trip be a Zoom call instead? Why the Uber Black and not just regular Uber? Is that ‘client entertainment’ really for the client?

Employee expenses have changed a little lately. The pandemic blurred the lines between ‘personal’ and ‘business’, with our homes becoming our second (or only) offices, and a newfound flexibility becoming the norm. Unless you work for Elon Musk.

With those changes, there’s been increasing looseness and ambiguity around business expenses. According to the recent SAP Concur + Oversight Spend Insights Report, expense violations rose significantly between 2020 and 2021, with “excessive personal expenses” up by 21.8 per cent. One of the biggest problem areas was mileage – if you’ve ever had to keep a logbook, you’re probably letting out an audible groan right now.

The report suggests that “employees are pushing limits where they feel they can – spending more for a meal, for example, because overall spending is down or expensing meals even when they’re working from home”.

Just recently, a former Swiss banking CEO was jailed for putting nearly $307,000 worth of strip club visits on his business expenses. With some Tinder dates, dinners and cooking holidays on top, too.

While you’re thinking big, don’t miss the small things

In the startup landscape, it’s crucial to not get distracted by the excitement of scaling up, growing revenue and raising capital. As your headcount and overheads increase, so do your expenses – and this can blow out right under your nose.

“It is not unusual for businesses to focus on what is their core revenue generating activities and keep across the highest expense categories within their business operation at the same time,” says Fabian Calle, managing director – SMB at SAP Concur Australia and New Zealand. “While businesses feel they understand all the expenses that are processed, over a period, small value high-volume expenses can accumulate to becoming a large portion of the expenses that are processed.”

The fastest rising areas of expense violations have a few things in common – they have less-established processes so there’s confusion around what you can and can’t claim. According to the SAP Concur report, these areas include: cleaning preparation for businesses welcoming staff back to the office; education spend; and service provider violations.

However, the usual suspects – airline travel, hotel spend and restaurant spend – picked backed up again in the last quarter of 2021. Fabian says expense claims for hotels and motels, auto rental, transport, airlines and restaurants are the key areas to keep an eye on now that we’re back to a more open world.

“It’s generally the small expense items that may typically go unnoticed,” says Calle. “It can be difficult to manually highlight such expense items without up-to-date technology that has the capability to intelligently uncover those items which are outside of trend.”

Discretionary spend is still your friend – just manage it

The solution isn’t as simple as “stop having expensive client lunches and parties”. Discretionary spending on things like restaurants, entertainment and travel has a clear purpose in business.

But how you monitor that spend is key. Digital expense management systems are playing an increasingly important role in helping businesses find more efficient ways to settle employee expenses and invoices.

“When considering the right technology to adopt, it’s also important to have a platform that can access data across different parts of the business – like travel spend, staff expenses and supplier invoices,” Calle explains. “This ensures that there is a complete view of all discretionary spend.”

Australian and New Zealand brands like Honda, Red Balloon and The Fred Hollows Foundation use automated expense, invoice and travel solutions provided by SAP Concur. These tools provide businesses with real-time data so they can make more informed decisions, while streamlining manual processes and improving compliance so there’s less chance of fraudulent claims.

Getting staff on board with these kinds of new processes doesn’t have to feel like a crackdown. The goal is to create an easier system that people want to use and can use anywhere.

“Ease of use is critical to employee adoption,” Calle says. “Expense management tools should have policies built within the configuration of the product, to guide employees on what may be in or out of policy, before the spend is made.”

You know, like strip clubs and lavish holidays. Strictly business.

For more info, visit concur.com.au.

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This article is brought to you by Startup Daily and sponsored by SAP Concur.