By Ahmed Fessi, CTIO of Medius
Employee expenses constitute a significant portion of company spending, encompassing any employee purchases in which they can choose what to buy, when to buy, from whom to buy, and for how much. These expenses can include travel-related expenses like airfare, hotel stays, mileage, meals, and transportation. They also include a wide range of expense categories, such as office supplies, consulting services, internet and mobile phones, subscriptions or company offsites. Recent data indicates that 69% of UK employees have experienced increased work-related costs, highlighting the growth in expenses.
This surge not only burdens finance teams but also creates opportunities for fraudsters to exploit companies lacking robust financial oversight. Without proper controls, businesses risk financial strain and reduced profitability. Adopting a proactive approach with robust expense management systems, clear policies, and regular expense report reviews is essential to mitigating these risks.
The Talent Implications of Managing Employee Expenses
Before the pandemic, it was common for employees to pay for work-related expenses out of pocket and then submit expense reports for reimbursement. However, with the shift to hybrid work, the financial burden on employees has become more evident. Poor financial management can lead to significant consequences beyond financial losses. A report by Vitality highlights that 69% of UK employees experience financial stress, which can result in burnout and increased absenteeism due to the mental toll of financial instability.
To address rising employee spending, companies need to simplify processes and implement clear expense policies. Effective management of various expense categories can reduce unnecessary costs, save time and money, and lower risks.
The Operational Implications
Companies face pressure to maintain financial health and long-term viability. In April 2024, the UK saw 2,177 company insolvencies, an 18% increase from March 2024, indicating the need for companies to explore ways to reduce operational expenses.
In this volatile environment, automated expense management solutions offer a lifeline. Leveraging artificial intelligence (AI), finance departments can gain insights and efficiencies that reduce costs and enhance operational flexibility. AI transforms expense management by automating tasks such as data entry and approval, freeing employees to focus on strategic decisions.
The Bank of England’s Financial Policy Committee reports that businesses with AI-powered expense management systems have significantly increased productivity. AI technologies like optical character recognition and machine learning accurately process receipts and invoices, reduce errors, and ensure financial record accuracy. AI can detect suspicious spending patterns and potential fraud in real-time, aiding in financial management and compliance. This includes detecting possible counterfeited or falsified invoices, potential duplicate expenses, and expenses that have been manually edited to increase a reimbursement amount.
The Solution
As part of having a complete CFO suite, AI not only streamlines processes but also improves data analysis, generates new insights, and enhances user experiences in Expense Management Solutions. From a product design perspective, AI can help develop user-friendly interfaces, in the form of virtual assistants and chatbots, eliminating the need for complex menus and workflows and offering a smoother overall user experience.
As expenses rise, operational resources are strained, leading to stress within organizations. Tightened budgets and slowed workflows increase pressure on teams to deliver results with limited resources. Proactive changes, such as transitioning to cloud-based Expense Management systems, are necessary to improve efficiency. SaaS, leveraging Cloud infrastructure, supports AI growth and scalability
In summary, adopting AI-powered solutions for expense management can significantly enhance financial oversight, reduce costs, and improve operational efficiency, ultimately promoting financial wellness amid economic uncertainty.
