Expense Reports Are Dead Expense reports are unnecessary, costly and time-consuming. Here's what small businesses can do instead.
Opinions expressed by Entrepreneur contributors are their own.
Expense reports have been around since 1775 (if you do the math, that's 246 years), and honestly, not a whole lot has changed since then. Case-in-point, they're still miserable to do, take inordinate amounts of time and resources, and more times than not, they are littered with errors and waste. Just the words "Expense Report" alone are enough to make you cringe.
There are 31 million small businesses in the United States. That means there are 31 million opportunities to provide small businesses owners, their employees and their bookkeepers with a better, more intuitive experience built specifically for them. Which, by the way, should save them time, money and headaches.
How much expense reports are costing your business
According to the Global Business Travel Association, the average expense report for a business trip takes 20 minutes for a finance professional to complete, with an average cost of $58 per report. On top of that, 19% of expense reports have errors, which take an average of 18 minutes to correct at a cost of $52 for each corrected report.
For a small business that processes just 1,000 expense reports a year, the true cost of processing those reports (including fixing errors) ends up being $67,880 and about 390 hours of work. Costs vary greatly by company, and for many, that number reaches well over half a million dollars and into the thousands of hours of manually processing reports and correcting errors.
Related: How Companies are Heading Towards Paperless Future
How eliminating expense reports can impact spend control
Another major issue of the expense report fiasco is that companies have started to lose control of how their dollars are being spent. When employees use their personal cards on business expenses or use unrestricted corporate credit cards, things can get hairy.
Managers and bookkeepers don't like confronting employees about questionable reimbursements, and employees get frustrated when they have to front expenses on behalf of the business with their personal cards. Small businesses, in particular, are vulnerable to this.
We spoke to a yoga studio owner during our market research who said she's been struggling with constantly tracking down receipts and figuring out which studio manager spent how much on what … for 25 years. She thought there must be some app or solution for this but hasn't found one yet.
Viable alternatives to expense reports for businesses without deep pockets
There are several expense management platforms out there (including ours) that can eliminate expense reports in a few ways:
Issuing company cards with pre-set budgets and spend control features
Enabling employees to upload pictures of receipts at the point-of-sale, using a mobile app.
Automated receipt reconciliation and transaction categorization
However, these features haven't been in reach of most small businesses, leaving them to continue relying on outdated manual expense reports that are costing them a hidden arm and leg. That's because most companies in the expense management industry have only focused on larger companies, enterprises and venture-backed startups that have the support of deep-pocketed investors.
Current market solutions exclude many small businesses with intensive credit checks, minimum spend requirements, long and confusing onboarding processes and sometimes, hefty fees. This has left small business owners and their bookkeepers to either use manual expense reporting methods or find a way to invest in bloated enterprise technology that is expensive and overly complicated.
This glaring gap in the market is what motivated us to create ClearSpend — a free, simple yet robust expense management platform that puts those automated expense management features in the hands of small businesses that need them.
We imagine our customers as the types whose desks, conference tables and maybe even dining room tables are covered in piles of crinkly receipts and exhaustive expense reports. Our dream is to clear that space and give back precious time, so small businesses can focus more on doing what they love to do.
Related: Managing Credit Cards for Small Businesses
Small businesses need an expense management champion
Small business owners and their bookkeepers have every right to be frustrated with the current state of the expense management software market. That's why we put our company's focus on them, to help SMB owners (and their bookkeepers) finally clear those papers off their desks and get back to focusing on what matters most.
For big and small businesses alike, expense reports need to go the way of the fax machine and the typewriter — something that people remember, not often fondly, like the outdated office equipment they are.
Jeff White is the CEO of ClearSpend. He holds over 20 years of embedded finance and payments industry experience. Previously, Jeff served as Vice President & GM of Payments at ProfitSolv, where he was responsible for overseeing the embedded finance strategy. Prior to that, he served as Chief Revenue Officer for Rocket Matter which was acquired by Greater Sum Ventures.