7 Ultimate Digital Transformation Tips for CFOs in UAE
The finance landscape is undergoing a seismic shift in an era of unstinted technological advancement. Back in 2018, a PWC report found that amongst the top 12 challenges that financial organisations faced, 4 of them were technology-related. It wasn't about deciding whether to implement digital transformation technologies but more about understanding the enterprise value these investments would add.
According to Deloitte, adopting the right digital transformation strategies can increase market value by up to $1.25 trillion across Fortune 500 companies. But how can organisations implement these strategies successfully?
The CFO's Perspective on Digital Transformation
Digital transformation is no longer just a buzzword; it is a mandate for modern businesses, and the CFO plays a central role in this paradigm shift. Gone are the days when the Chief Financial Officer (CFO) position revolved solely around balance sheets, budgeting, and compliance. The modern CFO is now tasked with leading the charge in the digital transformation of the finance department.
With its vision of becoming a global technology and innovation hub in the UAE, the need for digital transformation is even more compelling.
Why is digital transformation so vital for a CFO?
- Real-Time Financial Insights: Real-time access to financial data can be an invaluable asset in combating expense fraud. Digital transformation allows CFOs to detect irregularities promptly, leading to timely intervention and reducing the financial losses associated with fraud.
- Enhanced Reporting: CFOs can generate comprehensive financial reports more quickly and accurately, aiding in transparency and stakeholder communication.
- Cost Reduction: Automating financial processes can lead to cost savings, such as reduced labour and operational costs.
- Strategic Planning: Digital tools help CFOs analyse financial data and create insights to make strategic decisions and adapt to changing market conditions.
- Compliance and Risk Management: Digital solutions assist in maintaining compliance with changing regulations and mitigating financial risks.
What is the best digital transformation tool for you?
As a CFO, your journey towards a comprehensive digital transformation should be guided by specific features that enhance financial efficiency and help combat one of the most prevalent issues—expense fraud. Here's what you should look for in a digital transformation tool to achieve these goals:
1. Full Control Over Budget Allocation and Spend Visibility:
Access to complete control over budget allocation and clear visibility into how those budgets are spent is the foundation of sound financial management. Your chosen digital transformation tool should empower you to allocate resources efficiently and make data-driven decisions.
2. Real-Time Closure with ERP Integration:
Moving from traditional month-end closures to real-time closures is a game-changer. This transition ensures you have real-time insights into your company's expenditure, allowing you to address financial challenges swiftly. An essential component of this is seamless integration with your ERP system, which provides instant access to financial data.
3. Elimination of Petty Cash Usage:
Digitization of financial processes is a fundamental aspect of modern financial management. To achieve this, focus on strategies to eliminate petty cash usage as much as possible. Consider solutions that offer alternatives, such as merchant-specific cards, fuel cards, and PRO cards, which reduce inefficiency and enhance security.
4. Advanced Expense Fraud Detection:
Expense fraud is an all-too-common challenge faced by many companies. Leveraging digitization to combat this issue is essential. Look for a solution equipped with world-class Optical Character Recognition (OCR) technology to identify duplicate receipts and suspicious transactions. The goal is to ensure transactions are monitored in real-time and in an automated manner, such that financial compliance is continuously maintained.
5. Improved Audit Process for Accounting Teams:
Ensuring an enhanced audit process is a vital component of your CFO responsibilities. You must seek a digital transformation tool with two critical features for this. First, accounting automation powered by ERP integration streamlines financial processes and reduces the potential for human error. Second, the tool should provide 100% visibility into all receipts across the company, creating a comprehensive audit trail and reducing the likelihood of discrepancies.
6. Insights and Forecasting:
To thrive in a rapidly changing business environment, a CFO must have a finger on the pulse of their company's finances. A 360-degree digital transformation solution offers complete real-time visibility into all company expenditures. This feature allows you to provide timely, data-driven insights and forecasts, enabling proactive decision-making.
7. Multi-Subsidiary Expense Tracking:
In the UAE, as businesses achieve a reasonable size, they often evolve into multi-subsidiary or multi-branch entities. Given this common trajectory, it's imperative that the chosen digital transformation tool supports multi-subsidiary expense tracking. This ensures that financial data from all parts of the organization is aggregated and analyzed effectively. Not only does it provide a holistic view of the company's financial health, but it also enables consistent monitoring and control of expenses across the entire organization.
To illustrate the power of these digital transformation features, let's look at real-life business examples from the UAE:
1. Dubai Blockchain Mandate: Dubai is on a mission to become the world's inaugural blockchain-powered city. The Dubai Blockchain Mandate, led by the Smart Dubai Office, lays out a clear path for integrating blockchain technology across the city. By embracing blockchain technology, Dubai has the potential to realize annual savings of 5.5 billion dirhams in document processing alone, equivalent to the value of one Burj Khalifa every year.
2. Dubai Government Services: The government is committed to digitizing its services, the rate of which in 2023 stands at 99.5%. Currently, 87% of all government service transactions are digital. Furthermore, the government has also developed over 100 smartphone apps with cybersecurity and data law compliance.
The digital transformation process is an ongoing journey that entails mobilising the entire workforce and instilling a change-oriented mindset with no pre-defined endpoint that might extend well beyond your current leadership. It serves as the fundamental framework for an organisation's survival in an era marked by disruptions. Achieving success in this context involves formulating a strategy around making purposeful investments in the digital realm. It requires the prudent allocation of resources toward innovative technologies that can drive the organisation's strategic initiatives.
Ultimately, the successful execution of digital transformation mandates the ability to communicate to stakeholders that every digital initiative undertaken is a deliberate move to enhance the organisation's prospects for sustained success.
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At Pluto Card, our mission is to assist businesses of all scales make well-informed choices. To uphold our standards, we follow editorial guidelines to guarantee that our content consistently aligns with our high-quality benchmarks.
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Efficient Receipt Management For UAE Businesses
Collecting, storing, and otherwise managing receipts is essential to a well-oiled expense reporting machine.
Each receipt serves as confirmation of payment processing between yourself and the customer or vendor. You also need expense and sales receipts to file taxes and maintain your peace of mind.
Unfortunately, while saying receipt management is easy, the whole process itself is daunting. Tracking hundreds, thousands, even millions of employee and customer receipts leaves loopholes for fraud and misreporting.
Physical expense receipts are especially susceptible to being lost, damaged, or fading with time.
Fortunately, there’s a better way to do it: digital receipt management with Pluto.
- Automate more of the expense management process
- Reduce the risk of fraud and inaccuracies
- Create more efficient workflows and financial departments
- And overall streamline modern business operations
While you probably can’t eliminate 100% of paper receipts from your workday, you can still improve your process with an increasingly-digital footprint!
What is Receipt Management and Why Do You Need It?
Receipt management is the process of collecting, tracking, and storing business receipts.
Traditionally, receipt management is handled by internal finance teams. These employees collect various receipts, track costs in your accounting software, and store them for later. If necessary, the accounting team will also manually sort each expense.
A well-run protocol helps businesses:
- Simplify employee reimbursement programs
- Track and report tax deductions
- Provide proper proof during a tax audit
- Streamline expense reports and budgets
- Combat internal fraud and inauthentic chargebacks
- Avoid eating repair or replacement costs for items under warranty
- Calculate and improve long-term profitability
But there isn’t just one kind of receipt management system. Today, businesses have to wrestle with printed receipts, e-receipts, and even (gah!) handwritten receipts.
The mix is frustrating for businesses that have to follow several procedures just to reconcile the books.
Difficulties of Manual Receipt Management
Today, there are three basic ways to handle receipts directly:
- Manual receipt management involves handling, tracking, and storing paper receipts
- Digitization receipt management scans physical receipts to digitize the tracking process
- Digital-only receipt management is used for online or digitally generated receipts
While many businesses are moving toward digitization and digital-only receipts, some businesses are stuck in the dark ages. (The kind that involves typing physical receipt information into a digital spreadsheet.)
And as we’ll see below, manual entry strategies come with some…problems.
Easily Lost or Damaged Receipts
Perhaps the most obvious problem with physically tracking expense receipts is that there’s so much that can go wrong. Lost, damaged, or faded receipts make the business expense tracking process that much harder.
Even if the employee who spent the money doesn’t drop their receipt, it’s possible for paperwork to get lost on a desk somewhere. And if you need to find a receipt two years later? Better hope it was filed properly and hasn’t faded completely.
Consumes Human Resources
Manual receipt management is an extremely hours-intensive process.
Your financial team has to collect invoices, type their data into your accounting software, and double-check their work. Then, they have to reconcile business expenses against company credit card statements and track down potential instances of fraud or misreporting.
Not only does this require a lot of time, but it also impacts employee productivity. Every hour an accountant spends tracking receipts is an hour of productivity lost elsewhere.
Leaves Room for Human Error
Aside from the time and human resource cost, manual receipt management presents the potential for human error. And unlike on the product line or in customer service, every reporting mistake risks an unfavorable tax audit.
Even the simplest receipt management and tracking process involves several steps from collection to reconciliation. Every stage is an opportunity for an employee to get distracted, mistype a name or number, or duplicate entries. In bigger cases, they might even duplicate a payment, costing you more money.
And even if you catch the mistakes before they’re submitted, that’s more human hours wasted double-checking and correcting completed work.
Increases Fraud and Misreporting Risk
The risk of fraud is higher in manual receipt management programs, and instances of fraud may be harder to detect. Types of fraud that commonly crop up in expense reporting include:
- Inflated claim amounts
- Claiming personal costs on the business’ dime
- Submitting expense reports twice
- Falsifying “proof” to claim for money that wasn’t spent
Unfortunately, manual receipt management makes these kinds of fraud more likely and difficult to catch. For example, if the employee who authenticates receipts is committing or permitting the fraud, it’s harder to detect until after you’ve lost money.
Over time, even small acts of fraud can have massive financial consequences.
Contributes to Employee Dissatisfaction
For many companies, employee reimbursement programs contribute both to the need for manual receipt management – and to employee dissatisfaction.
Think about it. In a modern, tech-savvy business world, why should employees have to pay out of pocket, ever?
Virtual cards and online-based businesses have all but eliminated the need for an employee to front your expenses.
But if you’re still stuck doing manual receipt management, chances are, your employees are still submitting reimbursement tickets. (And grumbling about the time it takes to get paid back.)
And that’s not even touching on the frustration, tedium, and headaches manual receipt management programs cause your high-paid finance teams.
Jacks Up Business Costs
Together, all these factors paint a picture of increased business costs.
The time and human resource cost to track, reconcile, and store receipts.
The human and financial cost of detecting and counteracting fraud.
Even the maintenance costs for your printer and filing cabinets.
Every dollar spent on manual receipt management is a dollar sucked from office parties, growth, or your bottom line.
Benefits of Digital Receipt Management
It’s easy to see the costs that manual receipt management impose. Fortunately, there’s a simple solution: digital receipt management.
In short, digital receipt management involves using digital copies of receipts in your expense reporting strategy. Digital smart receipts are easy – simply integrate them into your accounting software and let automation take you away.
But even physical sales receipts can be digitized, Pluto allows you to digitize your receipt very simply - through your phone.
Incorporating such technology means that even paper receipts fold neatly into your overarching digital strategy.
And as you’ll see, the process comes with tons of benefits.
Increases Integration Potential
A massive benefit of digital tracking is the sheer integration potential. Most receipt management tools, from receipt scanning devices to receipt tracking software, easily mesh with your existing expense reports system.
From there, you can automate mindless tasks and set up occasional human checks to ensure the system works as intended.
Fewer Costly Errors
Another way that a digital receipt management program saves costs is by reducing employee errors. Digital receipts should meld seamlessly into your tracking system – no surprises there.
But even processing physical receipts is cheaper and easier.
With their mobile phones, employees can scan receipts and upload them instantly. From there, Pluto categorizes the information and adds it to the overall report.
While employees may spend a second filling in any blanks, increased automation greatly reduces the risk of input errors.
Reduces Risk of Fraud
Less human interference means your financial system is more resilient to fraudulent activities. Pluto improves speed and accuracy while digitizing the receipts.
That leaves fewer opportunities for fraudulent claims.
Uploading physical receipts means less physical space is needed for storage. That can save you on storage costs and reduce desktop and file cabinet clutter.
And because everything’s digitally maintained, you’ll still meet or exceed your tax authority’s required financial record storage period.
Not to mention, just finding your records will be easier than ever!
No person or business enjoys tax season. But digital management makes the process at least a little easier.
Because all of your information is stored online, it’s easier to access and export receipts as needed.
When tax time or the dreaded audit comes around, your data will be well-organized and easily accessible.
More Efficient Expense Reporting
Traditional receipt management is a costly, time-intensive, error-prone manual process that used to be necessary. With modern tools, businesses can streamline the entire financial structure of their organization.
No more lost receipts or worrying about fraud.
Less time spent inputting and double-checking data, and more time helping your business grow.
All these positive benefits will improve efficiency – and even bring smiles to your accountants’ faces.
Like using a virtual corporate card, digital receipt management speeds up the reimbursement process.
Since everything is tracked and verified electronically, it’s easy to set up an automatic or streamlined reimbursement protocol.
Putting Your Eco-Friendly Foot Forward
Lastly, any step your business can take toward going paperless is good news for the environment.
Cutting down fewer trees and reducing printer ink usage are laudable goals that can decrease your environmental footprint.
Not only will you enjoy cost savings, but you’ll feel better about doing business in an increasingly eco-conscious world.
8 Tips for Efficient Receipt Management
Digitizing your receipt management strategy is just the first step toward expense report success. To ensure you’re operating at maximum efficiency, consider the following tips.
1. Use Pluto App
The first step is to get Pluto and start managing your spending digitally.
While you’re moving toward digital efficiency, your vendors aren’t required to follow. Keeping the proper tech on hand ensures you can digitize any paper receipts that come your way.
Pluto allows you to take a picture of the receipt, upload it to your expense and just like that the reconciliation process is done!
2. Save Your Receipts
While you can set up secure digital folders to store all your digital originals and copies - Pluto does that for you!
Just take a picture of the receipt, upload it to the app and that is it.
3. Ensure High-Quality Digital Format Uploads
There’s no point in uploading and saving documents if you can’t read them.
Before tossing your physical copies, make sure you can clearly read the essential information on each receipt. (Such as the company name, date, purchased item(s), and amount.)
4. Categorize Submitted Expenses
Take some time to categorize your expenses (most businesses do this in chronological order). Pluto helps you with that, but just make sure to check the right category so the reporting stays in top notch condition.
5. Set Up a Simple Expense Report Strategy
Expense reporting is the backbone of any business’ financials. For prompt, complete reporting and tracking, ensure that you design a straightforward strategy.
Same-day submissions, fewer Excel sheets, and faster reimbursement protocols will improve efficiency and attitudes. Better yet, invest in a quality expense and receipt management software.
Or even better - start with Pluto, we have a free package. It will allow you to completely digitize and control your spending, while keeping your reporting in the best possible shape.
6. Establish Accountability
A top-notch expense reporting strategy only works if people use it.
To ensure your protocols are followed, emphasize and encourage accountability. Keep all managers and supervisors up-to-date with company spending and card policies and remind them to disseminate that information appropriately. Follow up with employee expenditures as needed.
7. Run Regular Internal Audits
Regular expense report audits help businesses track receipts fraud, clear up discrepancies, and streamline inefficiencies.
Take time each month or quarter to check for fictitious or overblown expenses or troubles with your expense reporting strategy.
Pluto allows you to run real-time reports at any given moment for any period of time.
8. Switch to Virtual Corporate Cards
Virtual corporate cards make managing receipt tracking even easier. Not only can you digitize the entire process end-to-end, but corporate p cards give you greater control over your expenditures and tracking.
Sure, you can’t prevent vendors from handing you physical receipts. But you can greatly minimize instances of employees walking in with a big stack of thermal paper to scan in.
Pluto offers unlimited virtual cards which will book all your expenses right into the dashboard!
- Proper receipt management is key to running a financially successful business.
- While manual receipt management reconciles physical copies, it’s increasingly unnecessary in an increasingly digital world.
- Digital receipt management simplifies the collection, reconciliation, and storage process.
- Digital tracking also reduces fraud potential, time and financial waste, and increases employee satisfaction.
- Digitizing your expense reports pairs nicely with digitizing your own payments with virtual corporate cards.
Spend Management: Guide & Tips For 2023
Spend Management: Guide & Tips
Businesses that have trouble managing spending run the risk of impacting their financial bottom line.
For example, poor invoicing practices that cause a delay in payment can lead to contract management issues or, even worse, a lost client for your business. It also might cause issues with some of your preferred suppliers if they feel they’re not being paid on time.
Making a slip-up that disrupts a subscription can mean your company lacks access to critical software or tools until the issue is fixed.
A poor expense report system means charges incurred on your business trip might result in many follow-up questions, so your accounts payable team is on the same page with purchase orders. A system without real-time visibility for spending data is not ideal for any organization and does not make it easy to reduce spend.
Intelligent spend management helps prevent these issues. A business uses spend management to comprehensively track and review organizational-wide spending and purchase orders down to the last dirham.
In this post we will deep dive into spend management and discuss the best ways to properly manage it.
The Importance Of Spend Management
What happens if your company is not careful with spending or has too much indirect spend?
You risk revenue loss and other issues that can quickly destroy a well-thought-out business plan. It’s hard to cut costs and improve efficiency if your financial processes are very time-consuming.
A McKinsey report reveals that external spending with suppliers often accounts for 40-80% of a company’s total expenditures - underscoring the importance of effective spending control.
For many companies, reviewing and optimizing spend can profoundly impact employee workloads!
Good spending management practices will help the company be more financially stable and prevent any financial crises. It is always a good idea to have a system to track where the company's money is going. This can help to make sure that all expenses are accounted for, and no money is wasted.
Advantages Of Digital Spend Management
In this day and age, using an online tool to keep track of your expenses should be a no-brainer. Let’s have a look at some of the main advantages.
Insight Into Everyday Expenditures
Where is every dirham your company makes going? If you don’t know, digital spend management will dramatically strengthen financial accountability, budgeting, and expenses. In addition, reporting on where company funds are flowing makes it much simpler to see how different department heads oversee budgets. Read more on how to improve internal control over financial reporting.
Stronger Financial Controls
Spend management tools like Pluto, allow you to not only monitor your spending in real-time but also set the limits on the go. In addition to that you can issue cards for departments or individuals, and even focus them on a particular type of usage, such as specific vendors only.
Effective spend management is a great solution to ensure a better-looking budget. Analyzing and managing spending makes it simple to find and cancel unneeded services, negotiate lower prices with new supplier contracts, and never have to pay a late fee again. It will also significantly help your board of directors as they’ll have a simplified, streamlined budget to review and discuss at the start of the year.
Common Spend Management Challenges
It’s easy to pursue spend management practices that hurt your business’s bottom line if you’re not careful. Many ‘traditional’ best practices might not fit companies with remote-first work policies, engage in cutting-edge industries, or have an unorthodox structure.
If your company has a dynamic structure, spend management becomes all the more important to help you keep up with the competition and get the most value out of every dirham spent.
Keep these potential challenges in mind as you pursue spend management practices.
Relying On Old Spending Data
Be wary of relying on old budgets or financial data when managing more spend. It’s challenging for leadership to identify problem areas with cash inflows or outflows, when they only have outdated information.
Overreliance On Manual Mapping
Having to go back at the end of the month to match spending to budgets manually can take an inordinate amount of hours and opens the door to errors and mistakes that can throw off a spend management policy.
Pluto helps to automatically match spend to budgets in real-time, ensuring accounting and finance teams have accurate updates.
Harnessing Too Much Technology
Modern financial software can dramatically help your company’s day-to-day operational flow. However, if these solutions do not work together, chaos can ensue which leads to data migration and processing errors. Pluto integrates with your accounting tools, cutting the data flow time significantly.
The post-COVID world of remote and digital work means your employees might be scattered across the globe and in different time zones. Having to arrange shared corporate cards manually or coordinate team spending with employees in different locations can be tricky. Pluto offers unlimited virtual cards, which allow you to provide a payment channel for any employee anywhere in the world.
How To Improve Your Spend Management Process
Optimizing your spend management process might seem tricky at first glance. Fortunately, small and large businesses often rely on the same core strategies to optimize spending.
Rely On Spend Management Software: Pluto can help automatically track expenses, keep abreast of budgeting, and help manage strategic sourcing. CEOs and CFOs then have relevant, real-time data at their fingertips to see where their company is financially.
Focus On A Few Payment Methods: Do you have too many company cards in your pocket? It might be time to streamline purchasing methods to help simplify your spend management strategy. For example, your business can dramatically improve expense tracking by asking employees to only use company cards for business expenses instead of asking for their personal cards to be reimbursed.
Have An Organized Approval Process: You can clarify your spending process (you might want to check our post on how to create a corporate card policy) by ensuring employees have a clear hierarchy of how and by whom purchases need to be approved. If your team is unclear, they might complicate the payment process by not filing the right reports, which means your financial team could be left in the dark about purchases.
6 Efficient Spend Management Strategy Tips
Your company needs to optimize its spend management strategy to ensure the final results lead to reduced procurement costs, improved efficiency, and streamlined workflows.
Spend management best practices also help improve vendor relationships and communication, procure the optimal goods and services your business needs, and even help you earn volume and early payment discounts due to more effective and simplified financial practices.
Keep the following steps in mind for the best results regardless of your organization’s industry or size.
Do you know exactly where employees spend company funds? If not, you’ll need to build a comprehensive list of company expenses, suppliers, and entities where funds are going.
This might quickly become a challenge if you’re in charge of a large business. If so, look to designate specific team members to review employee salaries, utilities, marketing, training, and all other day-to-day expenses to have the most detailed list.
You can’t improve what you do not measure. You can use Pluto to get a firm grip on your expenses. Pluto allows you to monitor and control your expenses so you clearly see how much was spent in which category.
You’ll want to ensure all accrued expense data is accurate and can be cross-checked with receipts and inventory records. Ensuring transaction data is precise, and expense lists are free of duplicates, spelling mistakes, and other mistakes makes the entire spend management process more efficient.
Take this step extremely seriously if your company spend practices have relied on more manual processing methods. Standardization ensures that multiple currencies, formatting differences, and other nuances are accounted for when looking at spend analysis data.
(Goes without saying that when using Pluto this is all pre-done for you!)
While optimal spend management brings all expenditures under a single umbrella to review, your team will still want to categorize expenses into various groups to make reviewing and making adjustments across different departments simpler.
It’s usually best to categorize expenses in multiple ways to understand where money is going. Pluto allows you to categorize expenses both through specialized cards or just by tagging, so everything is nicely grouped together when it is review time.
A well-thought-out process of calculating, verifying, and categorizing spending information will simplify your entire review process when you’re looking at spend data.
You should immediately be able to spot expenses that are anomalies or recurring spending that might be able to be cut out from the start.
Pluto’s dashboard can give you a high level but also a detailed view, so you can clearly identify trends and separate expenses.
Devise A Strategy
You’ll want to move decisively once you’ve identified potential changes to spending habits and department budgeting approaches.
It might seem difficult at first glance to start reducing budgets, cutting out vendors, or make other dramatic changes to your company’s budget and expense habits. Rely on good change management practices and your leadership team to cultivate employee and stakeholder buy-in to any adjustments.
Practice Good Data Forecasting
Keep updating your expense data as you make a budget and spending adjustments. Doing so keeps your team on top of where funds are going and can help forecast different spending scenarios and how they might impact your business’s bottom line.
Keeping data and information updated becomes particularly important if your expenses grow to ensure financial operations run smoothly. Don’t forget to cultivate supplier relationships if you work with different vendors for optimal inventory management.
Should You Rely On Spend Management Software?
Manually processing expense claims, keeping up with petty cash, and tracking company credit cards can quickly turn inefficient, hinder your company’s financial management, and inhibit the overall procurement process.
In contrast, the right spend analysis solution can aid real-time expense tracking, provide easy-to-read charts and graphs of high-level expenses, and capture and store financial-related documents, so your finance team members are not scrambling to find a receipt or report.
Pluto allows you to create cards for various purposes, edit spending limits on the go and monitor your expenses in real time. This allows you to scale up or down depending on what your business needs at any given moment.
With Pluto, you will be able to track spending patterns and areas of high expenditure and get real-time insights into your business finances. The powerful analytics will help you make better decisions about where to allocate your resources.
Ease Of Use
The main bottleneck of many spend management platforms is that the employees do not use them - as it is just too time-consuming. Not with Pluto! The sleek and user-friendly interface makes expense management a breeze.
Receipt upload and reimbursements can be quite a burden for the team. Pluto allows you to take pictures of receipts with your phone and just add them to your reimbursements list. With the use of categories and tags, you will be able to both submit and review them in record time!
Key Takeaways For Company Spending
Spend management remains an essential component of all organizations regardless of size. Accountability for every dirham flowing in and out ensures your company maximizes revenue and remains growth-focused, no matter the budget.
You can take the first step today by relying on Pluto and processes to establish control over budgets, track spending, manage payments, cut costs, and boost your financial team’s day-to-day operations and processes.
What Are Reimbursements? Types, Policies & Management Tips
Business expense reimbursement is one area of spend management that business owners do not always give its due. And yet, nearly every organization will have to reimburse employees for their expenses at some point.
Part of the problem is that these expenses can vary significantly, from buying office supplies to traveling or even medical costs. If your business deals with many types of expense reimbursements, you might wonder what you need to cover and how you should handle it.
If you’ve had trouble working out your organization's different business expense reimbursements, or you want to learn more about repayments, you’ve come to the right place.
Today, we’ll take a look at the different types of business expense reimbursements and even share some tips to help you streamline your expense reimbursement process.
The Definition Of Reimbursements
A business expense reimbursement is simply the act of paying back an employee for expenses incurred while performing a job for your organization.
Technically, almost any type of expense can qualify as a business expense for the purpose of reimbursement, depending on the reimbursement policies of the business. But to give you a clearer idea, here are some common examples of reimbursable expenses:
- Business travel costs
- Meals and entertainment
- Employee education or training
- Medical expenses
- Gas expenses for a company-issued or private vehicle
- Business supplies or tools
- And other miscellaneous business-related expenses
You could handle these expense reimbursements individually, meaning you review each expense separately, or you could create a policy for employee expense reimbursement.
Do I Need to Have an Expense Reimbursement Policy?
You are not required to have an expense reimbursement policy, and in some cases, reimbursing expenses is not even mandatory to begin with. Though that largely depends on the legal framework of your country.
However, since it is customary in the UAE and the MENA region to reimburse employees for expenses, then it would be wise to create guidelines and policies to help you organize and streamline that process.
Creating a policy for reimbursements helps set the right expectations for employees about what qualifies for repayment and enables you to streamline your expense reimbursement process.
With an expense reimbursement policy, your employees will know precisely what they can be reimbursed for, how to request said reimbursement, and how long it would take to receive the funds.
Types of Reimbursements
Whether you have a business reimbursement policy or not, you need to have a clear picture of which expenses your employees might incur for your business and how you would go about reimbursing them.
- Is the expense tax deductible?
- Is this a common type of business expense in your industry?
- Do you have a policy in place for this expense?
- Are there any types of emergency purchases that an employee might need to make?
Expenses that are commonly reimbursable include:
Traveling and accommodation
One of the most common types of reimbursement requests is for travel expenses. Gas has been a particular pain point for many businesses in the MENA region due to the rising costs of fuel. Other examples of travel expenses include moving to and from an airport or travel terminal, travel tickets, public and private transportation expenses, car rentals, and lodging.
Office supplies and communication
If your organization relies heavily on digital work, you might need to reimburse your employees for supplies like laptops, tablets, software purchases or subscriptions, training materials, and more.
Also, if your team needs to move around frequently and you need to maintain communication at all times, reimbursing them for their cell phone plans might be necessary. In particular, this applies to teams in sales, marketing, and business development.
Food and entertainment
Business trips typically cover employee meals as reimbursable expenses. As long as the expenses are incurred in the interest of the business, they’re reimbursable.
Medical expenses, such as health insurance, insurance premiums, and tuition, are another form of employee expense that is often reimbursed by companies. If your business deals with these types of expenses, make sure you have a clear policy for handling them.
5 Tips to Simplify your Reimbursements
Managing your business expense reimbursements can be a hassle if you don’t have a specific process in place to do so, and sometimes even if you do.
If you struggle with your expense reimbursement reports, consider following these tips:
Learn What you Need to Reimburse
Although the legalities of employee reimbursements vary from country to country, it’s traditionally customary for employers to reimburse their employees for expenses incurred on behalf of the company.
It is important to note, however, that your employees cannot claim reimbursements for every purchase made, only those that are specifically tied to your business in some form.
While the specific type of expenses you have to reimburse will vary from industry to industry, you should have a general idea of what costs an employee might have to cover out of pocket in the process of working for you.
- Do they need to travel around in their own vehicle?
- Do you need them to be communicated at all times?
- What kind of equipment do they require?
- Are there any health risks associated with their job?
These types of questions can help you figure out which expenses you will have to deal with. Clear guidelines about what is and isn’t reimbursable will help reduce instances of fraudulent reimbursement requests.
Use a Spend Management Platform
With the right expense management software, you would be able to automate and optimize end-to-end workflows throughout your process.
For instance, with a spend management platform like Pluto, employees can use a mobile app to record expenses as they incur them.
In this way, your employees no longer have to save receipts or wait before entering their expenses. Plus, Pluto can automatically assign reports to the right reviewer, making the review and approval process more efficient.
Not only that, but Pluto can also tag the receipt so the categorization of the expense is much easier and reporting is real-time.
In addition to providing digital copies of relevant documents, Pluto can notify your finance team of approvals and deadlines.
Spend management platforms enhance collaboration
Pluto’s expense management solutions come with an employee portal so that your finance team can collaborate seamlessly with your employees.
This allows you to save time when you need to discuss any irregularities with their expense reports. Additionally, your employees can use Pluto to check the status of their reimbursement requests.
The finance team can also use Pluto to manage costs more efficiently due to its analytical capabilities, real-time reporting and instantaneous spend limit settings.
Create a Thorough Expense Reimbursement Policy
When creating your reimbursement policy, you’ll want to make sure that it covers as many angles as possible.
One way to do so is to invite stakeholders from multiple different departments, such as HR, finance, legal, and procurement, to a brainstorming session, as their knowledge will make it easier to draft the policy.
Crafting your reimbursement policy
It’s also critical to consider the following when drafting your expense reimbursement policy:
- The specific type of expenses that can be reimbursed
- The process your employees need to follow to submit their expenses, including any proof and supporting documentation
- Whether any allowances will be given for expenses, and how to manage any excess
- The specific time an employee has to submit their expense report
- How the approval process will be handled
- When and how your employees are reimbursed
Promote the adoption of the policy
One way to help employees adopt the policy more quickly is by making it readily available to them. The policy should be emailed to your employees or posted on your internal networks.
Employees should be informed when they will receive their payment from the company. You should set up a transparent and clear process to communicate what can be expected in terms of expense reimbursement.
Be extra clear about deadlines and payments.
Be sure to let them know how they will receive the payment, such as via direct deposit or check, as well as how they will receive recorded confirmation of the payment made (such as a statement on their paycheque). You can complete this step easily with the help of an online payroll solution.
It is important to keep things running smoothly when it comes to paying employees. By processing reimbursements timely and reliably, you can easily prevent frustration caused by late payments.
Having your employees pay out of their own pockets and not receiving payment back sooner rather than later can cause unnecessary ill feelings toward your company. When you handle reimbursements well, it reflects back on you as a respectable and considerate employer who cares about employees.
Make sure your employees follow the deadlines you set
You need to provide employees with deadlines for submitting expense reports, such as one week before their next pay date, so they can be reimbursed and get approval for their claims.
Make sure the expense reports comply with the policy guidelines by giving yourself enough time to review them. By doing so, you can consult with the employee if there are any discrepancies, missing or incomplete documentation, or expenses that do not fall within the policy.
It’s important to submit expense reports on time since certain business expenses are tax deductible.
Optimize Your Expense Reimbursement Management Process
It’s not enough to know what your expenses are and to create a policy for their reimbursement.
You also need to make sure that your reimbursement process is organized and efficient.
Otherwise, you run the risk of creating bottlenecks if you get slammed by more requests than you can handle. You can avoid this by optimizing the process used to submit reports and their attachments, ensuring all reports are reviewed in a timely manner and processing reimbursements as quickly as possible.
Having put all of this in place, it’s now time for the audit. The importance of audits is particularly important for enterprises and mid-size firms where employees incur large expenses. Auditing your expense reports also helps you identify loopholes in your policy and reduce instances of fraudulent claims.
You can also use audits to analyze your business expenses and identify areas for reduction.
Ensure there is an organized system for expense reimbursement requests
You should ensure that the system your employees need to use to submit their expense reports is easy to use and understand.
Pluto allows the employee to submit all necessary supporting documentation, such as their receipt, the total amount of the purchase, a description of the goods or services purchased, and the date of the transaction.
What qualifies as supporting documentation?
Ticket stubs, credit card statements, receipts, invoices, and vehicle logs are acceptable records. To minimize employee time spent sending in expense reports, you should simplify, streamline, and digitize the process as much as possible. For instance, Pluto allows the employee to submit a picture of their receipt.
Use a Corporate Card or Direct Deposits to Remove the Need for Reimbursements
A corporate p card is a great way to prevent employees from paying out-of-pocket for business expenses.
You can track your expenses more efficiently and effectively with corporate cards, which provide spending limits that prevent employees from abusing their privileges.
Consider issuing corporate cards only to your regular travelers, or try direct deposits if you’re concerned about the cost.
Alternatively, you can also use direct deposits of reimbursement funds to eliminate the reimbursement process.
Two benefits result from this: One great perk of following either process is that your finance teams will have better visibility into the reimbursement process, making auditing employee expenses easier.
- The best way to deal with business expense reimbursements is to have a rock-solid reimbursement policy in place. This way, you can reimburse employees for their costs on your terms.
- Another great way to manage your expenses is to make use of a corporate card to eliminate the reimbursement process altogether, though this might not be feasible for all cases.
- As in many situations, your best option will most likely come in the form of digitization. Using a spend management platform like Pluto, will not only give you much better visibility over your employee spending but also streamline the reimbursement process for you.
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