The Tech What

The Tech What


3 Faulty Reimbursement Processes That Harm Your Business

Do you believe that all out of pocket expenses that employees make are considered as reimbursable expenses? If you answered yes, there may be a chance that your company follows a faulty reimbursement process. It’s time to give your perspective a fresh air of change. Let’s delve into the chaotic world of faulty reimbursement processes and understand how they can harm your business operations. 

What is an unorganized reimbursement process? 

Any reimbursement process that brings in confusion and conflict between the beneficiary and the benefactor can be labeled inefficient. Below is a list of a few situations that would contribute to inefficiency in the employee reimbursement process.

1. Manual Processes:

  • In the age of digitalization, if your organization primarily depends on a pen and paper to get the reimbursements sorted, something needs to be changed or upgraded. This especially applies to your firm if it is a mid-sized organization or bigger. Using a pen and paper-based process opens room for errors and makes it likely that the entire reimbursement process will be slower, leading to employee dissatisfaction. Employees may lose motivation due to financial strain caused by delayed reimbursements. Ultimately, this can lead to decreased productivity.  
  • Furthermore, your accounting team will spend most of their time and energy on data entry and calculations, increasing the turnaround time. 
  • A possible solution for this could be to upgrade to expense management software. Automation will make it easier for your employees to file reimbursement claims. Likewise, it’ll be easier for your accounting team to distribute the reimbursement to the employees who requested it. 

2. Lack of clear guidelines: 

  • As mentioned in the introduction of this article, not all out-of-pocket expenses need to come under your company’s reimbursement scheme. Without clear guidelines on which expenses are reimbursable and which are not, reimbursements will be based on subjective criteria. It can create a subconscious bias that can create a negative perception of your workflows in your employees’ eyes. Sometimes, even legitimate expenses may not be reimbursed, leading to employee dissatisfaction. It may even lead to conflict within your teams, impeding productivity.
  • Faulty systems can blotch your company’s reputation, decreasing customer trust and losing business opportunities. 
  • A solution could be to set up an internal committee that sets up and periodically reviews reimbursement policies. Once the guidelines are laid out clearly, the committee can overlook different operations undertaken for reimbursements. They can even conduct periodic surveys to assess employees’ satisfaction with the current reimbursement process. Setting up a committee would help because they can set up norms that comply with the company’s policies and legal regulations. It’ll ensure that your company adheres to fairness and is out of legal and financial risks.

3. Lack of documentation: 

  • If your company doesn’t practice documenting every expense or reimbursement, your account books may have to be witness to some serious conflicts. Without proper documentation involved in the process, employees may have to file reimbursement requests more than once if the initial request is lost, leading to frustration. 
  • Without proper documentation, illegitimate denied requests may reach the financial team again. Since they would have no proof of the rejected claim, the financial team may have to spend more time figuring out the solution, raising conflicts within teams. Additionally, some employees may misuse the policies and take advantage of the lack of documentation to get their fraudulent requests approved. It can be financially detrimental to the business. 
  • If any request is accepted but not documented, it can become difficult for the accounting team to justify all the expenses. 
  • A solution for this could be to use automation to your advantage. Using an expense management software, all entries would be documented, and duplicate entries will be automatically denied. If you use advanced technology, it may be possible to decline or accept a request based on its nature automatically. If a request is accepted, it’ll be instantly logged into the accounts book after verification, reducing manual intervention and data entry errors.

Final words: 

Unorganized reimbursement processes can lead to employee dissatisfaction, leading to decreased productivity. Financial operations may be slowed if the financial team spends too much time sorting reimbursements. Furthermore, the organization may even face reputational damage if mistrust of your financial operations spreads amongst your employees. The best way to tackle this is by setting up clear reimbursement regulations and using advanced expense reimbursement software that automatically logs expenses into your accounting system.