How Embedded Payments Is Optimizing the Expense Management Process

The PaymentsJournal Podcast

Organizations routinely ask employees to take clients out to lunch or attend industry conferences. Yet the expense management process designed to support these essential functions is often manual, time-consuming, and prone to delays, errors, and misuse.

In a recent PaymentsJournal podcast, Susie Shyatt, Business Development Executive at B4B Payments, and Hugh Thomas, Lead Commercial Payments Analyst at Javelin Strategy & Research, discussed the common challenges businesses face in managing expenses—and how embedded payments can help streamline this inefficient process.

Expense Reimbursement Vs. Corporate Cards

One of the most common issues in the expense management process stems from employees being required to use their own funds to cover company expenses. First, this means the employee must have sufficient funds available—something that can be a challenge for costly business trips involving airfare and hotel stays.

Another issue arises once the employee returns, as they must provide documentation for their expenses, which then needs to be manually processed. This can lead to delays or errors in reimbursement. There’s also the risk of abuse in the process—something that, in some cases, has even been inadvertently encouraged by management.

“With some companies that we’ve worked with in the past, their C-level groups are touting the ability to get points and earn rewards using personal cards as a benefit to new hires,” Shyatt said. “Whereas the HR and payroll and finance people see it as a headache, where they’re having to reimburse without knowing exactly what all of the payments are being utilized for.”

These challenges with expense reimbursement have led many companies to adopt corporate cards. However, company credit cards can present hurdles of their own.

“At the end of the month, you have to take this big bundle of receipts and photocopy them and get it back to somebody who then has to look through all that stuff and sign off on it,” Thomas said. “It creates tons of extra work for the payables department. It creates extra work for the payroll department. Frankly, it’s not anywhere as safe or compliant a way to buy on behalf of a company as when you’re having somebody submit their own personal expenses.”

Embedding for Speed and Visibility

Among all these pain points, one of the biggest barriers to streamlining the expense management process is that organizations are often unaware of just how inefficient it really is. Multiple groups within the same company may be involved, resulting in a fragmented, manual solution where items can easily get lost in the mix.

As a result, the expense management process becomes frustrating not only for finance office staff, but also for employees.

“Especially as younger generations have entered the workforce, they’re used to everything being quick in their personal lives,” Shyatt said. “You can go to a restaurant with 15 people and after one person puts it on a credit card, within seconds, everybody has paid that person back. It’s very confusing why a work payment should take so long, when I can make a transaction on a website, and everything is there in seconds.”

Payments technology is the reason these interactions are possible. Much like the innovations that allow roommates to seamlessly split a rent payment, embedded payments can be used to accurately reimburse an employee for a hotel stay. Additionally, embedded solutions can equip employees with the tools they need to manage expense activities upfront, which can help mitigate concerns about payment delays.

Embedding payments into the expense management process also brings substantial benefits to organizations. While this technology likely won’t replace staff members, it can reduce the amount of time finance personnel spend processing expense documentation—freeing them up to focus on more strategic tasks.

It also gives organizations greater control over how funds are being spent. When employees use personal funds to cover expenses, there’s often a lack of transparency into how and where those funds are sourced.

In addition, visibility into the expense management process is often increased because these solutions allow organizations to manage both employee and outbound payments from a single platform.

Many solutions also support faster or instant payment types—and real-time payments benefit not only the recipient but the organization as well.

“When you’re using these embedded solutions or expense management tools, it gives you more ability to maintain your working capital, and it gives you a better idea of where you truly stand from a cash flow perspective,” Shyatt said.

Removing the Inertia Barrier

Even though there are clear benefits to adopting embedded payments in the expense management process, many organizations worry that integration will be too costly or place too much burden on the IT team.

However, with the rise of embedded payments technologies, the biggest obstacle to streamlining the process is often resistance to change.

“Inertia is arguably the biggest barrier,” Thomas said. “If there was no inertia in the world, there still wouldn’t be check payments in the United States, after pundits like me have been talking about check payments disappearing for as long as I’ve been in this business. These things don’t change overnight. They don’t change over years necessarily, and that’s mostly a factor of how people run their businesses.”

Though many companies are focused on day-to-day operations, the benefits of modernizing expense management make it well worth the effort to step outside their comfort zone.

“At a lot of the companies that we work with, payments are not their core business, it is just part of what makes their business run,” Shyatt said. “In their mind, it can be a little daunting to look at these big, embedded solutions and think about adding all of these pieces into what they’re doing today, when it’s not the core business that they know.”

Deep Diving for Solutions

The first step for these organizations is to take a deep dive into their expense management process from end to end. They should talk to their accounts payable and payroll staff, as well as any employee who regularly participates in the expense reimbursement program. Then, the organization can identify the true pain points in their current process.

Next, the company should search for solutions that can meet these needs. This could include evaluating whether a platform can integrate with existing systems or finding a solution that offers more robust compliance reporting functions.

Organizations should also assess whether they need to leverage multiple payment types—such as payment cards, ACH, or real-time payment rails—to optimize their expense management process. Another consideration is whether they require a platform that can support payments in multiple currencies.

Once the organization has identified its needs, it can begin to address the inefficiencies in this critical function.

“A lot of times, especially at a higher C-level, we think we know what the problems are and what the headaches are, but we don’t take the time to get in the weeds and truly figure it out,” Shyatt said. “It goes back to knowing your pain points. Knowing exactly what you need not only helps with efficiencies within your company, but it also helps with your cost savings as well, because those go hand-in-hand.”

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