Whenever employees travel for business purposes or purchase office items, they have to submit receipts to the employer to claim those expenses. The finance team then collects these receipts for reimbursing the employees and ensuring that the taxes are filed correctly.
If these receipts are not managed efficiently, it can lead to several issues for the financial team, such as tracking cash flows, filing taxes, and detecting fraud. Therefore, every business requires a streamlined receipt management system to handle these receipts efficiently.
What is Receipt Management?
Receipt management is the process of filing, storing, organizing, and tracking receipts. It is a critical component of accounting for businesses. Receipt management allows the owners to track their revenue and monitor sales.
Traditional Vs. Online Receipt Management
Traditional Management System
Traditional receipt management involves storing physical paper receipts. It is the accountant’s job to verify each receipt against the company’s policies. This method is highly cumbersome and inefficient since it requires a lot of manual work and is prone to errors. Additionally, the paper receipts must be sorted and stored correctly to be accessed by the finance team when required.
The traditional receipt management system creates several challenges for the organization, such as delays in reimbursement, issues during auditing, and the potential for expense fraud. Therefore, it reduces the overall productivity of the company.
Online Receipt Management System
On the other hand, in the online receipt management system, the receipts are stored in a cloud-based platform, such as SaaS-based expense management software. The platform allows employees to upload their expense receipts to cloud storage so the finance team can access them from anywhere, anytime.
Online receipt management eliminates most of the challenges associated with traditional receipt management, such as handling paper receipts and manually entering receipt data into excel sheets.
In addition to enhanced convenience and accessibility, the online receipt management system provides other benefits to the company over the traditional system. Some of these include access to a consolidated overview of the company expenditure, reduction in receipt management costs, and improved data accuracy while filing taxes.
Therefore, the cloud-based online system is a more efficient way of receipt management than the traditional one.
Benefits of an Online Receipt Management System over Traditional System
According to the IRS, receipts must be stored for three to seven years. Hence, additional storage space is required to keep the receipts, leading to capital expenses. Moreover, the company has to bear the associated costs of tools such as printers, shredders, stationery, and photocopiers if they use paper receipts. When these costs add up, they can become a significant expense for the organization.
1. Helps in Reducing Costs
An online receipt management system is not only more organized and efficient, but it also helps the organization save money. This system reduces the costs associated with physical storage space by storing the receipts in a cloud-based platform. In addition, the cost of manual effort required to handle physical receipts is eliminated.
Consequently, an online receipt management system helps free up the organization’s bandwidth to do more business-critical tasks and focus on budgeting and cost savings.
2. Improves Searchability of Receipts
The traditional system for managing receipts is not only inefficient, but it can also be quite time-consuming. This system requires filing cabinets, boxes, and binders to store physical receipts. If someone wants to find a particular paper receipt, they will first have to locate the folder or cabinet it is kept in and then go through each receipt individually. Moreover, manually handling paper receipts makes them more susceptible to being lost.
An online receipt management system is a great way for finance teams and employees to access and track receipts. With just a few clicks, they can search for the receipts and view the related details. This process makes it quick and easy to find what they need, saving time and hassle.
The online receipt management system not only helps declutter the office but also improves the overall productivity of the employees. Additionally, the employees no longer have to worry about misplacing physical receipts. This system also allows them to access their receipts anytime and anywhere.
3. Reduces Inaccuracy
There are many problems that the finance team faces when they have to enter data from paper receipts manually. Sometimes the receipt is incomplete; other times, it’s torn or damaged, and the written details are often vague.
Also, sometimes the accountant can mistype the information while manually entering data in an expense report. A small error like this can cause a discrepancy between statements, and the accountant would then have to double-check all expenses and receipts.
An online receipt management system offered by expense management software helps eliminate these issues. It requires employees to scan their receipts so that the software can digitally extract the required information using the OCR (Optical Character Recognition) technology. This allows the online system to check for any mistakes or errors in the receipt. For example, if an employee submits an incomplete receipt, the software either won’t accept it or will flag it so that the employee is notified.
The software automatically extracts the information and enters it in the expense reports, eliminating the inaccuracy that can come from manually entering data. This greatly enhances the convenience of the finance team and saves their time so they can focus more on crucial financial activities such as forecasting and budgeting.
4. Supports Faster Reimbursements
The traditional reimbursement process is slow and tedious as it requires a lot of manual work from employees and the finance department. Employees can spend hours gathering receipts and filling out expense reports, which the managers must review and approve.
Lastly, the finance team is responsible for verifying each receipt while ensuring that the expenses comply with the company’s policies. In some cases, if data is missing or incorrect, the process can be even more time-consuming due to the requirement of constant back-and-forth communication.
Online receipt management can help reduce the time it takes for reimbursements for business expenses. This is because the finance team can easily access the receipts that the employees upload on the cloud-based platform. Additionally, this system notifies employees and managers of any inaccuracies, pending approvals, and deadlines for expense filing.
The expense management software is integrated with the company’s reimbursement policies, so the finance team doesn’t have to verify receipts manually. Automated verification speeds up the approval process, speeding up employee reimbursements. This also improves the overall satisfaction of employees.
5. Gives Comprehensive Overview of Expenditure
In a traditional receipt management system, it can be challenging to get an in-depth look into the company’s overall expenditure because the finance team has to manually enter data from each receipt into excel spreadsheets and then create an analysis report. Comparisons of revenue with expenditure can also be painstaking if done the traditional way since this process is tiresome and prone to human error.
An online receipt management system gives the company a consolidated overview of business spending during a given period. It is an effective tool that allows the finance team to track the company’s expenses and compare the spending patterns of the employees digitally.
In addition, an online receipt management system helps generate extensive reports and analyze the company’s cash flow. This is useful for higher authorities who want to gain deeper insights into reimbursements, business travel expenses, and others. It also allows the management to identify expenditure trends and eliminate wasteful spending in the future.
Ultimately, this enables the company to become more efficient financially, which may involve cutting down costs or providing additional expense allowance where required.
6. Reduces Expense Frauds
According to the Association of Certified Fraud Examiner’s Report, reimbursement fraud accounts for 21 percent of fraud in small businesses and 11 percent in large enterprises. Hence, it is necessary for managers to keep an eye on such frauds.
An online receipt management system is crucial for companies because it can automate the process of checking and verifying receipts. A SaaS-based expense management software with online receipt management can flag duplicate receipts, notify employees of non-business expenses, and even catch fictitious or inflated expenses. This is a huge time-saver compared to manual receipt verification, which is tedious and prone to errors.
Online receipt management systems help managers detect frauds on receipts more easily. Moreover, company policies can be automatically integrated through these systems. This means that only compliant receipts are accepted, saving time and hassle for both managers and the company.
7. Increases Efficiency
Traditional receipt management systems are inefficient due to repetitive manual processes, from receipts verification to manual data extraction and settling disputes.
An online receipt management system offered by an expense management tool simplifies expense filing and approval by eliminating tedious tasks, such as following up with employees for expense filing, checking policy compliance, or verifying that the submitted expense report is complete.
The expense management software is integrated with the company’s policies to flag any spending that falls outside of it automatically. It allows the finance team to identify and resolve claims more quickly. This also enables the management can focus more on essential strategies such as budgeting and cost-saving. Since the software automates most of the repetitive tasks, the entire workflow becomes more efficient.
8. Gives Personalized Reminders
Humans are sometimes forgetful by nature and can often forget important dates and deadlines. According to a survey, only 43% of receipts are filed within 15 days of the expenditure, whereas most employees, i.e., 52%, take 30 to 60 days or more to file their expense claims.
With online receipt management system, employees get reminders to file their expenses, eliminating the issue of last-minute filing. This is beneficial as a lot of employees often neglect to file their expenses promptly.
Additionally, the managers and finance department also get personalized reminders to complete pending approvals and process reimbursements on time.
9. Enhances Sustainability
We often assume that paper receipts are recyclable, but this is not always the case. During printing, chemicals like phenols are used, making paper receipts non-recyclable.
According to a survey by McKinsey, 33 percent of businesses follow sustainable practices to improve operational efficiency and reduce overall costs. Going digital not only helps in automation but is also a sustainable way to go. Initially, opting for sustainable practices demands some investment, but the company saves money by prioritizing sustainability over time.
Another thing to consider is that creating a sustainable workspace is great for the environment and the company’s brand reputation. According to a study by Maryville University, 87% of American customers purchase from a company that advocates for an issue they care about, and 76% of American consumers expect companies to take some action against climate change. This shows that customers are more likely to purchase from brands that follow sustainable business practices.
Optimize Productivity with an Online Receipt Management System
By switching from the traditional receipt management system to online, the company can reduce the chances of fraud, incomplete expense reports, and policy violations. Moreover, this saves the company time and money, along with becoming more sustainable.
Our SaaS-based expense management software is integrated with online receipt management. With ITILITE, your expense management becomes simpler and more efficient as you can collect, store, track, sort, and manage your receipts all in one place. Moreover, it allows employees to file their expenses anytime and anywhere without worrying about losing physical receipts.
Get the free demo of the corporate travel management platform by ITILITE to see how you can manage receipts with ease.
