This marks the 10th year that we’ve studied spend trends at Emburse, and as companies prepare for a potential market downturn, the findings come at a particularly important time. While this research can be used to guide us on the road ahead, it’s worth noting how the impacts of the last several years got us here.
This is our first full year of data since vaccinations were rolled out and lockdown protocols lifted, and yet it suggests that the spending trends initiated during the pandemic will linger on. We’ve also noted that the shift to remote and hybrid workplaces may be one of the reasons why the volume of expenses has doubled since last year. Despite the higher volume, the percentage of in-policy claims dropped (only 43% of companies report high levels of policy compliance, compared to 57% in 2021), likely caused by unmanaged or long-tail spend - that which falls between employee expenses and invoice-based spend.
Based on our findings, we identified three key trends you should know for 2023:
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Spend visibility at the forefront
With the shift to remote work that took place over the past few years, transactions previously funneled through accounts payable are now increasingly getting processed as personal expenses. Employees have grown accustomed to buying everything with personal or corporate cards and submitting them through expenses, and as a result, unmanaged spend is on the rise. To counter the implications of decentralized employee spending, organizations will need to take steps to increase visibility into all payments made from corporate accounts.
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We found that one of the biggest frustrations companies face when it comes to their current expense management process is employees losing paper receipts or submitting reports without receipts (49% of companies listed this as one of the three top pain points).
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What’s more, as companies scale, they say their expense processing costs grow proportionally. Small businesses spend less than $10/report, while enterprises spend double or even triple that. Thirty-two percent of enterprises spend $21-$31 on each expense report, and 24% spend more than $31.
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Policy enforcement problems
As high inflation drives up costs and interest rate hikes increase the cost of debt, companies need to find ways to better manage and enforce their policies and control spend. This may be more challenging for businesses still relying on manual methods to manage and approve expenses, which are reporting higher rates of out-of-policy claims. Yet the answer may not be all that complicated. The area ranked “greatest need for improvement” by respondents was simple: better management of employee expenses.
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One in five manual companies in our survey report very low rates of in-policy expenses: fewer than half of their employee expenses are within policy.
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While companies of different sizes appear to have many of the same top pain points, some issues that ranked highly for enterprises fall off the radar at the small business level. Small businesses struggle with late reports, but less than enterprises do (24% vs. 49%, respectively). Twenty-seven percent of enterprises struggle with reviewing expense reports for policy violations, while only 7% of small businesses could say the same.
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Digital payments takeover
Our research suggests that organizations will continue to push digital payments as a way to reduce costs, increase productivity, and improve the employee experience. This comes as no surprise as we’ve seen this trend around for a few years. In 2020, analyst firm IDC reported that digital payment capabilities are becoming more integrated into expense management solutions, and our findings confirm that the market is quickly moving away from paper-based payments. The universal frustration from lost receipts may drive companies of all sizes to embrace virtual or physical corporate cards with built-in expense policies.
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With the pandemic rendering paper check runs impossible for most companies, electronic payments were ranked by 70% of respondents as a most-valued feature of spend management. Mobile receipt capture was the second most valuable feature (35%), again reflecting a shift away from paper-based processes.
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Benefits found in “better spend optimization” (e.g., producing less waste, securing better vendor discounts) also scale, from 36% at the small business level to 50% at the midsize and enterprise level.
To get these findings, Emburse surveyed more than 500 finance professionals for insight into how their organizations are applying spend management techniques ahead of a potential recession. While some are already streamlining the expense reporting process via electronic payments and reimbursements, others still have a long way to go to achieve spend optimization.
Read more in our 10th annual Spend Management Trends report or view the infographic.