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Rewatch our CIPHR Connect partner webexpenses on CIPHR’s stand at the CIPD HR Software Show (filmed on 14 June 2018)

The challenge with expense management isn’t creating a policy — it’s making the policy work in the real world. In this session, Joe explored some of the ways that technology can help organisations to put their expense policies into practice.

CIPHR Connect is an ecosystem of trusted business applications that integrate seamlessly with CIPHR’s powerful HR and recruitment solutions.

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So, as Megan put it, we are an expense management system company. We specialise in managing your expenses. It pretty much does exactly what it says on the tin. There’s a bit of an epidemic around all of kind of managing expenses and everything that comes with that. I’ll explore that in a bit, and some of the stats around that shortly. Just to begin with, though, I’ll give you a bit of an intro about who Webexpenses are, where we came from, what we are about and who we work with CIPHR.

So, we were started back in the year 2000 by three accountants who basically thought there’s gotta be a better way to do your expenses. Nobody typically likes doing expenses. It’s a bit of a laborious task. Come the end of the month, you’ve got a wad of receipts, you’re panicking, you get your spreadsheet out, you attach it to that. It takes a bit of time, you are out of the way quite a bit, and no one likes doing that as such. So, they thought, “Okay, brilliant. We can make a system out of this.” So, back in 2000 they invented the first piece of software. That went great and so it grew steadily up until about five years ago where we were then taken over by our current owner. Since then, there’s been a lot of change. You know, all the development’s been brought in-house, and a lot of changes to the software itself. The industry that we work in, it’s a pretty fast-paced, fast-moving industry. A lot of competitors, a lot of different businesses coming up, and the technology is ever changing. We’re kind of at the forefront of all that with OCR technology, using the app as kind of the main driver of this system as well.

Some of the other key bits about Webexpenses that have come to the forefront over the past few years are we are a global business. We opened an office in Australia a couple of years ago now, and then opened one the beginning of last year over in America. So, the reason we did that it gives us the ability to give you 24/5 support throughout the working week. But also just expands our global reach. As a business, we operate in over 60 countries worldwide, so having multiple bases throughout the world enables us to kind of interact with all our clients at a much more local level. We’ve got around 1,000 clients and nearly 200,000 users accessing the system on a monthly basis. So, the system itself is pretty heavily used. It’s very configurable and customisable. It’s a one-to-many solution, SaaS-based cloud solution, so you can just pick and go whatever you want. That’s pretty much a nice quick overview about Webexpenses as a whole.

As Megan mentioned, we partnered with CIPHR. It’s a relatively recent partnership. But we saw there was an opportunity there for us to bolster their offering as well as ours. So, we work in partnership by providing them that specialist expense management solution that they can offer to their new clients and existing clients. And it just gives you that kind of extra tool for managing all of HR problems and finance issues as well.

So, expense management, what is it? Typically, the historic way to manage your expenses has been Excel spreadsheet, receipts. It’s pretty straightforward, it’s pretty cumbersome. You can’t do much with that. It’s a monthly thing. You send it off to your finance team and that’s it. Reporting wise, you can’t get too much out of it. Now, how we do this, very different. So, there’s a couple of ways that you can access the system it’s typically via the desktop or we have a mobile application as well. But what we will do, we’ll dive into a bit about why expenses is a problem.

So, why is expense management important? Seven percent of an average business’s expense budget is spent on corporate travel. Now, if you are a £100 million turnover business, that’s quite a bit of money spent on travel. So, you kind of wanna keep a closer eye on where that money is going, where it’s been spent, is it being spent correctly? Are people over-claiming potentially? So, on top of that as well, we looked at a report from the Aberdeen Group. They kind of noted that in order to become a leading organisation, you need to automate as many processes as possible. So if you’re still trying the manual way of doing expenses, then perhaps you need to look at how you can automate that process so that you can focus on other more important processes within the business.

The kind of pressures faced around expense management, typical ones we find here, visibility. I’ve mentioned this already. It’s key to have visibility on all different areas of spending within a business. But here’s an area that we found, and I’ll come to that in a bit, where people can fraudulently claim on a host of different things, and that will rack up. For example, it costs annually businesses throughout the globe, it’s a $2.9 trillion epidemic. So, you think, “That’s quite a bit of money that could be reduced just by a simple process being put in place or a simple piece of software.” We, as a business, decided to carry out a report. We interviewed around 4,000 different people across the UK, the U.S., Australia and New Zealand. This kind of gave us a good idea of where the key common expense fraud claims came from. So, for example, mileage, now that’s a big one. Most people, historically, you get a claim, it’s 48 miles, maybe you’re gonna make that 50. You round it to the nearest naught or the nearest five. Now, if you do that every day, over the course of the year, 45 PML, that’s gonna add up, and that’s gonna cost one person business, okay? Say you got 100 people on the road, that adds to a substantial amounts of money that you are overpaying in expenses throughout the year.

Other things which are quite interesting that people have claimed for, drinks, food and stuff for family, partners. So, you may get an overnight allowance, but you kind of stretch that, you get a meal for two and you expense that. There are some ridiculous ones I’ve heard in the past. For example, there’s an MP who claimed £0.39 for a [inaudible 00:05:52]. So, you think…and he was the wealthiest MP at the time as well. So, you think, “Okay, so if he claim it, fine.” But there’s some interesting claims there. David Cameron, as well. He actually claimed for a book, £10.99. And it’s a book on great historic speeches. So, I don’t know if that’s done him any good. And maybe I should have got it before today. But, yeah, it’s an interesting claim to put through on your expenses there. Taxis, as well. That’s an interesting one. How many times I’ve I got in taxis, got a receipt off them and it’s being blank and they’ve just told me just to fill it myself. Now, the risk of that is, you know, it’s a 20 quid taxi, you could put 30 quid, who’s to know? So, those little bits of, you know, fraudulent claims there. How do you kind of negate those? How do you manage them? How do you stay on top of that? How do you report on it? Businesses who don’t have that visibility or reporting function don’t know what they are losing out on. Ignorance is bliss at times, but ultimately, when it comes to finance and money, you wanna be as efficient and cost-effective as possible as a business.

In the United Kingdom, they pretty much mirror up with the standards around the world. But falsified expense claims as well. That’s an interesting one where perhaps somebody has claimed for train tickets, but then cancel the train and not had to go, and they’ve still put that expense claim through. How do you know if that’s the case, they may still have their receipts, refunded it. You don’t know. Is anyone here from the West Country here at all? No? Good. Those pesky people over in the West Country have increased the average fraudulent claims for the rest of the country quite substantially. I myself live in the West Country, so that doesn’t bode well for me. I’ve noticed my boss is over there as well so I’m gonna keep that quiet. But, yeah, as you can see, the average overclaim per person, £30, may not seem too significant per person. Again, you add that up, if you’ve got 100 people, if you’ve got 1,000 people in the business, that’s quite a bit of money over the course of a year.

Interestingly as well, men seem to be a bit more carefree when it comes to putting fraudulent claims through the system. Now, I’ll come on to it in a bit as well, but that could come down to the roles that are involved with expense fraud, which I’ll show you. But again, it’s an interesting one to look at. Nine out of 10 office workers have never had an expense report challenged or declined. So that’s quite substantial. So, you think, if you can get away with it once, you’re gonna do it again, and again, and again. And you can keep going until you are caught basically. But how are you gonna get caught if you don’t have a process in place to catch people? It’s quite simple. Einstein said, “Definition of insanity is doing the same over and over and expecting a different result.” So, if you have the same process in place and people are not getting caught, nothing is gonna change. So you need to do some change within the business.

One of the key that I personally have looked at as well is the changing nature of organisations in terms of employees. So, the whole buzz around Millennials and Generation X and Generation Y coming into businesses. Now, Millennials are gonna be the largest kind of generation within the workforce in the coming years, and they’re gonna be moving into leadership roles. Now, if you’ve got a workforce who’ve grown up kind of in a vastly changing technological era, so smartphones, iPhones, apps galore, and they come into a business and they’ve gotta do their expense on a piece of a paper, they’re not gonna be best pleased probably. You’re gonna wanna give your workforce the tools they want and are used to be able to do their job properly, and feel like the organisation that they are in is a forward thinking, technological improved business. So, that I think is a very important thing in terms of the workforce itself and the tools that they have to kind of carry out their roles.

Now, causes of expenses fraud. This is an interesting one. A lot of people in businesses they do it because they say, “Well, everyone does it, so why shouldn’t I?” Other people have been more sinister. Some feel that it’s as form of payback. So, maybe they’ve got a grudge against their organisation and they think, “Okay, I’ll put through a few fraudulent claims. That’s how I’ll get back at them.” Others feel undervalued or underpaid. So they’re gonna claim their money back this way. Now, we work with a whole host of organisations going from three people in the organisation up to thousands and thousands. So, I know of one company, one of their kind of top claimants in the business, which they weren’t aware of until kind of we did some reporting for them, claimed £30,000 of expenses in one year. You think, “That’s a salary in to itself.” So, if somebody is claiming that, you know, what else could they be potentially, you know, putting through? Another good thing about kind of having the visibility around what people are claiming on as well is if you have another system in place, for example HR management system, and people should be going through that to book trains, planes, hotels. But then you notice that they are putting them through your expense system, that’s costing you money. So, there’s a lot of different ways that having more visibility on your expenses can save you money as a business.

It is interesting to see the other reasons why people fraudulently claim. So, some of them…it is the getting away with it ultimately. If you’re gonna do it time and time again and you’re not getting caught, you’re gonna keep doing it. As I said, not paid enough and undervalued. This highlights, though, a problem for HR within a business because if you’ve got that culture where people think that they can get away with these things, feel unvalued, then maybe there needs to be change from HR’s perspective in the business. I know, when we talk expenses, you think finance. Who writes the policy for expenses? Is that HR? Is it Finance? Who manages it after that? A lot of people within a business, you know, in their induction, they’ll get the HR policy…they’ll their Expense Policy, read it, that’s it, forgotten. So, other claims…or accidental fraudulent claims, they won’t know what their policy is, so they’ll put it through and they’ll claim for it. It might not be that the process they have in place to check it is that strict. So, they’ll just go through, they’ve accidentally claimed for 150 quid hotel, but they are only allowed 100 quid. But that adds up again. So, having that ability to constantly show people what your policy is, reinforce that policy, update that policy regularly gives you that ability to kind of reduce those fraudulent accidental claims, though. So people may not want to do that.

Some of the key things that came up as well is around guilt. I’ll get to that in a bit, but it’s interesting to see how little people feel guilt when it come to basically stealing money. But because it’s from an organisation they work for, then they seem to think it’s not an issue. As I mentioned, these are kind of key reasons why people think they can get away with it.

Human nature. That’s an interesting one. That’s gonna be present wherever you go and whatever you do. They think they can get a little bit more because they are gonna take here. They are gonna take…they’re gonna keep pushing the boundaries until they get caught. Here’s the guilt that I was talking about. Thirty percent of people don’t feel any guilt when they are filing their expenses. Now, why is that? Is that because the business they work for, again, doesn’t have a culture where they feel valued? Potentially, now all of this is driven from a HR perspective. So again, it comes back to having an environment where people feel transparent and honest and feel like they come to work, they are valued, and they don’t need to do these sort of things. With the right processes, with the right systems and with the right culture driven from HR and Finance collectively, then this could be reduced. Again, this is kind of to iterate where I said a moment ago in terms of over-claiming for lower wages. And the fact that it’s just easy to get away with it. If it’s all done through Excel spreadsheets, then it’s very easy to get away with it. If you don’t have that visibility and a proper workflow and reporting, then you’re not gonna be able to know where you’re losing a lot of money.

This fact is slightly awkward, being a salesperson myself. So apparently, we are the worst for this, 25% of sales people apparently do fiddle with their expenses. Now, 90% of people in the room are probably sales people, so this isn’t gonna go down too well. But I imagine most of you that have come here today are gonna be claiming some form of expenses. I hope we don’t fall into this bracket. But inevitably, some people within this room will, according to these stats. So, CEOs and managing directors as well. Now, do you they have carte blanche to do what they want? Potentially, potentially not. But still, 20% of them…well, 90%…nearly a fifth of MDs and CEOs do fiddle their expenses as well. Finance people as well. They are not whiter than white, they’re in there. So they do have a bit in there as well.

But the key things to take away from this, though, is the repercussions. Only 69% of those that were caught just faced a slap on the wrist. No actual punishment was taken out. So you think, “Well, if that’s gonna be the punishment for fiddling my expenses and in essence, stealing money from an organisation, then all right, I’ll do it again. Not a problem.” Twenty percent were sacked. Now, those 27% that were sacked, probably did something quite bad or maybe weren’t performing to the best of their ability. So, if we look at that stat again, sales people, 25%. If your top sales people is fiddling their expenses, are you gonna fire them? I don’t know. But that’s a moral question for HR to kind of deal with. But if they are bringing the business, you know, substantial amounts of money each year, you’re gonna look at that a bit more leniently than somebody who is under performing and feels like they need to claw back some of their lost earnings through expense fiddling.

These are kind of some of the key stats around expenses and why it’s important for a business to kind of act and put a process in place to save them money and save them kind of embarrassment at the end of the day. Forty percent of…there’s a 40% overclaim on mileage. As I said earlier, that’s where you can just round up from the nearest 10 or the nearest 5. It’s easily done and it’s, you know, I guarantee most people have done that. You know, on a spreadsheet, how do you track that? With the system that tracks mileage from point A to point B, it’s hard to kind of get around that, especially when it flags up when somebody does change the mileage as well. So, having those systems in place stops that from happening. Time is another thing which is kind of key, especially for a lot of organisations who maybe have a small finance function or don’t have as many…sorry, have a lot of people putting claims through. Three hours per claim typically for a manual expenses process, that’s gonna add up, that’s a lot of time. That’s per claim. So, 100 people in the business, say you’ve got 2 finance people, that’s a couple of days, a month of that work taken up by doing expenses. I’m pretty confident as a business, you probably want those finance people doing something other than processing expense claims, especially if there is a system in place that can just do it for a couple of clicks. So, back to the overspend as well. Average expense overspend, £22.

I’m sure you can see from all this that we’ve gone through it’s not just a finance problem that expenses exist in. It does lap over to HR, that’s where policy is driven from, that’s where culture is driven from. So, there needs to be some synergies between Finance and HR, that’s why we’ve partnered with CIPHR. We’ve realised that that, you know, is a key area for change to be driven from. But the key is again, back to what I’ve kind of reiterated time and time again, how do you know that that’s a problem within the business? Visibility. That’s ultimately what it is. You are not gonna get the stats from a spreadsheet saying I’ve overspent here, I’ve overspent here. You need something that’s able to drill down into different categories, into different divisions, into different claimants on what’s being spent? Why they’ve spent that? How it’s overspent?

So, that pretty sums up in a nutshell why expense fraud happens, why it’s there, how it’s easy to get away with. But also kind of highlights the reasons why you need to kind of fix that problem and how you can fix that problem. It’s there, you know, there are solutions there, here we are, Webexpenses, we are a solution for that problem. So, it’s easily fixed. Any questions?

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