INEFFICIENCY OF TRADITIONAL BUDGETING METHODS
Traditional ways of tracking and managing your company's spending could perceive you to think that you are in the 20th century, manually working on spreadsheets, bank statements, and paper receipts. These traditional and tedious efforts are also susceptible to human error, and it's a real challenge for the finance teams to get an exact number of your company's expenses. A real and exact account on the company's budgets can help managers to take profound administrative decisions for the organization's benefits, but with such conventional practices of managing expenses, it is near to impossible. This lack of data results in slow reimbursement processes, gradually resulting in a decline in employee morale, an increase in organizational disputes, mismanaged workflow, and henceforth lowered productivity.
Moreover, when it comes to reimbursements, paper receipts work as sole proof from the employee side. Unfortunately, paper receipts can be feigned and manipulated. Generally, companies pay no consideration to their spending policies, and as a result, even the employees are not concerned about the unnecessary draining of the organization's budgets. Such inefficacious practices can lead to out of policy expenses, incurred by the employees, on the company's cost. While approving receipts for reimbursements, there is no solid way for the finance teams to check on the authenticity of the receipts. This can result in an increment in the number of organizational frauds, and that too, all of it goes unnoticed. Also, irregular and variable expenses are too small and less frequent for finance teams to get involved, so they are left entirely in employees' hands. Now the problem here is that generally there is little or no communication between the staff associated with different departments. This results in duplicate or unnecessary purchases and since they pay using cash, from their own pockets, or with the company credit card, it becomes difficult to spot if there has been any sort of overspending.
Adding further to the miseries of the finance teams, they sometimes need to run around and ask the employees to submit their receipts on time, and eventually, at the end of every month, the amount of work that the finance guys need to do is overwhelming. Consequently, because they need to adhere to certain deadlines, they have to turn a blind eye towards all the suspected receipts. A lot of considerable time and effort is thus wasted on a work that could have been done more efficiently and easily. Alternatively, sometimes employees use company credit cards for carrying out business expenses. But in terms of managing data, even this is not an efficient process, as almost all credit cards provide bank statements every month. This could force the finance team to do the reconciliations during other important deadlines.
Above all, employees themselves don't prefer filing receipts, and generally, they postpone it to the very last minute. The finance teams have to often extract the data from the receipts and input them manually into spreadsheets. All this wasted precious time, counting other's dime.