One of the hottest areas of B2B FinTech today is corporate travel and expense (T&E) management, with innovators looking to address the friction associated with expense reports and reimbursements. Many solutions aim to get rid of expense reports altogether, and instead aid corporates in allowing employees to efficiently and securely use company money while they travel (often using commercial card products).
However, the traditional strategy of employees using personal funds while on a business trip, only to expense out those purchases at a later date, remains common. A new report from virtual payment solutions provider Conferma says this method can, in essence, turn the employee into a financier of their employers.
In its latest research, published Monday (Aug. 13), Conferma estimated that employees spend more than $380 million of their own funds to finance their business trips, which they expense out later on. To calculate that figure, Conferma took into account the average value of an expense claim, the percentage of employees that use personal funds to pay for expenses, and the working population within the U.K. at companies with more than 10 people (17.9 million, according to Parliament U.K. 2017 statistics).
Previous research, published by American Express, predicts a recovery in corporates’ T&E spending across Europe, with businesses increasing their budgets for employee spend — a trend that could amplify the employee burden of financing their employer’s travel purchases.
More than one-third of the 1,009 employees in the U.K. surveyed by Conferma said they use their own money to pay for work-related expenses at least once a month. On average, a single expense claim is about $92. As T&E technology providers turn to commercial and virtual card technologies in an effort to address the challenges of expense management and reimbursement that corporates face, Conferma’s research introduces another side of friction that retroactive reimbursements create: cash flow management woes for the employee.
A third of surveyed employees said they have faced cash flow issues because of deadlines at their companies to submit expense reports, and more than a third said they wait up to two weeks to be reimbursed for work-related purchases. Half of workers aged 18 to 34 told Conferma that they face short-term cash flow crunches (this age range is also the group of workers with the highest average monthly spend on work-related purchases, researchers noted), and nearly half of workers said cash flow issues and expense report deadlines are causing them stress.
The research suggests that employers face more challenges than the expense management, reimbursement and reconciliation process. They’re also facing negative consequences of decreased employee productivity, as 41 percent of workers admitted they would not make a business expense if it took longer to get reimbursed. Conferma noted that this could mean businesses miss opportunities they gain when workers travel: 43 percent of employees would halt meeting with current or potential customers, for example.
In a statement, Conferma Co-founder and CEO Simon Barker said the research findings were a “surprise.”
“We knew it was a problem, and one we are working hard to address, but the impact of this on both employees [and] employers really is a cause for concern,” he said. “It simply should not be the case in today’s world that individuals, particularly the low-paid, are having to hold back personal spending due to the delay in expense repayment. Likewise, it is staggering that a single business opportunity should be missed due to an employee’s decision to hold off marketing because of these inefficiencies.”
He said that, while it is understandable that these issues would exist decades ago, it does not make sense that corporates should continue to deal with these points of friction in today’s business climate.
“Businesses must do more to address this issue for their own benefit, as well as the well-being of their own staff,” added Barker.