Mercurius IT’s Lee Cridland on expense management and building processes
A Q&A with one of our partners
In this guest post, Operations Director at our partner Mercurius IT, Lee Cridland, talks to us about his first experience of expense management, building a system and how to get employee buy-in when introducing new expenses policies.
Lee also covers the necessarily differing approaches to expense management in multinational corporations versus midsize businesses, where to start when building your own expense management function and his experience of managing expenses across Siemens and Mercurius IT.
Q: What was your first experience of managing expenses?
LC: My involvement in expense management started when I was Divisional Information Officer at Siemens. There were around 30,000 employees at the time. I had a team of about 40, working from various sites around the world, and one part of my role was managing their expenses. This was a particularly difficult task for many reasons: they were claiming in various currencies, claiming for a range of things and there were different policies and accounting structures for each site and country. There were policies for all kinds of expenses, including mileage, accommodation, travel and gifts or hospitality. If you went on a train, there was a given allowance and if you stayed somewhere overnight there was another kind of allowance. Each site also had their own policies; so the UK site was bound by UK law, the German site was bound by German law, the US site was bound by US law and so on. To combat this, Siemens had a business policy that applied equally to all locations—but there were always differences.
Luckily for me, my assistant helped me greatly. Her role was to make sure that all those policies were followed as well as taking care of the general admin which was very tedious and time-consuming as we didn’t have a global expense management system. Every day, I would come into work and I’d be brought a stack of paper, sometimes 20 sheets high, sometimes 50, and I would sign each sheet. I was approving expenses, but I was also approving where they were being charged to. I’d have a range of non-billable expenses, both personal and company, non-billable project-related expenses and billable expenses going back to the customer. For any billable expenses, I had to make sure we had all the evidence—evidence for customer sign off, evidence for local VAT regulations and, sometimes, evidence for the government.
At the end of the day, the approval of expenses is not a value-add activity. It is admin and the more you can take the pain out of that, the better.
Q: Having had that experience at Siemens, what elements did you bring with you to Mercurius IT?
LC: Frankly, having a process. Simple things like having one template that everybody uses. Retaining a standard way of working and having templates and documents in place so everybody is aware of how the process should run and can follow that process repeatedly. In the past, we didn’t do that. You want to make sure that the template actually collects the necessary information and provides a set of instructions about how to fill in the template. Ensuring that everybody is aware of the daily allowance figures, making sure you’re putting expenses in the right place, describing exactly what the expense is for—rather than just saying “travel”, I need to know what days, where you went and the odometer reading on the car; you need to have a record of that for HMRC.
Secondly, having a common approval process and not approving in an ad-hoc way. Having simple and understood approval levels or delegated levels of authority. If someone puts in a personal expense then someone else needs to check and approve it, that person will have a delegated level of authority to do so. The other thing was the collection of receipts. In the past, it wasn’t common practice to enforce the collection of receipts. Now, it’s clear to everyone that if you don’t provide the receipt then you won’t get the expense.
Without the receipt, we can’t claim the VAT back, which immediately increases the cost of the expense by 20%. That’s what I learnt from Siemens and brought to Mercurius—having a common, transparent way of doing expense management that everybody follows.
Q: What does outstanding expense management look like to you?
LC: A perfect expense management system, in my mind, would be one which is flexible and easy to set up because what you’re really dealing with if you have a great expense management system is flexible workflows. I know from our own work with workflow systems that this will make your process a lot quicker and even reduce the admin involved in collecting, processing and approving expenses. Having multiple categories of expense that follow different limits, trigger points or alerts with an easy way of scanning receipts so they can be attached to the appropriate expense. Then having a mechanism to help you drill into the expense and get into the individual lines so you can see the receipts and proofs that are associated with those lines.
Another sign of an outstanding expense management system is the ability to either post the expense transactions into your finance system directly or give a report which is structured so that someone can easily go through it and post it into the finance system. Lastly, I would say including reporting (or business intelligence, as it’s now known). Using a reporting dashboard to analyse if there are trends over time—for example, if some projects are massively more expensive than others or if some individuals have much higher spending patterns—being able to compare and contrast different people’s spending patterns so you can go back and influence them to make changes is very useful.
Zetadocs Expenses is one such outstanding expense management solution that really helps finance and approval teams.
Q: What would be the result if a business had no expense management system in place?
LC: Well, it’d be chaos. If there wasn’t any system in place, the amount of admin would be massively increased and there would be no transparency whatsoever. Most people would not abuse the system but you’d get some that would, by putting in false expenses or exaggerating their claims. You wouldn’t get any VAT back because there would be no way of collecting receipts or proofs of expense, so the cost of expenses would go up and profitability would go down.
All in all, it would be very problematic and for certain things, it could be that you’re not complying with HMRC requirements. For people who claim mileage, the company is obliged to keep an odometer log to compare the claims to the actual miles. If HMRC were to audit and find that a record isn’t kept, you might have to pay the money back or no longer be able to offer a mileage rate direct to your employees. So, it is crucial that there is an expense management system and policy in place for any business.
Q: For someone tasked with building an expenses process for their organisation, what advice would you give?
LC: The first thing I’d do is build a template. The reason for this being that the template is the foundation for everything else. The template obliges people to record their expenses and if you’ve got a well-structured and organised template, they will collect all the necessary information. Templates also force people to think carefully about what they’re writing on it.
Once you’ve got that basis and everyone in your organisation can see the tangible benefits of having a process to manage expenses, it’s time to invest in that process to reduce your own overhead in collecting and processing expense forms. That’s where a solution like Zetadocs Expenses comes in. With an application (mobile or otherwise) to house your template, people are obliged to record their expenses correctly and in a structured manner. The solution can also handle the submission of claims, managerial approval and reimbursement in the background, giving you more time to focus on other tasks. Start by identifying the stages of your process that are causing you the most grief, whether in terms of time, admin or errors, and match them with a solution that can address those in a cost-effective manner. Expense management is really a process of continuous improvement and a solution like Zetadocs Expenses is the first step in that process.
In 2010, Lee Cridland joined Mercurius IT as Operations Director, having climbed the ranks at Siemens in the UK and Germany to become Divisional Information Officer and Head of Transformation Programmes. During his time at Mercurius IT, Lee has been responsible for building Finance, Delivery and Account Management processes, leading the Application Development practice and consulting on Business Intelligence. He holds an Honours Degree in Engineering & Manufacturing, is a Chartered Engineer and has a Master’s Degree in Business Administration.
Discover more about Zetadocs Expenses, our award-winning expense management solution, by clicking here.
This article was written by Alex Skelton, Marketing Executive at Mercurius IT.