Are slow reimbursements hurting your employees and your business?
When running a business, there are millions of things to think about; reimbursing your employees for out-of-pocket expenses may not seem like a high priority. However, have you considered the impact slow reimbursements have on your employees? You would be surprised about how far-reaching the effects of slow reimbursement are and how they can impact your business.
First of all, what do we mean when we say ‘slow reimbursement’? From an employee's point of view, slow reimbursements are repayments that happen outside the normal pay cycle. At a minimum, you want to avoid the messy situation where an employee gets stuck paying interest on their personal card for business spending because there has been a lag in reimbursement. A timely and efficient process for reimbursing your employees is crucial to their engagement, well-being, and ultimately, your company's growth.
We’ve unpacked the three common ways slow reimbursement processes are hurting your employees and your business — plus a simple way you can change this.
1. Eroding employees' personal finances
Whether it is remote-working needs, buying office supplies or client lunches, you want your employees to feel confident with spending in-line with their role in the company. But the simple fact is, it’s very common for employees to be concerned that the personal money they’ve spent won’t be repaid speedily. Moreover, if slow reimbursement does eventuate, an employee will feel like that company has little concern for their personal finances.
In regrettable circumstances, there can be situations where an employee can also face personal finance liabilities. For example, if an employee uses their own money for a business trip and the reimbursement takes too long, they may not be able to pay their bills on time. As a result, they may face late fees or interest charges on the bill, and their personal credit score may be negatively affected.
More commonly, if employees don’t have access to a company credit card, they will be hesitant to use their personal money for work-related expenses. Employees may avoid opportunities to network or develop skills, which presents a large concern for growing businesses and businesses reliant on building strong relationships with clients. Employees may also delay purchasing what they need until closer to pay run (and reimbursement), again a concern for businesses looking to seize opportunities and empower their staff.
There are also situations where employees will simply wear the cost of the purchase rather than deal with the process of reimbursement. Depending on the expense amount, if things degrade to this point, retaining staff may start to become an issue.
2. Compromises employee relationships
What do slow repayments say to your employees? First, it says, “your financial wellbeing isn’t a priority for us”. This can have a flow-on effect through the company, as company culture and feeling valued at work are primary reasons people join or leave a business. From the employee perspective, the speed of reimbursement says a lot about management. If you expect your employees to carry the financial burden, it is a short step in their minds before further trust is broken.
No one likes having to remind their manager to approve a submitted expense or ask for the business credit card for another routine purchase. While not seemingly integral from a management perspective, having a concrete reimbursement cycle is important if you want to build a strong, trusting culture in a workplace.
A simple and clear reimbursement process will combat many of these concerns. This could be expense management software or, even better, the use of company credit cards. By doing this, you are working to alleviate employee concerns, so they are confident to make purchases on behalf of the business in order to do their jobs.
3. Causes employees to be less productive
One of the hardest things to measure in a workplace is productivity; however, financial stress undoubtedly has a negative impact. According to a study by Financial Health Network, 78% of employees with high financial stress say it impacts them even more than work, family, or health-related issues. Slow reimbursements contribute to this stress and can be a distraction throughout the workday.
This impact on employees can happen even with an expense management software and reimbursement process in place. The reimbursements process is time-consuming - the receipt must be submitted, along with categories and other required information for repayment. Then the expense often needs to be approved by a manager(when they get around to it). It also consumes the time of your financial manager, having to oversee the process, plus dealing with any record-keeping, chasing receipts or correcting errors in the submissions themselves.
Both of these situations are less than ideal — you want your employee to be able to purchase what they need to get the job done, and not have to spend hours getting their money back. Similarly, you want your managers and financial team to be empowered to make quick approvals on spending, so they can spend their time focusing on more important things.
Let’s eliminate expense reimbursements
A solution to all three common pains are company credit cards. First and foremost, they will remove any arduous process of reimbursement you have now — employee confidence will be up, and time spent doing financial admin will be down. They will be able to spend on behalf of the company and not have to worry about being out-of-pocket.
All good business card issuers will have the option of multiple cards for staff, saving you the awkward process of juggling and keeping tabs on the card around the office. Ideally, having access to credit as opposed to debit will provide you with even greater flexibility across the board; you won’t be restricted by the balance of your account, nor have to spend time preloading balances on cards.
Archa is a company that ticks all of these boxes - a spending solution that lets you instantly issue multiple cards to all of your employees. Automation is a win for all - employees and employers. So if you want to spend less time doing financial admin and more time focused on your work, speak with an expert to learn how Archa can help you do just that.