Employee expenses keep rising: Spend management can save companies cash

CFOs and controllers are on the lookout for every angle to keep spending in check. The last thing most companies want to do is lay off people to get costs under controls. A new report shines a light on an area to examine …

… employee expense reports. The business-related (hopefully!) charges employees are passing along to their employees has gone up in every category since 2019, the year before COVID shutdowns changed in-office policies and sparked inflation.

A new report, “A Look Inside Expenses: How Much Are Your Employees Spending?” from SAP Concur, shows cost per transaction rose in every category except train fare over the past five years. The increases can be pegged to inflation.

Two categories highlighted in italics deserve greater scrutiny:

• airfare: from $698 in 2019 to $770 in 2023 (10% increase)
• miscellaneous: $182, $217 (19%)
• other: $182, $202 (28%)
• car rental: $150, $192 (28%)
• entertainment: $123, $157 (28%)
• lodging: $116, $140 (21%)
• telecom: $90, $98 (9%)
• train: $75, $71 (-5%)
• gasoline: $43, $56 (37%)
• meal: $43, $56 (30%)
• ground transportation: $30, $34 (13%)
• parking: $25, $28 (12%)

Before approving expenses, finance team needs specifics

Did the other and miscellaneous categories catch your eye? We’re guessing that they did.

SAP Concur notes that transactions listed as other is “where we see the most spending. In 2023, 22% of expense spending across transactions … appeared in the ‘other’ category … [which] has become the most expensed category in terms of total spend, increasing from 17% in 2019. The cost of expenses in the ‘miscellaneous’ category also increased from 9% in 2019 to 11% in 2023.”

Both categories allow for potential fraud unless expenses are explained in detail and they go through a chain of command for approval before finance staffers are forced to make the call. Unfortunately many employees are feeling the squeeze of inflation. Many folks are tempted to pass off personal expenses on their companies — as many as a quarter of workers say they’ve done it at least once. Millennials and Generation Zers are the most likely to try.

Companies may be tempted to provide a small handful of expense categories to choose from. You may be better off offering more options to get a handle on what people are charging back to the company, be able to better assess total costs and cost per transaction, and see if savings are possible. A wider array of choices can also reduce other and miscellaneous expenses slipping through the cracks.