10 Jan 2016 Embracing the misuse of the expenses process
A researcher at an American University received funding to study the use of tablets as an alternative to laptops in the work environment. A session was booked with a team of volunteers from a local business and a request is raised using the University’s purchasing system to acquire 12 iPads for use in an experiment. Financial approval is received. IT approval is granted but the lead time from the preferred supplier is 4 weeks – not quick enough for the session that is booked. Failure to have the iPads ready in time threatens the whole research project. What should be done?
Perhaps the most pragmatic thing to do is to go to the Apple Store, buy the iPads using a credit card and use the expense process to claim back the cost. So the researcher does this. She gets prior approval from her manager and goes shopping. The research project is saved.
I was told this story as an example of how sometimes, purchase to pay processes are inadequate and why people needed corporate credit cards with a high value credit limit in order to accommodate urgent situations like this. “I understand” I said but added “where are the iPads now?”
An embarrassed silence followed.
Although everyone had acted with good intentions, by using the expense process to acquire the iPads, it meant that, from a procurement perspective, they became invisible. By sourcing them directly rather than through IT using the proper process, they were not recorded as assets of the University and because they were paid for using a credit card and reimbursed through payroll, there was no visibility of that spend or of the supplier. The University’s IT spend was understated by the value of 12 iPads. It was said that the iPads were given to the volunteers as a “thank you”. Call me cynical but I suspect they may have found their way to eBay.
It’s one of those black holes in spend analytics and it can be a nightmare to control. Use of the expenses reclaim process as an alternative to the proper procurement process is extremely common. Buying things like IT consumables and office supplies and claiming the money back as a personal expense avoids the controls that a purchase to pay system imposes so in many circumstance it’s easier. But it means that corporate expenditure cannot be managed effectively. Because expense spend usual goes through payroll, the details of what has been bought goes unreported. And it’s not just trivia like stationery and memory sticks. Venues, conferences, training, travel – they all get bought on personal credit cards. What’s more, the culprits don’t even see what’s wrong with this process. They have a job to do and they want to use the most expedient method to acquire what they need.
So how should this maverick behaviour be managed? The usual way would be to educate and mandate the correct purchasing processes – to try to eliminate the misuse of the process but anyone who has ever tried this will confirm, it’s an impossible job. The fact is, there will be emergencies and there will be situations where common sense dictates that the rules need to be broken. And this is why I especially like Coupa’s expense module.
Coupa’s expense module shines a light on the misuse of the expense process but not in a patronising way. It allows the use of expenses because it recognises that it’s use is inevitable but at the same time, it encourages good practice. This overcomes one of the most common objections that P2P practitioners face – the one about P2P not meeting business needs – because it’s a real objection. Most P2P systems do not meet all business needs and it’s important therefore, rather than attempt to eliminate the use of expense as a procurement tool, embrace it and make it a compliant P2P channel – then you can manage it.
Pete Loughlin can be found on twitter @peteloughlin