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Manager Approval Of T&E Reimbursement Eliminated - What Do You Think?

Manager's Approval | Removal of Manager's Approval in Travel and Expense Reimbursement Process - Is it good or bad?

 

I have came across to this idea of removing the manager's approval in the expense reimbursement process. Once an Expense Report is submitted by an employee, it will go directly to Finance and Accounting for approval until it finally goes to actual reimbursement. Managers, at the same time, can still view the expense reports of their subordinates but there will be no approval on their part. The objective of this idea is to reduce the administrative work of managers in approving the expense reports and focus more on the "real" work they need to do. Will this idea compromise the compliance in the established T&E policy? Are there any controls that can be established to address the risk of fraud/non-compliance?

Answers

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

First, you just transferred the "administrative work" (ie, approval) from the Managers to Finance and Acctg. Overall, it cancels out reduction of work. The main problem I see here is that Finance and Acctg does NOT have any idea of the expenses they are "approving". Sure, it is T&E, but for what trip, for what client, are the expenses appropriate? These are question that the Finance and Acctg being the "approving" authority CANNOT answer.

Second, T&E policies are NOT set in stone, so changes can be made. Your compliance issue can be remedied.

Third, you are eliminating one set of eyes as far as fraud detection is concerned...the Managers.

ALL these being said, CULTURE AND QUALITY OF PEOPLE tend to impact the type of policies in place. If you have not had any incidence of fraud or irregularities and you "trust" your people, then policy can follow suit.

Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

I have to agree with Emerson; it's a transfer of labor, managers are the ones that know what they're approving and maybe in some cultures you could get away with it.. at least for a while.

There are a number of other aspects of the total process that could yield more efficiency. These two free white papers come to mind.

This one has some interesting data on the costs of identified elements of the process:

"Uncovering The Seven Hidden Costs Of T&E Expense Reporting"
https://www.proformative.com/whitepapers/uncovering-seven-hidden-costs-te-expense-reporting

"Rules-Based T&E Expense Reporting"
https://www.proformative.com/whitepapers/rules-based-expense-reporting

Best... Sarah

Anonymous
(Senior Process Expert) |

I agree with the main problem you mentioned that Finance and Accounting may not have an idea on the expenses they are approving. I also believe that managers has the "authority" and responsible in approving expense reports, particularly on the compliance aspect. Finance and accounting, on the other hand, is responsible in ensuring that expenses are properly accounted for (e.g. in accordance with Accounting standards, goes to proper general ledger account, etc.)

Follow-up question: Is the problem mentioned above constant in all cases? Since the trend nowadays is that Travel and Expense spending is increasing, multinational companies chooses to outsource their T&E Back Office Management. With this kind of set-up, how can we equip the employees with skills that can address the posed problem?

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

In short, it is bad internal control to not have approval by the employee's manager. The manager is the only person in the organization that will have consistent knowledge as to whether an employee was actually traveling or entertaining.

Additionally, the manager presumably has P&L responsibility and needs to have control of the approval of these expenses.

Finally, I hope you have a process for pre-approval of T&E before they are incurred. Pre-approval is one of the best ways to control T&E.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Anon
It's not clear whether any of these expenses are rebillable to clients. That can make a vast difference to your degree and method of oversight.
Clients who are incorrectly billed for travel will form a poor opinion of your services and that loss of business and brand value can be high. It's too late (and it's the wrong group) if only finance "audit" these expenses.
Emerson is spot on with culture and quality of people-what tone is set at the top?

Ken Stumder
Title: Finance Director / Controller
Company: Ken Stumder, CPA
(Finance Director / Controller, Ken Stumder, CPA) |

I personally would not ever take manager review out of the equation in an org where travel is a meaningful component of the P&L. I like the way we set it up at a former employer.

The expense reports went from the employee to an audit team who ensured all the expenses had receipts attached and were compliant with policy.

*Then* it went to the manager for approval. Depending on $$ thresholds and manager level it either got paid or was routed to our team for additional review / approval.

The audit team was a service we paid for and worth it in my opinion. The general outcome was that managers focused on legitimacy of the expenses and the finance team tracked expense categories at a high level and only got individually involved for the subset of the expense reports that merited it.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Here is an excerpt from Netflix's culture (that came out a year or two back). This is under the category of "Freedom and Responsibility."

MOST companies have complex policies around what you can expense, how you travel, what gifts you can accept, etc. Plus they have whole departments to verify compliance with these policies.

Netflix Policies for Expensing, Entertainment, Gifts & Travel:
Act in Netflix' Best Interest (5 words long).

“Act in Netflix’s Best Interest” Generally Means…
Expense only what you would otherwise not spend, and is worthwhile for work
Travel as you would if it were your own money
Disclose non-trivial vendor gifts
Take from Netflix only when it is inefficient to not take, and inconsequential
“taking” means, for example, printing personal documents at work or making personal calls on work phone: inconsequential and inefficient to avoid."

It's thought provoking...but why not?

Do the top executives set the right tone at the top when it comes to the way they "Act in Netflix' Best Interest"? If they do, then the consequences for anyone who cannot be left free to act responsibly can be clear and sharp, and consistently applied.

When people say that you cannot trust people, do they mean only others can't be trusted?

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I also apply audit concepts on policies. The extent of audit relies on instances of discrepancies or fraud. This concept should also apply with policies/procedures. If there is NO "need" to audit/check or "approve" (included in the process) because there have been no incidences of fraud or abuse, then the policies/procedures should follow. Simply put, rationalizing the steps/procedures. Of course occasional checking/audit is appropriate. That is the main reason why I said, culture and quality of people matters.

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

From an accountability perspective, I cannot imagine not having the manager approve. It is not just the traveler that is being held accountable. The manager is responsible for seeing that company expenses are being managed properly so put that manager on the hook for monitoring travel. In particular there is always the question of whether the travel was warranted or not and the manager is the one who should know that.

Bob Low
Title: Principal
Company: Perron & Low
(Principal, Perron & Low) |

I also agree managers need to stay in the approval loop. While accounting can check expenses for adherence to policy i.e. receipts, managers are responsible for the necessity and appropriateness of the expenses.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Somehow I see the Finance and Acctg "approving" expenses, complete with receipts and all....... but from a hotel in Cancun.

Damon Butler
Title: VP Finance
Company: BBX Capital Corporation
(VP Finance, BBX Capital Corporation) |

Travel ends up in the manager's budget, of course they should monitor and approve.

Anonymous
(Controller) |

Two years ago I became the Controller of a $20 million company that doesn't have manager approvals for expenses, and therefore I began to review all the T&E reports. There have been a few times where I had to ask for clarification on an expense, but there hasn't been any problems with questionable expenses. This is largely due to the culture of the company, where employees DO act in the best interest of the company. I recently asked the employees to please include a written manager approval for any unusual expenses, as I realized that the managers are generally aware of unusual expenses, but approval is verbal. As Emerson said, the culture and quality of the people impact the policies in place, and with trusted employees and no irregularities, policy can follow suit.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Interesting set of answers. I think the answer depends on culture, size, organization, types of expense reimbursements made and what is needed to maintain positive control.

Positive internal controls is the bellwether. If issues arise, modify. If business changes, then change with the business. What's right for my business today may not work for your business or mine next year.

That being said, this is a great place to see how different people are handling this (and other) issues.

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