Many business process improvement initiatives seem to focus mainly on the very high visibility processes of the enterprise such as the supply chain, order fulfilment or customer service management, while negelecting the smaller but supporting everyday processes, including travel authorizations, expense filing and timesheets. These smaller processes, when poorly designed or designed without considerable care in the business rules and policies enforced, could mount in cost over a period of time. This paper seeks to examine a simple but relatively common implementation of a manual expense filing and reimbursement process and using the help of BPM simulation tools, derive some insight into the true costs of managing this process at a small company. In addition we identify ways that organizations could improve the ROI of an expense process in order to maximize efficiency and effectiveness.
Expense report filing and reimbursement is a routine process in almost any organization today regardless of size or location. While very few companies have fully automated processes, most companies still make use of manual or semi-automated processes. Filing an expense report typically begins with an employee taking time (typically unbilled time) to prepare the report in accordance with the norms and policies of the company. The filing process for the employee involves gathering up of transaction receipts, locating form templates, appropriately filling out the fields of the form, checking, sigining and finally submitting the expenses to a reporting manager for approvals. Senior managers would then approve / disapprove the report and move it on to the finance group for further approvals, filing, scheduling and ultimate payment to the employee. In many instances, the finance team may have one or two levels of approval before final payment is issued. Finally the employee verifies payment to their bank account , signaling the conclusion of the process.
There are two important challenges that may arise with this process:
As a case study, we ran a BPM simulation of the expense filing process for a small company with 300 employees over a 12 month period. In a given week, about 60 employees submit expense report for reimbursement each week, and all expenses for a given month must be filed before the month end. Expense reports filed ranged in value from $30 to $6000. The policies enforced include:
For simplicity, we did not consider the increased costs of exceptional activity such as expense items with no matching receipts, disapprovals for exceeding caps, non-expense items such as alcohol, personal items, etc. or the failure of participants to file reports on time
From our simulation results, it is clear that processing 2500 expense reports per year can cost a company upto $1.35 million in unbilled cost. Depending on the distribution of the expense report value, the cost of processing can be significant relative to the value of all expenses processed.
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Figure 1
A number of insights gained from the simulation include:
Organizations looking to identify areas of process improvements should pay close attention to “less visible processes” in their organizations. All processes regardless of priority to the company have real costs incurred in their performance. As demonstrated, these costs can be significant. Through careful business process and rule design, along with the aid of simulation tools, organizations should raise the priority of supporting processes; determine the true cost drivers of their processes and improve them through policy and redesign to reduce cost and delay. Over the medium to longer term, there should be increased satisfaction from the participants of these processes as well as tangible benefits on the company bottom line.
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