Let The System Be The Enforcer: How Rule-Based Policies Eliminate Errors And Reduce Stress

Accounts payable team members don’t enjoy hassling their co-workers about following procedures regarding business expenses. And anyway, research (plus plenty of anecdotal evidence) confirms that kind of micromanagement can be counter-productive. But, at the same time, AP teams have books to close and that’s made more difficult if procedures aren’t followed. Airbase’s Annual Benchmark Survey of Finance Professionals reports that fixing errors is one of the top manual tasks performed by finance teams.

The solution? Implement rule-based policies so that the system enforces and records compliance. With rule-based policies, employees make requests through automated workflows that have approval compliance requirements built right into the process. Instead of reading through lengthy instructions, and doing their best to interpret and adhere to language-based policies, AP teams can focus on other far more valuable efforts.

In a consolidated platform, automated rules apply the same workflows across all areas of spending, whether an employee wants to purchase a SaaS subscription by virtual card, use a physical corporate card for a client dinner, or be reimbursed for a purchase made on a personal card. This uniform platform experience removes ambiguity for everyone and eliminates the need for AP teams to reconcile multiple systems.

A study by the Global Business Travel Association (GBTA) found that almost one in five expense reports contain an error, which ups the ante for careful scrutiny of expense reports or reimbursement requests. A rule-based approach eliminates that need by applying controls during the purchasing or reimbursement request process. Any errors are flagged for review and a request won’t be processed until it is compliant.

Read our comprehensive guide to creating rule-based expense policies.

Rule-based policies free up AP teams from spending time on:

• Missing or incorrect approvals. A business’s approval requirements can vary by factors such as the cost or category of an expense, and sometimes multiple approvers are necessary. Approvals may have to be consecutive or concurrent, so that a specific workflow must be followed. Some purchases may have to be approved across departments. For example, the IT department may wish to have approval of marketing software expenses over a certain amount. Automated approval chains ensure that every request obtains the correct approvals, no matter how complex, in the right order. It’s much easier for a system to keep track of who needs to approve an expense, and when, and route the request accordingly. ‍
• Missing receipts or other required documents. Chasing down receipts is one of the most tedious tasks AP teams face. With automated receipt compliance rules, employees won’t forget to include a receipt. Making it easy to attach receipts by simply prompting them to take a photo with a mobile device after using a physical corporate card or when submitting a reimbursement request also ensures nothing is missing from a transaction. Checking that a W-9 has been filed before paying a vendor is another configuration that takes the burden of document collection off the finance department. ‍
• Incorrect categorization. A smart system can recognize and learn from previous categorizations and automatically assign a GL category for a physical card transaction. Plus, when categories are set at the approval stage when creating a virtual card request, they can be adjusted as needed before spending happens.‍
• Spend outside of policy limits. Configuring spend limits into a rule-based system means AP teams won’t receive procurement or reimbursement transactions that exceed policy limits. Making it possible to configure those limits for specific periods of time (day, week, month, quarter, or year), or to restrict a request to certain vendors or events, builds in further cost control right upfront. Budget adherence becomes fully visible when it’s possible to view real-time reports and adjust the levers of control when needed.‍
• Ineligible reimbursement requests. A rule-based system can be configured to determine what constitutes a reimbursable expense, so if an employee submits an ineligible expense, the system rejects it. ‍
• Requests for a duplicate expense. With traditional purchasing processes, when an employee purchases a SaaS subscription that the company already pays for, the AP department may not notice until the credit card bill arrives. A rule-based system can be configured to send out an alert for a possible duplicate request.

Employees love a rule-based system because it eliminates:

• The need for expense reports. Cumbersome expense reports are rendered obsolete in a rule-based platform, since employee expense reimbursement requests are submitted with required documents and automatically flow through the configured approval chain.
• Delays in payment processing. Approving reimbursements as they are submitted rather than in a batch expense report, and making it possible for an individual purchase to be reimbursed, allows the system to route payment directly into an employee’s bank account once the configured conditions (such as receipt submission and approval) have been met. ‍
• Uncertainty regarding procedures. Automated processing means employees can rest assured that they have followed policy when they submit a claim, so they’re not vulnerable to any accusations of misuse of funds regarding expense claims. Ambiguity, or possible misinterpretation, is removed from the equation, which protects both finance and employees spending company money.

Modern Expense Policies: Shifting from Traditional to Rule-based Policies.

Airbase is paving the way for rule-based expense policies and has released a guide to help companies transition from a traditional written expense policy to a rule-based one.

The guide breaks down the actual construction of policy rules, key decision points, and how the pieces fit together in the context of an automated AP system. After all, the foundation of any rule-based approach is defining useful terms upon which you can build your rules. And to further assist readers, example rules templates for common use cases are included.

The guide also offers some advice and best practices when it comes to selecting optimal payment methods. There are a number of payment options now available to companies, and there are likely even more factors for your company to consider when determining its preferred method. Who’s making the payment? How large is it? What’s the intended purpose?

Taking the first step toward putting this kind of system in place can be unfamiliar, but it is ultimately worthwhile. The end result of eliminating these pain points is ultimately a better work environment and a more productive company.

A deep impact.

When a rule-based system handles compliance and documentation requirements, companies experience a transformative shift in spend culture. Employees feel more ownership of their purchasing, and AP teams can play a more strategic, as opposed to disciplinary, role. Greater transparency means:

• Neither AP departments nor employees spending company money are confused by opaque policies.
• An automated audit trail is available whenever needed, complete with the full record of requests and approvals.
• An audit is an overall better experience when the finance team knows that transactions outside of company policy aren’t even possible.

Companies that rely on a rule-based system report a much-improved attitude toward expenses.

AspireIQ Controller, Dmitri Litin, noticed an increased sense of accountability. “A single source of truth that provides visibility allows us to be much more direct and makes it clear that every dollar matters.”

‍Michael Zheng, Head of Finance at Affinity, notes the shift towards collaboration, instead of tension. “Airbase has shifted the conversation around spend. What used to be a post-expenditure questionnaire, ‘Why did you spend this?’, is now a collaborative planning conversation, ‘What will you need to spend on in the short and the long-term and how will it benefit the business?’”

If you’d like to learn more about how Airbase supports rules-based expense policies, we would love to show you a demo.