Calculate the ROI of Your Expense Report Software

The expense report process can be notoriously time consuming. Manually submitting, reviewing, reimbursing, and recording expenses adds up. For a small business — often with finance teams that wear many hats — that time can add up.

Expense reporting software can automate many parts of the process, saving you time and money down the road. So if you’re wondering whether to make the switch to expense reporting software for your small business, then understanding the return on investment of a solution is a good place to start. 

And if you’re looking for expense reporting software, our guide walks you through the process

The ROI of Expense Management Solutions

If you’re interested in a general idea of ROI for an expense management solution and don’t want to spend the time analyzing internal costs, The Aberdeen Group published data on averages for expense report processing:

  1. Average business cost to process a single expense report without expense report software is $20.65
  2. Average of 1.5 expense reports submitted per employee per month
  3. Average business cost to process a single expense report with expense report software is $7.50

Calculating the ROI of Expense Management Solutions

The basic ROI calculation is:

(Monthly Savings – Business Cost to Process Expense Reports)
————————————————————————
(Business Cost to Process Expense Reports)

To find out your monthly savings, you’ll need to know what your current average cost per month is to process your expense reports. If you don’t have this data and want to use Aberdeen’s data, multiply the industry average to process a single expense report by the number of expense reports you process per month (again, you can use the industry average per employee and multiply it by how many employees you have if you don’t know).

Current Monthly Processing Costs

(current cost to process a single expense report)
X
(# of expense reports processed per month)

Next, figure out what it would cost with an expense management solution in place to process your monthly expenses. This will be based around some assumptions of how much time you think you’ll save from your current way of doing things, or again, you can use Aberdeen’s data.

New Monthly Processing Costs

(new cost to process a single expense report)
X
(# of expense reports processed per month)

Subtract the new costs from the current costs to get an understanding of your monthly savings.

Finally, you can calculate how much of a return on investment an expense management solution would be by subtracting the new monthly processing costs from your savings and dividing the total by your new monthly cost. In other words what you want to know is, yes the costs are lower per month, but is the difference worth the effort?

Using Aberdeen’s data, the ROI calculation would look like this for a company with 150 employees:

[$20.65 x (150 x 1.5)] = Current Monthly Processing Costs of $4,646.25

[$7.50 x (150 x 1.5)] = New Monthly Processing Costs of $1,687.50

[$4,646.25] – [$1,687.50] = $2,958.75 in monthly savings

or an ROI of ($2,958.75 – $1,687.50) / $1,687.50 = 75%

This translates to saving almost $3,000 a month on processing costs: meaning the investment in a new system will return 175% of what you paid.

Ready to kick off the search for expense reporting software? Download our free guide.