Expense Management Is Undergoing a Revolution, but Legacy Systems Hold Firms Back

Every dollar of working capital matters to today’s businesses.

That makes tracking and managing expenses important, as evidenced by “Grubgate,” where tech giant Meta fired more than 20 employees for abusing the company’s meal expense system.

Yet effectively tracking and managing employee business travel and other expenses remains complicated and convoluted.

Traditional methods involving manual data entry and paper receipts are being replaced by digital solutions that can automatically capture and categorize expenses using artificial intelligence and machine learning.

By integrating with accounting systems and providing real-time insights, these tools are bolstering financial transparency and helping companies get a firmer grip on cash flow while at the same time redefining how expenses are tracked, controlled and projected.

However, while B2B payments are seeing expense management innovation, many firms are using legacy infrastructure and traditional rails for payments that have yet to fully support the latest in digital payment innovation.

Read also: Virtual Cards Drive Working Capital Efficiency for North American Growth Corporates

Addressing the Innovation Gap in B2B Payment Systems

For companies with extensive legacy systems, the transition to a modern B2B payment platform requires time, investment and operational overhaul. Legacy infrastructure, often built on fragmented systems and siloed data, cannot easily adapt to the real-time, integrated functionality that today’s expense management tools offer.

The lack of flexibility in older systems creates friction for companies seeking seamless integration and transparency. Legacy payment rails, like ACH and wire transfers, are often slower and less efficient compared to emerging options such as real-time payments.

While new, AI-powered expense management tools can optimize internal processes, their impact is ultimately limited by the traditional payments infrastructure on which many incumbents still rely.

Jonathan Vaux, head of propositions and partnerships at Thredd, told PYMNTS in April that while corporate solutions have progressed, they often lag behind consumer-centric solutions. Despite advancements, many employees still resort to personal tools for their travel needs, indicating a gap between corporate and consumer experiences.

“There are lots of great things about card rails, but you’re trying to force the message into the message structure of the card, as opposed to using separate data API processes,” Vaux said. “Fundamentally, a lot of the technology now exists that didn’t exist 20 years ago that could enable a more optimized experience.”

Thredd Chief Technology Officer Edwin Poot agreed.

“There’s a huge gap between what makes it easier for me as a user, versus what makes it easy for the company,” he said.

Digital transformation doesn’t happen overnight, especially in an area as intricate as B2B payments. But by gradually transitioning to newer systems — while selectively retaining core legacy components — companies can work to bridge existing technological debt and innovation gaps, incrementally modernizing operations without incurring excessive downtime.

See also: How Harnessing Transaction Data Unlocks Spend Management and Reduces Fraud for Businesses

The Path Forward: Balancing Innovation With Infrastructure

Looking forward, a concerted effort from technology providers and companies to modernize infrastructure will be critical to the future of expense management.

“The most important thing is for the business to understand what they are trying to solve for … and that is typically to help control the expenses from a business perspective and help with reconciliation purposes for efficiencies,” Marcos Gelfi, vice president and global head of commercial fraud/dispute products and cardholder solutions at Discover® Global Network, told PYMNTS in September.

Collaboration between financial service providers, software developers and companies reliant on legacy infrastructure is another essential strategy. As expense management solutions evolve, B2B payment providers can enhance compatibility and integration options, reducing the disruption that modernization might otherwise cause. With a collaborative approach, legacy-reliant companies can adopt the latest technologies at a pace that suits their operational needs while still capturing the benefits of automation, analytics and seamless integration.

The PYMNTS Intelligence report “From Trips to Tips: How Faster Payments Can Elevate Travel and Hospitality” found that business travel is set for change with the introduction of instant payment options. Many employees front their travel costs, waiting for reimbursements that can lead to financial strain.

According to the report, 43% of consumers now favor instant payments for business expense reimbursements, up from 40% in January 2023. Seventy-eight percent of employees expressed satisfaction with instant payments in business settings compared to 70% across all payment types. This escalating preference for speed in financial transactions reflects a broader cultural shift toward immediacy, and companies that adopt these technologies will likely see improvements in employee satisfaction and retention.

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