Microsoft simplifies global employee expense management with Dynamics 365 Finance

Reducing complexity in expense reporting

For a global company like Microsoft, employee expense management can be extremely complex. On average the Microsoft Finance Management team handles 1.2 million expense reports and 5.6 million corporate credit card transactions submitted by 180,000 employees in 120 countries each year. The sheer magnitude of expense submissions posed challenges for tracking, oversight, and accuracy, as well as risk factors related to regulations and compliance, tax issues, and security which can vary from country to country.

For the Microsoft Finance Management team, this complexity was compounded by reliance on an  on-premises expense management infrastructure and a web of customized networks (often integrated as part of a business acquisition) working with differing criteria based on things like job title, department or division, even geographic location. “With so many moving parts the Finance Management team was challenged by the lack of flexibility in introducing new features, the potential for errors, the high cost of third-party systems, and the risk of ensuring Microsoft compliance standards,” says Eric Karnrigh, Program Manager of the Expense Management Domain, Microsoft Digital Employee Experience (MDEE).

For context, publicly traded companies doing business in the U.S. must align with financial reporting standards established by the Sarbanes-Oxley Act (SOX). These include proving the ability to safeguard data, tracking attempted breaches, logging electronic records for auditing, and proving compliance. In addition, different countries have their own expense reporting and compliance requirements. For example, in many European countries, companies must account employee per diem expenses. In the United States, employees are required to itemize all hotel-related charges. 

There was also the uncomfortable fact that Microsoft employees were spending more than 500,000 hours per year itemizing and filing expense reports. “From scanning endless receipts, to accounting for currency exchange rates in different countries, to entering the names of all the people you bought lunch for at an off-site meeting, it was time-consuming to say the least,” says Karnrigh. 

The MDEE team joined with the Finance Management team to create a more centralized and automated system that would help global expense management operations run smarter and create a better experience for Microsoft employees around the globe. 

Innovating with flexibility

The initial phases of creating a new centralized system began in 2019 with the migration of diverse data from 120 countries stored on a Microsoft legacy AX 2012 expense management system to Microsoft Dynamics 365 Finance, with Microsoft Azure and Microsoft Power Platform as a foundation. Before starting, the MDEE team thought the migration could take up to two years to complete. 

In the end, it was completed in six months due to a clear plan of migration to the cloud by region and the flexibility of Dynamics 365 Finance. “With Dynamics 365 Finance out-of-the-box features the development team could integrate quickly with backend systems and migrate data simply and securely,” says Surya Vaidyanathan, Principal Program Manager, Dynamics 365 Finance, Microsoft.

The pandemic temporarily stalled the project and with remote work enforced, the teams had to revise their development approach. But, Vaidyanathan says that the agility of Azure and Dynamics 365 Finance combined opened new possibilities, where different individuals or teams of people could focus in on specific functional modules. The team was able to effectively collaborate on a plug-and-play modular architecture for the new system even while working remotely. “With Azure as a foundation and Dynamics 365 as a unifier, it is possible to replace any component, integrate any expense tool that exists,” says Vaidyanathan. “Including third-party expense tools with unique functions.”

The modular architecture also means tools can be easily reused and new ones can be created and “plugged in” to handle specific use cases. This is especially helpful in addressing country reporting and compliance requirements. Microsoft Dynamics 365 Finance helps developer teams to layer automation, connecting functions while also keeping them separate. “One of the key objectives we heard from the MyExpense developers is that they wanted to avoid customizing features at the outset as much as possible so that there's less maintenance on their end,” says Vaidyanathan. “With Dynamics 365 Finance they get the ability to implement new capabilities as needed and cut the development cycle from months to weeks.”

Improving the user experience

With the employee experience in mind, the MDEE team used Dynamics 365 Finance to build models to manage workflows based on Azure Machine Learning —bringing automation to processes that were highly time-consuming. For example, rather than relying on credit card billing information that can sometimes take days to show up on a statement, the team chose the immediacy of scanning receipts to drive expense report automation. Using technologies within the Microsoft Azure stack like Optical Character Recognition (OCR) technology receipts are easily scanned and processed, while Natural Language Processing (NLP) and Azure Machine Learning models help contextualize the data. 

Machine learning modules are trained to assess each transaction and assign a line-level confidence score. High-confidence expenses are submitted automatically, while expense submissions with lower scores are flagged to notify the employee or their manager for additional review.

To further simplify the experience, the MDEE team created a clean, modern user interface for the website so employees can find what they need quickly. The team also reduced the number of expense categories from 400 to 120. In addition to eliminating the tedious process of identifying the right category to match an expense receipt to, this change is helping to improve reporting accuracy. Miscategorized expenses are a thing of the past, which helps the Finance Management team better track spending as well as policy violations.

In addition, MyExpense automatically maps to the unique reporting and compliance requirements of the countries where employees are located. “For example, with the European per diem reporting requirement or in the US with hotel itemization—Dynamics 365 Finance allows us to build in and automate these functions to create a more seamless experience for employees no matter where they work,” says Karnrigh. 

MyExpense also has features where users can customize their experience. For example, the tools default setting sends automated expense reporting reminders to employees on a weekly basis, but users can decide their own cadence. Managers and finance management teams can auto-create and auto-approve expense reports. Karnrigh adds that the customization aspect is an important factor for accessibility. “During an early pilot was ran in 2021, we were able to see where we could make even more improvements to help employees of all abilities gain the same levels of access and feature automation.” 

Rolling out and continuing to evolve

In 2022, Microsoft rolled out MyExpense by region to 130,000 global employees in 108 countries and the legacy system was retired. MDEE supported the roll-out with change management support, training, and communications to help users adjust to the new experience. “MyExpense is now the go-to solution for Microsoft employee expense reporting,” says Karnrigh. In fact, employees are currently filing approximately 70,000 expenses monthly, all in total compliance, totaling USD1 billion annually. “And early feedback points to savings in developer support, maintenance, and operational costs, and also reducing the amount of time employees spend on entering expenses.” For example, a complex expense report that would have taken someone at least 40 minutes to complete can now be done in less than five minutes. Overall, this time reduction is estimated to translate to USD50 million in time savings each year.

More refinements in expense categories and features in different regions are in the works and the MDEE and Microsoft Finance Management teams will continue to work together to improve the tool. Future plans include enabling a continuous-learning “AI brain” that gets smarter with feedback from users and ensuring that 100 percent of all transactions are screened by AI for compliance. A mobile version is planned for release later this year.

“The solution we’ve created is configuration driven and drives accelerated development,” says Vaidyanathan. “It's scalable. With all of the benefits that you get with the cloud, the scalability of Azure-based platform and Dynamics 365—it's extensible for other purposes too.” That includes making the core solution available to Microsoft customers. 

“Microsoft is a globally trusted brand,” says Karnrigh. “It’s exciting to think that the work our teams put into creating a solution to help Microsoft employees can also be used by our customers to better support their employees around the world.”