Traditional ways of reporting and reimbursing expenses involve many unnecessary issues and risks. They include manual handling of physical receipts and manual verifications which are prone to fraud and error. The inefficiency of traditional expense management further weakens your employee morale, financial productivity, and your bottom line. To mitigate these risks, most leading companies resort to using an expense management software.
Using an expense management software makes life easier for expense reporters as well as accountants and approvers. In today's eco-friendly and efficient work culture, it is a must-have tool for scale. In this article, we discuss what expense management is and why it plays a crucial role in your business.
“I no longer file expense reports, so I no longer experience the pain of it. What if everyone had a virtual assistant to do that kind of effort?”
- Stewart Butterfield, CEO, and Co-Founder, Slack
What is expense management?
A business regularly incurs costs and expenses to keep its engine running and its wheels rolling. These expenses are essential for the business to maintain and expand its operations and production. As a company grows, the quantum of spending and spenders grow too. It’s important to note that it’s not always the investors that spend for a business. The employees also incur personal costs to keep the business running.
These expenses are something the company owes to its employees. They are also responsible for repaying them as soon as possible with minimal effort or resistance. However, to compensate for a cost, an employee should first report their business expenses. They do so, in the form of an expense report with tabulated business spends, the purpose of spend and more. These expense reports are then verified, approved, and reimbursed.
In a nutshell, the management of expense reporting, approval, and payment of employee business expenses is known as expense management.
What is an expense management software?
As the name suggests, an expense management software is an application that helps employees manage and report their business expenses. Additionally, it is also used by finance teams to manage reimbursements, expense reports, and travel requests. An automated expense management software streamlines every aspect of expense management to minimize the risks associated with traditional expense management.
It enables a business to receive and process business expense reports from its traveling employees. Additionally, it also checks these expense reports for policy violations before reimbursing them. The basic elements of expense management remain the same, but the elimination of manual submission and checks make a huge difference to everyone involved.
What does an expense management software do?
- Tracks your receipts
Presenting the proof of your business expenses in the form of receipts is an essential step for reporting your business expenses. An expense management software provides multiple ways to its users to upload, update, and submit the information of their business spending.
- Instead of collecting and submitting the physical copy of every receipt, users can upload an image or the e-receipt while reporting a business expense. This makes things quick and easy for the employees as they no longer have to worry about managing physical receipts.
- All business receipts are saved in a unified cloud storage so that they can be accessed and tracked instantaneously. This is helpful for approvers and verifiers as they can access the expense reports of every employee on a single platform without digging through a vast collection of paper receipts.
- Accountants find such an organized medium ideal for internal and external auditing. This is mainly because every reimbursed expense can be effortlessly tracked back to its source and supporting evidence. This also helps to quantitatively and qualitatively evaluate employee spending trends and patterns.
- Enforces travel and expense policies
An expense management software automates the process of policy checks and enforcement. It comes with various in-built features to ensure that policy violations are tracked and mitigated effectively.
- A business expense is checked for policy violations as soon as it is created. In case of a breach, the designated persons get notifications immediately.
- By integrating with corporate credit card programs, employers are sent direct bank feeds to reconcile every reported card expense. The software matches the business expenses with the statements and prompts the authorities in case of mismatches.
- Expense management softwares give employers the liberty of adding and modifying expense policies to meet their requirements and budgetary goals. These configurations define the parameters by which the software evaluates every reported expense claim.
- Admins can decide the implications and consequences of policy violations in case a reported expense is not in line with your T&E policy. This helps reinforce policy compliance within the company.
- Streamlines expense report approvals
Once a business expense is uploaded, the software scrutinizes it and forwards it to the respective stakeholders. If it finds the expense in violation of a policy, it notifies the approver and the employee by flagging the expense and bringing it to their attention.
- The approvers can investigate and verify a flagged expense report without having to go back and forth between any physical receipts and policy documents.
- The software also states the reason for flagging the expense and identifies the policy in question. This quickens the process of verification and approval.
- Apart from speeding up the process, an expense management software also makes the process more flexible and adaptable to changes in policies and workflows.
- It offers admins the freedom of setting up approval workflows to specify a definite or preferable chain of validation and processing. In the case of policy violations, the designated authorities can be notified directly without affecting the rest of the workflow. This helps in streamlining the investigation and approval of expense reports.
Why should you use an expense management software?
In today’s fast-moving world, time is money. Businesses are automating every possible task to save time to make more money. Expense management too, is in a transitional phase. Many companies are switching to an automated expense management software to expedite and upgrade the process of expense reporting, approval, and reimbursement. By doing so, they enjoy the benefits of dynamic automation that reduces both work and errors.
Advantages of using an expense management software:
- Reporting of employee business expenses is device agnostic. This cuts down the tedious manual work and efforts involved in collecting and storing physical receipts.
- Employers and finance teams can customize policies and approval workflows as per their business requirements. This helps them record and document important business findings.
- Most expense management software can integrate with card programs, accounting software, and travel management systems to contain discrepancies. This helps finance teams maintain all the information under one platform.
- Employers can gain insight into spending trends by using analytics and statistics of past data. This helps finance teams to make well-informed business decisions.
- An automated expense management software checks for policy violations in real-time and reconciles expenses with bank feeds automatically. This not only helps save time but also ensures no fraudulent expense claims go unrecognized.
- Every uploaded expense report has a digital audit trail of all actions ever taken on it. This helps keep the expenses ready for accounting and auditing purposes.
- Users can personalize expense and user fields to make sure the system has all the required information before processing a business expense claim. This helps streamline the entire process of expense management within your company.
An automated expense management software not only eliminates the risks and hidden costs involved in expense reporting but also eases out the entire process. It also decreases unnecessary manual work for both your employees and finance teams.
An automated expense management software is what a growing business of today needs. It helps ease out the process of expense reporting for your employees. It also proves to be more efficient for your finance teams to record and manage business expenses for accounting and planning purposes. It is safe to say that in this modern age, an automated expense management software is a state-of-the-art tool that helps save time and resources in a compliant and user-friendly way.