One of the key concerns for all companies is managing business expenses. This task is difficult to orchestrate with manual processes, handwritten notes, and paper receipts. By employing software to track and monitor employees’ expenses, companies can expedite the expense management process, decrease the chances of errors, and distribute reimbursements quickly.
What is Expense Management?
Expense management software is used to track employees’ spending and determine how the costs incurred are reimbursed by the organization. It also applies policies and procedures employed to control spending of this type. Suppose the employees are provided with daily allowances for meals whenever they travel for business purposes. In that case, those limits are accounted for in the expense management process when generating reimbursement for workers.
What is the Importance of Expense Management?
In order to maintain appropriate business, all companies must be able to pay their bills on time. Employee expenses are one of those bills. Expense management will always be vital for companies with employees who are involved in businesses outside the office. Even simple transactions, such as the client’s lunch paid by the employee, need to be documented, approved and reimbursed.
With efficient expense management programs in place, companies can issue reimbursements fast and accurately. After all, no one would like to wait for months for reimbursement of expenses covered.
Types of Expense Management
There are different ways companies employ to manage expenses. Those include
Paper track: It is the traditional and outdated method of expense management where employees have to collect paper receipts and submit those to the accounting department for approval on a quarterly or monthly basis.
Spreadsheets: It is a popular method for companies trying to reduce their dependence on paper but has yet to move on to a dedicated, automated system for expense management.
Expense management software: The expense management processes of a company are simplified by expense software. The expense software alerts managers about expense reports that need review, allowing them to accept or reject the claim. The approved expenses are then sent automatically to the accounting department for reimbursement.
Expense Management Process
Expense management is a multi-step process, including documentation and submission of expense reports. It also involves submitting reimbursement claims, rescheduling payment claims, denying or approving them, and finally reimbursing the employee.
With effective expense software in place, companies can monitor their expenses, ensure that employees are not abusing the system, and take action if they find out they are. For example, if they find out that a salesperson has decided to fly first class without approval for the same, the violation will be revealed by a quick check of their receipts. With a manual system, it can be challenging to find these issues, especially for a company with a growing team of field workers.
Some of the common issues with manual systems include needing more information, slow approvals, and approval of spending without a thorough review. Apart from wasting the employees’ time, it also keeps them thinking about where their expense checks are.
Just like other manual processes, manual expense management can be time-consuming, inefficient, and error-prone. The advantages of automating expense management are supported by statistics. 82% of the companies that have started using expense software report that this software has simplified their business processes.
Other vital motivators for companies taking up these processes include the need to have the spend management activity of the entire company on a single platform rather than distributed over different papers and spreadsheets and the need for real-time insights into spending.
Expense Management Policy
To control employees’ spending, implementing an expense management policy that everyone has to follow is one of the best ways. These policies can help determine why an expense has yet to be approved and help make the final decision on whether the costs should be reimbursed.
Following are the things that all expense management policies must include:
- A comprehensive list of the expenses usually paid for by the company.
- A complete list of the costs that the company does not cover.
- The list should be in clear and concise language.
- Organizations need to regularly change and update their expense management policy. As the company emerges, this policy must be adjusted to accommodate those updates.
- The policy should also incorporate practices like the need for pre-approval of certain expenses and should clearly define the various steps in the approval process.
Features and Capabilities of Expense Management Software
The following are some key features of expense software:
- They can be used to track all the receipts of the employee.
- They let employees capture receipts with their smartphones.
- It can be used to place the receipts on a centralized dashboard.
- It can be used to document company policies and spending limits.
- They allow companies to change these policies and limits as required.
- They can check policy variations.
- They can be used to schedule reimbursement checks for payment.
Advantages of Expense Management Software
Due to expense management software, companies can automate time-consuming processes, reduce the chances of errors, and attain more efficient control over particular employee expenditures. The software also ensures reliable tracking, better compliance with company policies, and faster reporting.
The expense software also streamlines the expense approval process using custom workflows by automatically directing those tasks to the right people. These solutions finally incorporate analytics that can detect problems quickly and enhance decision-making.
Expense software has many advantages over traditional methods of managing expenses. If you are a business owner and still need to switch to automated expense software, it is high time you do.