Expense management is a crucial part of your business. No doubt that managing your expenses can be a time-consuming and even complex task when done manually.
But good news- that is where expense management software comes into play.
In this article, we will discuss expense management and how using expense management software can help you ease this tedious task. Get ready to dive deep and learn more about expense management, especially with the rise of technology and software to improve your expense management process!
Expense management refers to the systematic process your business can adopt to control, track, and optimize expenses incurred during your business operation.
This process involves managing business expenses such as travel, entertainment, and other operational expenses. Expense management ensures that your funds are spent efficiently and budget-consciously.
Expense management is crucial for your business as this can make or break your profitability or loss. It helps your organization save money by identifying only the necessary expenses and making monitoring your spending and budget easier.
Your company’s finance team is responsible for managing and overseeing the expenses of your business. Your finance department is also the primary driver of your expense management process. They ensure that your costs are budgeted and accurate and that your spending is approved, monitored, and reported accurately.
Take note that you need to involve your employees in your expense management process so you can educate them on budget limitations and spending policies to avoid experiencing financial risks.
The goal of your expense management is to ensure that all your business expenses are tracked, recorded, reviewed, approved, and reimbursed in a timely and accurate manner. This way, your company can manage your finances and control your costs.
Your expense management process typically involves three main parties:
3. Finance Teams
Your expense management process typically follows several steps.
Step 1: This step involves expense submission. Employees submit expenses, including receipts and other supporting documentation, to managers through your company’s chosen expense management platform.
Step 2: This step involves expense approval. Your managers review each expense submitted by your employees and approve or reject them based on your company policy and other budget constraints.
Step 3: This step involves expense processing. Once your managers approve expenses, these are processed by the finance department and go through the reimbursement process through payroll or vendor payments.
A critical aspect of your expense management involves expense audits and record keeping.
Expense audits are typically performed to ensure all your expenses are legitimate and have a supporting document. Doing expense audits and record keeping ensure your company prevents experiencing fraud, errors, or other unnecessary expenses.
On the other hand, record-keeping is essential for future external audits and tax purposes. Having well-maintained records ensures your company can quickly provide documentation for tax filings and ensure you have what you need for financial audits.
As you already know, expense management refers to monitoring, controlling, and reducing business expenses. It is the process of tracking, recording, and processing expenses for the purpose of managing costs and staying within your company’s budget limits.
At the core of expense management are several essential tasks that your business must undertake to keep your expenses under control:
1. Recording expenses: This involves keeping accurate records of expenses incurred using paper receipts or digital record-keeping using expense management software. This information is important in tracking and monitoring expenses incurred by your business.
2. Payment execution: This is another important aspect of expense management, ensuring all expenses are authorized and paid promptly. Delayed payments may create serious problems for your business, especially if it results in late fees or penalties.
3. Tracking: This is an important component of expense management as this allows your business to monitor your cash flow and identify areas where costs can be reduced. Your business must keep a close eye on your expenses so you can identify trends and anomalies that require further investigation.
Your business can use different types of expense management approaches, each having its own advantage and limitation.
Let’s dive into these expense management types so you can determine which one is best for your business.
1. Paper Tracking: Paper tracking is a traditional method of expense management that involves using paper forms to record your expenses. This approach relies heavily on physical documents and requires manual data entry, which can be time-consuming and prone to human error.
2. Spreadsheets: Spreadsheets are software application that allows users to perform calculations and store data in a tabular form. Spreadsheets work similarly to paper tracking but with the added benefit of bank data import and other data features. One benefit of using spreadsheets for expense management is its ability to import bank data, eliminating the need for manual expense tracking.
3. Expense Management Software: Expense management software is an essential tool that enables your company to simplify its expense management process. It offers an ideal solution by providing a streamlined process for creating, submitting, approving, and reimbursing expenses. With this, your company can eliminate the daunting manual paperwork for manual expense management and move towards more automated workflows.
4. Telecom Expense Management (TEM): This expense management category deals with managing and optimizing telecom costs and services. The primary purpose of TEM is to help your organization gain control over your telecom expenses, improving the accuracy of billing and increasing operational efficiency by reducing unnecessary expenses.
Keeping track of your expenses for reimbursement of tax purposes can be time-consuming. Fortunately, there are tools available to simplify this process.
1. Expense Reports: This is critical to your company’s financial management system. It enables your company to track spending and categorize expenses for tax filing, auditing, and budgeting. The key elements included in an expense report typically consist of the date, vendor name, category, total amount, and payment method.
2. Expensse Sheets: While similar to expense reports, they differ in the sense that they provide a detailed breakdown of each expense, typically organized by date, category, vendor, and amount. Expense sheets are especially useful for businesses that require frequent expense trackings, such as startups or small businesses. Many software options are available to create and track expense sheets, including QuickBooks, Expensify, and Xero.
Effective expense management is crucial for the success of your business success of the following benefit it brings:
1. It enables systematic tracking of expenses
2. It helps you identify areas where your company spends most of its revenue
3. It provides you with a clear picture of your organization’s finances for better control and decision making
4. It prevents you from experiencing the risk of overspending and incurring unnecessary expenses
5. It ensures that you have a clear understanding of your financial health
6. By tracking expenses closely, companies can reduce unnecessary spending, avoid going over budget, and improve financial controls.
7. Expense management systems can decrease human error and fraud while improving employee efficiency.
Implementing effective expense management processes in an organization enhances the employee experience and ensures compliance with IRS rules and regulations. Systematic expense management is critical for your business to manage your finances effectively, making better-informed decisions and allowing you to remain competitive in today’s economy.
There are two primary ways to approach your expense management:
1. Traditional Expense Management: Traditional expense management involves paper-based systems that rely heavily on human input, leading to costly errors, longer processing times, and increased risk of fraudulent activities. This approach can be time-consuming, tedious, and inefficient, involving manual data entry, paper-based receipts, and physical storage of expense reports.
2. Automated Expense Management: On the other hand, automated expense management provides your business hassle-free, efficient, and accurate way of tracking expenses. By automating the expense management process, your business can eliminate errors and manual data entry, providing real-time visibility updates and ensuring compliance with the company’s expense policies. This approach can save time and reduce expenses, making managing expenses across different departments, teams, and projects easier.
An expense management policy is a set of guidelines and rules that provide your business framework for managing employee spending and controlling expenses.
This is essential for your business so you can effectively manage your costs and ensure compliance with financial regulations.
To effectively manage your business expenses, an expense management policy helps you govern how your employees spend company funds, such as setting spending limits, requiring receipts, and defining the types of expenses allowed.
Here are the qualities of an effective expense management policy:
1. It must provide clear instructions for employees on submitting expense reports, including deadlines, the format, and who to submit them to.
2. It must include information on non-reimbursable expenses, such as personal expenses, and disclaimers to clarify your company’s liability.
3. It must involve key stakeholders, including finance and HR teams, to ensure the policy aligns with your company’s goals and objectives.
4. It must be communicated to all employees, and regular training sessions should be conducted to reinforce the guidelines and procedures.
Here are some key steps you can do to ensure you improve expense management within your organization:
1. Establish an Expense Management Policy: This is the foundation of effective expense management for your business. Your policy must outline what expenses are allowable and what expenses are not.
2. Standardize your process: Standardizing your business processes will help ensure that everyone in your organization follows the same procedure. This makes it easier to manage expenses and reduces the risk of errors or fraud.
3. Go Paperless: A paperless expense management process is faster, more accurate, and more efficient. Instead of dealing with paper receipts and reports, you can use digital tools to track and manage expenses.
4. Schedule regular expense reviews for your business: Regular expense reviews help to catch errors or discrepancies before they become significant issues. You can schedule monthly or quarterly reviews to ensure that expenses are tracked accurately and that employees follow the policy.
5. Educate your employees on best practices: This may include training them on how to submit expenses, what expenses are allowed, and how to avoid common mistakes when submitting expenses in your business.
6. Audit your Expense Management Process: Regular audits help ensure the expense management process works effectively. This can include reviewing receipts, checking for errors or fraud, and verifying that expenses are allocated correctly.
7. Encourage Accountability and Transparency within your organization: Encouraging accountability and transparency can help to reduce the risk of errors or fraud. This can include providing clear guidelines on how expenses should be submitted and reimbursed and creating a culture of transparency around expense management.
8. Automate your Expense Management: Automating expense management can help you to streamline the process and reduce the risk of errors or fraud within your company. This can include using expense management software to track and manage expenses, automate approvals, and generate reports.
An expense management system is a tool your business can use to manage your employee expense. This system can help you automate the processes involved in your employee expense reporting and reimbursement, making the process simpler and less prone to error.
An expense management system is important for your business since it helps reduce the need for paper, minimize errors, and even help your organization stay on budget. Additionally, it can help you easily track your expenses and ensure you are not overspending.
An expense management system can range from informal collections of spreadsheets to all-inclusive software systems that provide detailed expense reporting processes and analytics.
Here are some of the reasons why you need to use an expense management system:
1. Reduce time and money spent on manual expense report management: With an automated system, your employees can quickly and easily submit expenses through an online single platform. Your managers can approve or reject them with only a few clicks. This saves time and reduces the risk of errors in data entry or calculation.
2. Improves user experience for your employees: With a user-friendly interface, mobile accessibility, and fast reimbursement times, employees are more likely to submit expenses on time, accurately, and efficiently.
3. Improve expense tracking and compliance with reimbursement policies: Your company can set specific rules and limits for each expense category. Your software can easily flag expenses that do not meet the requirements. Thus, preventing inappropriate expenses from being reimbursed.
By implementing a robust expense management policy and software, your company can easily comply with regulations and standards set forth by the IRS or other governing bodies.
Your expense management software offers several features to help you streamline your expense management process:
1. Expense Tracking: One of the core features of expense management software is expense tracking. The software allows employees to submit expenses easily and gives managers an organized system to track expenses, ensuring that nothing falls through the cracks.
2. Expedited Expense Reporting: Another critical capability of expense management software is expedited expense reporting. By automating the process, the software significantly reduces the time and resources needed for reporting.
3. Effective Policy Compliance: Effective policy compliance is another essential feature of expense management software. The software ensures that your organization is adhering to its expense policies and helps avoid any penalties or legal issues arising from non-compliance.
4. Analytics & Insights: Expense management software can also offer useful analytics, providing insights into areas of overspending or potential cost savings. This data can inform financial decisions and help your company stay on budget.
5. Complete Integration: Finally, complete integration is a critical capability of expense management software. The software should be fully integrated with accounting systems, payment methods, and other relevant software to ensure seamless operation within your business.
Choosing the right expense management software for your business can save you time and money, improve your employee experience, and simplify your expense management process.
Here are some of the key factors you must consider to help you choose an expense management software that will align with your business needs:
1. Look for software that provides a multi-level approval process. This ensures that the appropriate stakeholder reviews your expenses before reimbursement.
2. Choose software that integrates with your travel desk to ensure your expense management process is more streamlined.
3. Another important feature you need to consider is your software’s capability to read digital receipts. This will save you effort in the manual process of data entry.
4. Ensure your software is compatible with your accounting software to avoid data discrepancies.
5. Consider the effectiveness of your software, including upfront costs, ongoing maintenance fees, and potential savings from efficiency improvements.
By selecting an expense management software that meets these criteria, you can simplify your expense management process, reduce costs, and improve your bottom line.
Overall, expense management automation is an important process within your business. Using Expense Management Software can help you optimize your expenses better and even provide you with financial records for your business.
Automating your expense management process can help you streamline tracking, reporting, and reimbursement of your employee expenses while ensuring you comply with internal policies and external regulations.
If you’re ready to explore a software option that can help your accounting department with an expense management solution, schedule a demo with ProcureDesk today!