All companies need to track the costs of running their business, which only becomes more complex as the company grows or diversifies its expenses. Many companies, especially the small ones, are taken aback by the sheer effort involved in reporting and tracking this constant stream of payments, which is why they often don’t do it well. Surprisingly, a large number of them fail to realize just how crucial an automated expense management system can be.
Those who have dealt with expense management know that it doesn’t only refer to a few travel receipts here and there. Employee expenses are an essential component of the corporate sector and feed into profit-driven activities as well as necessary staff obligations. Since they are a sizable business cost, an organized management system is crucial for their proper upkeep.
Although expense management can be a cumbersome and intricate process, there are efficient ways of streamlining it, and the effects can be hugely beneficial.
What Is Expense Management?
Expense management is the process through which companies reimburse their employees for business-related costs. Expenses can encompass anything an employee may be authorized to seek reimbursement for, from travel costs to home office supplies to software subscriptions.
The process requires collecting receipts, documenting each expense for tax purposes, and tracking the business’s total spending. The traditional way of managing these expenses includes paper reports, physically handled receipts, and tracking spreadsheets.
However, due to the significant amount of time and labor costs consumed by the process, companies are now implementing expense software that automates and handles the process for them. By investing in this technology, companies can reduce their processing costs, increase productivity, improve working capital management, and minimize the wiggle room for errors and risks.
The Benefits of Travel and Expense Management
Travel and Expense Policy Enforcement
If you have an expense management system in place, this should typically mean that you have formulated and implemented an expense policy. The policy is a simple yet comprehensive guide for spending and reimbursement. It should generally include the following guidelines:
- Describe the type of expenditures employees can be reimbursed for;
- Inform employees of their expense-related responsibilities;
- Explain the process for filing expenses and receiving reimbursements.
An expense policy should be clear, understood by all employees, reasonable, and enforceable. It will ensure that your employees are treated fairly, that they understand what they can report as an expense, and that there is consistency across claims.
With the implementation of expense software, you can specify the conditions for each claim, after which the system may reject the incomplete or non-compliant claims. This helps companies eliminate any potential mishandlings, errors, or fraud.
If a company aims to manage its finances properly, it needs to track how employees are spending the budget. Lack of visibility can result in finance teams missing errors, duplicating reports, undocumented receipts, or even potential fraud.
With an organized and centralized expense management system in place, documents can be stored and categorized so that managers can pull and review them at any time. By tracking them accurately, managers can also ensure that employees are reimbursed on time and in full.
Since the software can categorize these entries for you, it reduces the need for manual input and thus prevents missing entries, duplicates, or errors.
A company will almost always allocate a defined portion of its budget to specific expenses, so it will need to track if actual spending falls within that budget. Proper expense management will allow a complete overview of spending at all times.
A company will almost always allocate a defined portion of its budget to specific expenses, so it will need to track if actual spending falls within that budget. Proper expense management will allow a complete overview of company spending at all times.
Companies that don’t track spending trends over time are not only unable to stay on top of budget allocation and use, but they are also facing worse decision-making about policies and potential fixes when it comes to out-of-policy or fraudulent activity. In general, the company will cease control of its financial decision-making due to incomplete or unorganized information.
Having a clear overview of spending trends is especially important if the company experiences increased spending within certain areas, which is often the case with larger companies. Expense management software will be able to alert the designated managers of such changes promptly and accurately.
Outdated, unorganized, or undefined expense reporting processes can take a heavy toll on your company’s time, money, and resources. In the absence of a defined system, your employees may be unfamiliar with the conditions for filing or processing claims, which can lead to wasted time on either of those fronts.
By replacing these manual processes with technology-backed systems, expense software significantly improves the efficiency of your operations. It will handle all claims for you, pre-determine the conditions, allocate reimbursements, and eliminate any errors without manual help.
This way, you will not only have a fast and effective expense management process, but you will also be able to reassign other crucial tasks to your employees, increasing your overall efficiency.
As your company grows, so will your business-related expenses. To stay on top of your spending, and have a proper reporting system in place, you need to work on streamlining your expense management; this means properly handling the entire process from claims to reimbursements.
Having a well-defined and organized expense management system can benefit your company in more ways than one. Some of these benefits include:
- Expense policy enforcement
- Data visibility
- Spending overview
In order to optimize any of these areas, it is best to look into expense software and the ways in which it can automate and enhance your expense management.