The Ultimate Guide to Streamlining Expense Management

Expense management is one of the key areas where businesses have to tread a fine line between cutting back on expenses and spending effectively. This job usually falls to the finance department. They are responsible to make the expense management process better, control costs, and reduce mistakes that can prove costly.

Outdated expense management processes result in ineffective expense management and an incredible waste of time. Paper forms, spreadsheets, and emails are not equipped to handle the expense management needs of modern businesses. A streamlined, automated expense management process can help you identify unnecessary expenditure and cut back on costs.

What Is Expense Management?

Expense management is a systematic set of processes businesses use to record expenses, execute payments, and track their spend. This includes keeping tabs on purchases businesses make, like assets and inventory, as well as the expenses incurred by traveling employees. It also involves defining a spend policy, enforcing it, and finding ways to cut down spending.

Why Manual Methods Don’t Work Anymore

Outdated expense management methods result in ineffective expense control and can lead to unnecessary expenses. The problem with a conventional pen-and-paper system is that it’s prone to human errors, expense frauds, an exhaustive paper trail, and reimbursements that take weeks to get to the employee's bank account.

Here are some of the problems businesses face when they don’t use expense management software:

Waste of Time, Money, and Resources

Manual expense solution means time-consuming tasks for you and your employees. According to the Aberdeen Group, the cost of creating and approving one expense report manually is $41.12, while an automated report costs only $7.17.

Difficulty Enforcing Policies

Auditing reports and processing payments manually can easily become a full-time job for your finance team. It becomes difficult to enforce corporate spending policies when they have to go through rows of data.

No Control Over Spending

It’s difficult to monitor all your spending, especially when it is spread across multiple spreadsheets. This leads to bad business decisions as you don’t have the complete picture.

The Key Elements of Expense Management

Expense management has two equally important aspects: how a business spends its money, and how it keeps track of the expenses. However, there are several elements in the entire expense management cycle that start when expenses are incurred.

Recording the Expense

When a business purchases inventory or a capital asset, receipts are stored at the end of the transaction. This applies to employee-incurred expenses as well. For example, traveling salespeople record their business expenses promptly using mobile devices as and when they happen. This comes handy to manage travel expenses in one place.

Compiling and Submitting Expense Report

When employees return after business trips, they list out all the expenses incurred and compile a report and submit it to the manager. Some organizations use paper forms, spreadsheets, and email to do this. Modern businesses use dedicated expense management software or workflow automation tools to handle this.

Expense Processing

Once the managers receive the expense report, they ensure that all the reported expenses are qualified business expenses. They send it to the finance team which ensures that all the expenses are compliant with the organization’s spend policy.

Reimbursing the Employee

The employees are reimbursed for spending on behalf of the company through the accounts payable department. This either gets sent in a separate paycheck, or gets processed along with regular payroll.

Accounting for the Expense

The finance team posts journal entries to appropriate accounts after the employees are reimbursed. They also keep a digital copy of the receipts to claim tax deductions during the year-end.

Best Practices to Streamline Your Expense Management

Record Expenses Promptly

It’s really important to record spending as and when it happens so as to account for all expenses. A travel expense tracker with a mobile app comes in handy so employees can submit expenses even when they’re on the move for a business travel.

Automate Whenever Possible

Whether it is automated expense approvals for a particular amount, or creating journal entries immediately, you can find many ways to introduce more smooth functioning. Also, applying automation to approve expense reports saves up a lot of time.

Avoid Paperwork

While exhaustive paper trails are important, you don’t want to go down a rabbit hole during audits. Paper receipts not only fade and become illegible with time, but they’re also easy to lose. It’s always better to scan the receipts and back them up on the cloud.

Integrate With Other Software

Connect your expense reporting process with your other systems like accounting software to avoid manually entering the same data twice. This not only saves you time but also eliminates human errors.

Set Up Online Reimbursements

When the finance team approves an expense claim, you can expedite the reimbursement process by setting up an ACH payment or a direct bank transfer, and sending the money directly to the employee’s bank account.

Build Your Own Expense Management System With KiSSFLOW

KiSSFLOW is an expense management system, that lets you build a custom expense management app that is tailored to suit your exact requirements. With KiSSFLOW, you can build powerful forms with simple drag-and-drop functionalities to capture all the necessary information.

Once someone submits a request in KiSSFLOW, it moves automatically to the next person in the approval chain through simple notifications. There’s also an option to accommodate your expense policies so the system throws up a red flag in case of policy violations. This makes it easier for the finance teams to approve or reject a claim. You can also set up automated approvals up to the desired limit. Further, you can generate powerful reports that identify unnecessary expenses and offer 360-degree visibility on your spend.

If you’re looking for expense management software, take KiSSFLOW for a whirl. See how it can give you insights on cutting down expenses–start your free 14-day trial today.

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