Keeping track of all your business expenses can be easier with the right software. We explore the functionality and features of expense management tools so you can choose the best one for your startup.
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Running a business isn’t free. Supplies must be bought, repairs need carrying out, and travel must be paid for. Before long, even small organisations with a single-digit workforces can find it hard to keep on top of what employees are spending.
Most small to midsize enterprises (SMEs) will start out with a manual system for managing expenses. Keeping records on spreadsheets (or even paper) works to a certain point, but it requires a lot of human input and can be prone to mistakes. It also creates work for anyone responsible for reimbursement, since they need to transfer the information to other systems in order to make payments and maintain an audit trail.
In this article, we explore how an expense management system, based on expense report software, can help SMEs simplify the way they track and account for business expenses.
What is expense management software?
Expense management software describes tools that help organisations keep track of their various business costs, including travel, accommodation, office supplies, staffing, entertainment, and rent.
They provide a single platform where employees can record their expenses, submit and manage receipts, and claim expenses. Managers can use the platform to approve claims, and accountants can reimburse employees through the system. Managers can also generate reports to get an overview of expenses-related information. Many products integrate with other business tools, like accounting software, or enterprise resource planning (ERP) software.
What does expense management software do?
Expense management software streamlines or automates many of the steps involved in the expense management process. To illustrate this, consider these scenarios of a business trip before and after implementing expense report software.
A small video production agency is sending three employees on a two-day shoot. The agency has booked and paid for accommodation and flights already, and allocated those costs against the project budget in their accounting software. During the shoot, the employees keep hold of their receipts for taxis and meals, plus any other on-the-ground expenses.
When they get back, they each fill out an expenses claim spreadsheet, print it out, and pass it on to their manager accounting team, along with their paper receipts. The manager checks all the figures, signs it, and passes it to the accounts team. They then carefully enter all the information from the paperwork into their account system and compare expenditures against the company’s credit card statement.
The person managing the project also inputs the costs into their project management software to ensure that the project budget is accurately recorded. If the employees have exceeded the project budget for whatever reason, they need to investigate why that is and potentially have some difficult conversations.
The accounts team handles all the reimbursements. This involves transferring the outstanding costs to the employees’ accounts to coincide with the end-of-month pay run.
Before their trip, the travelling employees download the company’s expense report app on their phones. During the trip, they can take photos of receipts for any expenses they incur which automatically logs the cost in the app. They also take a corporate credit card with them, which is connected to the same system. Because the app is integrated with the company’s accounting and project management systems, data is automatically transferred across to these systems back at the company office for every purchase.
The accountants and project managers don’t need to worry about budgets being blown, because they can set limits on spending in the app. They can also set and apply policies about where, when, and how employees can spend.
Once logged in the company’s systems, the expenses can be approved automatically in many cases, and reimbursed quickly— sometimes on the same day.
Why is expense management important for businesses?
The right expense management tool can save your business time and money and help you maintain better oversight of business expenditure. Here are some of the major advantages.
Lower risk of human error
Like any automated system, expense management tools pass data between systems much more quickly and faithfully than a human can. It’s easy for a tired or overworked person to misread or mistype a number, especially when they have hundreds of reports to process. Computerised systems don’t make these mistakes, and they move data in the blink of an eye, so people are freed up to do more valuable work for the business.
Keeping all of your company’s expenses-related data in one place makes it easy to generate reports. These can be done per employee, per project, or for certain dates— whatever the business requires. Stakeholders don’t have to pore over multiple files across multiple systems to gain a quick summary of the information they need.
Better audit trails
If your projects have to comply with internal policies or external regulations, you may need to provide records of business expenses and the associated activities. Expense report software lets you do that in one platform and can help teams get a quick account of the facts. These audit trails can also be useful for tax purposes.
Easier policing of expenses
Some employees take liberties when claiming expenses, but the right software can help you enforce company policy. This can include setting spending limits, ensuring employees buy through approved suppliers, and flagging when breaches occur. Some tools also include features to help spot fraudulent or dishonest claims.
It’s not just SMEs that benefit from expense management software; employees can, too. To maintain a happy workforce, it is vital that employers reimburse employees promptly for any business expenses they incur. By automating the entire process, people who are claiming expenses don’t have to wait as long for colleagues to process and approve the claims.
Make better decisions about business expenses
Having a consolidated home for expenses data helps your business see the bigger picture and make informed choices. You may notice areas where you are over or underspending, for example, or you may spot opportunities to negotiate deals with certain suppliers. Some tools even automate this and will flag opportunities to optimise your spending.
How can your SME choose the right expense management system?
Choosing the right expense management system for your business involves asking some basic questions.
First, consider the main features you will need. If your expenses are straightforward, you may be able to use a less expensive tool with core features like receipt management, approval process controls, and reimbursement management. However you may require multiple currencies, key integrations with other software, or reporting features that are only available with more advanced products.
Because the major benefits of an expense management system lie in its integrations, you will want to ensure that any system works with other existing platforms you use, especially your accounting, budget tracking, and project management tools.
You should consider some of the fundamentals that apply to any software deployment. There are different pricing structures available (per user, per feature, monthly or annual subscriptions, flat rate) and hosting options (on premises or cloud). Also check that your preferred tool will work with the operating systems you use across all your company’s devices. This includes desktop and laptops (which are likely to be running windows or macOS) and mobile devices (likely Android or iOS).
Get your business expenses under control
Rolling out expense report software can be a win-win for an SME. Employees have a simpler way of claiming expenses and get reimbursed faster, and the company streamlines operations and gets better insight into costs.
With the right tool and the right integrations, expense management can be a hassle-free process that actually saves the company money in the long run.