At some point or another, an employee may need to use company funds to make a business-related purchase. When this happens, expense management comes into play. Learn all about small business expense management and how to streamline your process to ensure you reimburse employees in a timely manner.
What is expense management?
So, what is expense management exactly? Expense management is the system your company uses to process, pay, and audit business expenses. This may include, but is not limited to, employee travel and entertainment and reimbursements (e.g., office supplies).
With an expense management process, a business reimburses employees for what they spent on business-related matters. And generally, businesses set up policies and procedures so employees know what counts for expense reimbursement.
Business expense management gives you insight into employee expenses and helps you categorize spending. Not to mention, it ensures that you’re compliant and makes it easier to gather reports for audits.
Types of expense management
You can monitor, track, and store employee expense information in a number of ways, such as using:
- Paper forms
To find the best expense management solution for your business, consider the pros and cons of each option.
Spreadsheets are easy and inexpensive. However, they are more time consuming and can be confusing to some employees.
Paper forms work well with paper receipts and are an inexpensive way to manage expense reports. But, they also require a lot of manual work for both employees and expense report approvers.
Expense management software can streamline your tasks and reduce the workload for everyone involved. Although it’s the most expensive option for expense management, software can help you reimburse employees more quickly and avoid mistakes.
Tips for a better expense management process
If it seems impossible to maintain your spreadsheets, you’re constantly making expense management mistakes, and your employees are wasting too much time filling out expense reports, it may be time to rethink your expense management procedures.
Want to improve your expense management process and streamline the task of reimbursing employees? Take a look at these four tips.
1. Put it all in writing
To ensure your expense management process goes off without a hitch, put everything (yes, everything) in writing for you and your team. That way, you and your employees can use your policy as a guide.
Include the following in your expense management policy:
- What employees can be reimbursed for (e.g., supplies, travel, etc.)
- What employees cannot be reimbursed for
- Steps employees must take to get reimbursed (e.g., filling out a form, providing receipts, etc.)
- How long it takes to receive reimbursement
Have each employee sign a copy of the policy to show they read and understand it, and keep the signed copy in their employee files for safekeeping.
2. Follow policies to a T
The last thing you want to do is be lax about your expense management policy. Otherwise, you could wind up with inaccurate records, missed reimbursements, etc. To avoid any issues, follow all policies to a T.
Make sure you:
- Thoroughly explain your policy and procedures to all employees
- Only reimburse for expenses listed in your policy
- Have employees follow every procedure put in place
- Keep your policy and procedures up to date
3. Utilize expense management software
To further streamline your expense management process, consider ditching your spreadsheet and investing in expense management software for small business.
Expense management tools, like software, can help you organize your expenses and review who has and has not been reimbursed.
Before you switch to software, consider the pros and cons for your business. Here are a few perks of using expense management software:
- Simplifies processes
- Speeds up employee reimbursement
- Decreases delays and errors
- Increases efficiency and compliance
- Boosts productivity
- Simplifies reporting
- Improves workflow
- Ensures expense management policy compliance
One major con to software is the cost. Utilizing software is more expensive than using a spreadsheet or paper forms. However, you can shop around to find what works for your business and find the best deal before committing.
On the benefits of using expense management software, Michael Cummins, Director of Finance of Insurance Geek, said:
Automation is critical when it comes to making your expense management process better. Using solid expense management software saves you additional time by automatically generating necessary reports, saves paper by using a completely online system for reports and forms, and allows you to monitor the progress of the software anytime. Most importantly, having an automated system allows you additional time to focus on your business and make better predictions about your spending habits.
4. Integrate processes with accounting and payroll
If possible, try to find a solution that integrates with your accounting and payroll processes. For example, you can find an expense management system that integrates with your accounting software and payroll.
Integrating makes things a breeze from all sides. When you integrate with your accounting, you don’t have to worry about updating your books. And if you find a solution that integrates with your payroll, you can reimburse your employees more quickly.
When searching for a solution, check to see if your current platforms have expense management integration options and if there is any additional cost for integrating.
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