The pandemic has been a reset button for businesses of all sizes. It has changed the nature of business travel, business expenses, and even day-to-day business operations.
Unfortunately, this means business owners and Finance teams need to start from scratch when dealing with employee expenses and reimbursements.
But do businesses start when it comes to financial improvements, you ask?
We’ve crafted this blog to answer this very question and more. We’ve also built a business use case for why your business must consider an expense software to sustain remote expense management effectively. Let’s get started!
Table of Contents
Main challenges of traditional expense management
- Spreadsheet-based expense reporting depends on the accuracy of human beings to enter the correct values into expense reports. Any incorrect values would translate into lengthy reimbursement cycles, back and forths with employees, additional costs to the business, and unhappy employees.
- Intentional or unintentional manual data entry errors also mean that Finance teams have to verify each expense report individually to ensure that no incorrect, duplicate, or fraudulent expenses get by. This can be quite a time-consuming and low-impact task for Finance teams to repeat regularly. This would eventually lead to fatigue and fraudulent claims slipping by.
- The onus of preventing expense fraud would fall on the shoulders of the Finance teams entirely. This can be quite a responsibility to take as any minor slip-up (which is quite likely to happen) could hurt the company’s finances in the long run.
- Business owners, leadership teams, and Finance teams have little to no control or visibility into the nuances of expense management within the company. This leads to bad business decisions not backed by data, expense fraud, and overall financial leaks within the system.
When businesses lack proper visibility into spending and financial obligations, small financial problems can gradually develop into more serious difficulties. Company directors should monitor warning signs such as persistent cash flow shortages, unpaid liabilities, and uncontrolled operating expenses. Understanding what a company director should do if their company is in financial distress can help leadership teams recognise potential risks and take appropriate action at an early stage.
These challenges coupled with manual processes, deadlines, data entry errors, and back and forths can hamper your business, financial, and employee productivity. Thus, companies must consider leveraging automation-driven technology to take off the load from the Finance teams and stay afloat and thrive despite the testing times.
Why is an expense management software the answer to control employee business expenses?
1. Seamlessly automates the entire expense management process
While traditional expense management is error-prone and cumbersome, automation with an expense management software helps reduce time-consuming work for your Finance teams and employees. Additionally, the software turns any challenges faced in the traditional process into a one-click easy task.
This translates into:
- Seamless expense tracking and reporting for employees from any place, at any time, and by using any device.
- Accurate extraction of expense data from receipts using OCR technology to prevent manual data entry errors.
- Advanced insights into spending habits, patterns, top spenders, and top policy violators across the company.
- Access to secure cloud storage for easy retrieval of expense data during audits.
Accurate expense records also make it easier for Finance teams to prepare and review essential financial reports. Business owners can use these reports to monitor income, spending, profitability, and cash flow without depending entirely on external bookkeeping support. Learn about the five financial reports every owner should be able to run without calling a bookkeeper to understand which financial insights can support better business decisions.
Pro-tip: Remember that keeping accurate records of expense data is critical to staying audit-ready. Failure to do so can lead to severe troubles with the IRS.
2. Enforces expense policies and ensures strict compliance
Companies often struggle to enforce policy compliance even with the most straightforward expense policies. We can attribute this to ineffective communication and weak policy enforcement. If left unnoticed, this leads to overspending in multiple areas and frequent expense policy violations.
An expense management software comes with a robust policy engine that enables Finance teams to create custom rules depending on the needs of the business. In addition, the software checks all reported expenses against company policies and informs employees of any violations right away.
This allows employees the liberty of not remembering policies and yet submitting compliant expense reports. In case an expense is flagged, the employee can provide reasons for the violation in the comments. The software documents these entries in a digital audit trail that the employee and key decision-makers can access. This not only eliminates back and forth with Finance teams but also ensures your business stays audit-ready, always.
Maintaining accurate expense records is also important when businesses prepare invoices and meet their tax obligations. Finance teams should coordinate expense documentation, payment records, and reporting schedules to reduce discrepancies during quarterly tax periods. This guide to aligning invoicing with quarterly taxes explains how organised financial processes can support better compliance and reporting.
3. Manages company-wide expenses
Every department within your company has different types, categories, and reasons behind business expenses. While employees do not need to worry about this, your Finance teams are often left clueless regarding the larger picture of business expenses.
An expense software addresses this problem with a real-time travel and expense dashboard that provides Finance teams with overall breakdowns based on set parameters with zero extra effort. This empowers Finance teams to always stay in the loop when it comes to expense management, remote or not.
Monitoring company-wide expenses can also help businesses identify periods when additional working capital may be required. Companies experiencing temporary cash flow gaps sometimes explore alternative financing options to cover operational expenses and maintain business continuity. A merchant cash advance is one such financing option that eligible businesses may consider after reviewing its costs, repayment structure, and potential impact on future cash flow.
4. Insight into identifying cost-cutting strategies
An expense management software comes with the advanced data analytics feature that helps Finance teams draw logical conclusions from company-wide expense data. This could be across individuals, departments, budgets, cost centers, and more.
Finance teams can analyze these insights to find new opportunities to cut, save, or optimize operating costs to ensure no waste of resources and money.
Identifying cost-saving opportunities becomes more effective when businesses combine historical spending data with future financial projections. Financial forecasting allows management teams to estimate upcoming expenses, anticipate cash flow requirements, and prepare budgets based on expected business activity. Using e-books for financial forecasting can provide additional guidance on organising financial information and improving forecasting practices.
The same principle of tracking expenses and planning budgets also applies to personal financial decisions, especially when preparing for a major purchase. If you’re planning to buy a property, learn how to evaluate your income, expenses, and housing costs with this guide to figuring out your finances when buying a home.
For instance, if Finance teams notice that all traveling employees frequently use the same airline or chain of hotels for stay, they can negotiate with the vendor for better deals. Such measures can help Finance teams reduce operating expenses while also reevaluating budgets and overall spend.
Regularly reviewing spending, income, savings, and financial priorities can help businesses and individuals make more informed financial decisions. Explore these five areas of your finances to re-evaluate to identify opportunities for better budgeting and stronger financial management.
5. Prevents fraudulent expenses from getting by
Pymnts reported that around 85% of employees across the U.S had admitted to lying on their expense reports. This would roughly mean that businesses would lose a total of $150 million every year on fraudulent expenses alone. This makes it a necessary evil to stop.
An expense management software prevents expense fraud, out-of-policy expenses, duplicate expenses, and more by seamlessly enforcing policy compliance and flagging non-compliant expenses while notifying Finance teams and employees. This ensures no fraud gets by with zero manual effort or intervention from Finance teams.
Beyond preventing fraudulent claims, transparent expense tracking can help organisations evaluate how their spending aligns with broader environmental, social, and governance objectives. Businesses can assess costs associated with energy use, employee welfare, resource consumption, and sustainable operations to understand their wider financial impact. Learn how to do custom financial modeling for ESG analysis to explore how financial data can support more informed sustainability-related decisions.
Conclusion
While manual spreadsheet-based expense reporting can be a tiresome process, an expense report software automates your entire pre-accounting process while also simplifying expense management from end-to-end. Most successful businesses are now rapidly switching to an expense software to cope with remote expense management.
Once spending is under control and a financial plan is in place, individuals can also explore ways to build long-term financial security. Understanding the benefits of investing in precious metals for a safe future can help readers learn about another potential component of a diversified investment strategy. It’s time your business does too!
