Expense management not only tracks employee spending but also determines how the organization will reimburse the costs incurred. It also applies the procedures and policies used to control this type of spending. For example, if employees are given daily allowances for meals when traveling, then the expense management process accounts for those limits when generating reimbursements for workers.
Expense Management Important
All companies must be able to pay their bills on time in order to stay in business, and employee expenses are one of those bills. For any company with employees who conduct business outside of the office, expense management will always be vital. Even something as simple as a client lunch paid for by an outside sales manager needs to be documented, approved and reimbursed.
With effective expense management processes in place, companies can issue those reimbursements quickly and accurately. Employees don’t like waiting months after they cover an expense to get reimbursed.
Types of Expense Management
Companies have different ways of managing expenses, including: -->Paper tracking. This is the traditional—and outdated—way to manage expenses, with employees collecting paper receipts and submitting them to the accounting department for approval on a monthly or quarterly basis. -->Spreadsheets. This is a popular choice among companies trying to reduce their reliance on paper that have yet to move over to a dedicated, automated expense management system. -->Expense management software. This approach simplifies the expense management process. The software alerts managers to expense reports needing review, letting them accept or reject the claim. Approved expenses are then automatically routed to accounting for reimbursement.
The 7 Habits of Highly Effective CFOs: Technical and Behavioral Skills to Lead Y
Expense Management Process
Expense management is a multi-step process that includes capturing and submitting expenses, which can involve: submitting reimbursement claims, approving or denying those claims, scheduling the claims for payment, and, finally, reimbursing the employee.
With the right process in place, companies can monitor their spending, ensure employees aren’t abusing the system, and take quick corrective action if they are (e.g., letting individual employees know that they’re spending more than they should be in specific areas). If, for example, a salesperson has been flying first class without prior approval to do so, a quick check of his or her receipts will reveal the violation.
It can be difficult to find these issues with manual systems, particularly for a company with a growing team of field workers. Missing information, approval of spending without a thorough review and slow approvals are all common issues. This not only wastes employees’ time but also leaves employees wondering where their expense checks are (often as they’re already racking up new expenses for the next closing period).
