How to Manage Expense Reports More Effectively

If you manage expense reports, you know it is more than just preventing fraudulent transactions from taking over your business; it helps your finance team take charge over the company’s expenses, maintain precise records, and keep your employees happy with timely reimbursements. Yet, despite the elegant benefits poised by automated expense management, 43% of businesses use manual time-consuming and error-prone processes.

To remain more effective and relevant in the process, company policies that define specific expense report-related rules must be in place. Employing technology for submitting expense receipts further slims the chances for fraud and human error in expense reports.

Manage Expense Reports Efficiently: How to Process Expense Reports for Your Small Business

Efficiency in a business setup can make or break internal business structures. Successful ventures share one thing in common – efficient processes and activities stemming from streamlined operations.

As the business grows, so too, does the need for more efficient resource and finance management as well as risk aversion. Managing expenses is part and parcel of a successful venture. Here’s how the process goes at a glance:

By implementing an efficient and streamlined process, small businesses can effectively control expenses, eliminate manual data entry, and make data-driven decisions.

What is an Expense Report?

An expense report contains a detailed record of all expenses incurred by an employee for routine business-related activities.

Depending on the organization, the report may contain the following essential elements:

By most company policies, an expense report must be presented to the finance department for reimbursement.

>> Related: Switching from Manual to Automated Expense Management Systems <<

Why is Expense Management Important?

Expense management is an essential aspect of running a successful business. It involves the careful tracking, analysis, and control of company expenses to ensure accurate financial records and cost-saving opportunities. Effective expense management not only shapes the financial health of the business but also contributes to higher employee satisfaction.

Accurate financial records are crucial for any business to make informed decisions and plan for the future. Businesses can maintain precise records of financial transactions, allowing for better budget planning, forecasting, and financial reporting in compliance with legal standards.

Such visibility enables businesses to identify cost saving areas, ultimately improving profitability.

Types of Expense Management

There are several approaches to expense management that businesses leverage to track and control their expenditures. While some opt for paper-records and spreadsheet-based expense management, emerging trends suggest that AI and other software-based expense management approaches will set the pace for future corporate expense management.

Users of automated expense management enjoy features like real-time expense approval, receipt scanning, policy enforcement, and so much more.

Why Should Businesses Automate Expense Reporting?

Automating expense reporting streamlines the expense management process and improves overall efficiency. 

One of the key advantages of automating expense reporting is the minimization of human error. To understand how error-prone manual expense management can be, here’s a brief summary of the activities involved:

>> Related: 7 Tips to Avoid Finance Report Errors <<

Automation closes the gaps posed by manual expense management, further ensuring compliance with expense policies and regulations.

The Expense Management Process at a Glance

The expense management process involves various steps that businesses follow to efficiently and accurately track, analyze, and manage expense reports. From initially capturing expense information to generating financial reports, this process is typically streamlined and automated through expense management software. 

Expense management software endows small businesses with the tools they need to minimize (or even eliminate) the need for manual data entry, minimize risks, ensure compliance, track employee spending, and gain visibility into their financial health.

Below are the key aspects of the expense management process:

1. Have a Policy in Place

Having a policy in place for expense management is crucial for any organization. It provides clear guidelines and procedures for employees to follow when it comes to managing their expenses, ensuring transparency and accountability throughout the process.

One of the key benefits of having an expense management policy is that it defines what expenses count as legitimate business expenses. This clears the confusion behind employee spending. Expenses are carefully categorized with each report; for instance, travel, accommodation, and meals are collectively classified as travel expenses while office supplies may fall under administrative costs.

2. Double-Check Expenses

In the process of reviewing employee expense reports, double-checking expenses holds significant importance for businesses. This crucial step ensures accuracy, compliance, and a deeper understanding of employee spending habits.

By carefully reviewing expenses, businesses can catch any mistakes or inaccuracies that may have occurred during the expense reporting process. This helps to maintain the integrity of financial records and prevent any potential issues with auditing or reconciliation.

Furthermore, double-checking expenses allows businesses to ensure compliance with spending policies and guidelines. It helps identify any violations or instances where employees may have exceeded spending limits or used company funds for personal expenses.

>> Related: How Much Is T&E Policy Compliance Worth? <<

3. Approve Reports and Process Reimbursements Promptly

Approving expense reports and processing reimbursements promptly ensures that employees are reimbursed for their out-of-pocket expenses in a timely manner. Delayed reimbursements can lead to frustration, dissatisfaction, and even financial stress for employees, negatively impacting their productivity.

Prompt approval and reimbursement processes contribute to financial efficiencies within the organization. By promptly reviewing and approving expense reports, companies can identify any potential errors, inaccuracies, or out-of-policy claims.

4. Add Up Expenses and Receipts

Adding up expenses and receipts helps maintain transparency and prevent any discrepancies in financial records. To achieve this, follow these steps:

If there is a discrepancy between the total of expenses and receipts, it is important to identify the missing receipts. Contact the employee to track down any missing receipts and gather the necessary documentation.

Why Paper Expense Reports are Becoming a Thing of the Past

Paper-based expense reporting is becoming a thing of the past, with more business than ever looking to phase out manual expense management in the near future. It can be a time-consuming and error-prone process to manually manage expense reports, hindering both business productivity and accuracy. 

Businesses now have a better solution at hand – expense management software. This software automates the entire process and helps businesses manage expense reports efficiently. The software automatically extracts relevant information from the receipts, categorizes the expenses, and routes the reports for approval.

>> 71% of CFOs Say T&E Management Absorbs Too Much Time <<

Compliance with Expense Report Regulations

Complying with expense report regulations is of utmost importance for businesses to maintain financial integrity and avoid legal repercussions. Compliance with expense reports is a collaborative undertaking between management, finance, and employee departments, where changes to company policy must be communicated in good time.

Non-compliance can lead to considerable losses financially. It may tarnish the company’s reputation as concerns about financial management and general integrity tend to rise within and outside the organization. Regulatory and legal penalties become difficult to dodge in such cases.

Investing in expense management software aids in more effective policy enforcement, and the creation of compliant expense reports.

Choosing an Expense Management Platform for Small Businesses

Settling for a suitable solution to help your business manage expense reports should come after careful consideration of business needs and insightful evaluation of existing platforms. 

TravelBank is an one-in-all solution you need for your business expenses and here’s why:

Need an all-in-one expense management platform that caters to your needs? Try TravelBank today!

FAQs

What is expense management software?

Expense management software is a digital solution that helps businesses track, analyze, and manage expense reports. It provides a centralized platform for employees to submit expense reports, while allowing finance teams to review, approve, and reimburse those expenses efficiently.

How do expense reports work?

Expense reports serve as a record of business expenses incurred by employees during their work-related activities. They typically include details, such as the date of the expense, the vendor or merchant, the amount spent, and any relevant receipts or supporting documentation.

What should be included in an expense report?

An expense report should include all necessary information to support the incurred expense, such as the expense date, description, category, amount, and any applicable receipts or invoices. Additionally, it is important to adhere to the company’s expense policies and adhere to any specific guidelines provided.

How do I prepare an expense report?

To prepare an expense report, start by gathering all relevant receipts and documentation for the expenses incurred. Then, enter the details of each expense into the expense management software, ensuring accuracy and completeness. Attach digital copies of receipts, if applicable, and submit the report for review and approval.

How do I review expense reports?

When reviewing expense reports, ensure that all submitted expenses comply with company policies and are supported by valid receipts or documentation. Verify that expenses are accurately categorized and properly documented. With expense management software, you can easily review and manage expense reports, make comments or suggestions, and approve or reject them.