Informative Expense Management Guide

The guide covers answers to 5 significant questions revolving around Expense Management that can turn a layman into an expense management expert:

  • What is Expense Management?
  • How to Streamline Expense Management?
  • What is Expense Policy?
  • What are the Challenges Faced in Expense Management Process?
  • Why is Expense Management Automation Important?
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Expense Management

Expense Management Guide

Timer35 Min Read


What is Expense Management?

Expense management is a business approach for handling the cost of processing, paying, and auditing business overheads and governing business spending. In current times, it is done using expense management software, tools, and technology so as to not only control the spending but also analyze the data pertaining to expenses of an organization.

Business Expense Management includes:
What Is Expense Management
  • Raising requests for traveling, and spending money on different business needs
  • Taking approval to make the same business-related expenditures
  • Adhering to the predefined expense policies of the company
  • Submitting documents of expense proof like receipts, invoices, and bills for validation and calculation purposes
  • Releasing the final payout with applicable deductions/reimbursements
  • Performing audits to check for discrepancies, thereby detecting/preventing double entries and expense-related frauds
  • Carrying out expense analytics for decision making and business forecasting purposes

Did you know?

“26% of respondents say their companies don’t even know whether submitted expense reports comply with their corporate policies, and only about one in four can automatically flag non-compliant reports for follow-up.” – Tallie Survey

If we try to picture what has changed in the ways of managing company expenses over the years, we have come a really long way! Earlier, there were hoards of paper receipts, numerous excel sheets containing expense claims topped with tedious validation activities. But, looking at the recent developments in the process of T&E management, the automated expense management software have made it easy to implement spending policies, view all the expense data in one place, capture receipts and process reports, and reimburse employees for their expenses more quickly.

The software has added to expense management efficiency by:
  • Delineating flexible expense policies
  • Specifying an expiry limit on expenses
  • Generating real-time expense receipts
  • Configuring the expense report submission
  • Fixing number of expense processing cycles
  • Allowing quicker expense payouts by final approver

For companies that do not embrace expense management automation, a crisis such as the COVID-19 pandemic can simply make the whole expense management process even more challenging– given that employees can’t submit expenses physically, nor the transfer of expense documents can happen. Most importantly, how can such businesses account for unscheduled costs that employees might incur while setting up the operational infrastructure for remote work?

So, there is a dire need for employers to relook at their expense management, effectively strategize the process and make sure business continuity as working in a crisis mode has, undoubtedly, become the new normal.

There are two key elements of expense management process and these elements largely cover all aspects of the expense management process:
  • The way a business pays for particulars
  • The way a business tracks the spend

Types of Expense Management

In a corporate set-up, there are multiple expenses that the employer has to bear. But when it comes to proper planning and management, following 3 types of expenses are taken into consideration:

  • Travel & Accommodation Management – managing expenses involving employee travel and accommodation
  • Purchase Management – business purchases like raw materials, and finished goods purchased from the vendors
  • Cash Management – expenses like rent, utility bills, outings and gatherings
Let’s throw some light on how the step-wise traditional procedure of expense management is different from the new automated means of spending control:
Traditional Expense Management Vs Automated Expense Management
Pro Tip: 1

The most value is in systems that use mobile apps to capture receipts (cited by 48%) and allow direct deposit by ACH (36%). Both responses make sense because chasing down missing documentation and processing payments are time-consuming tasks.

How to Streamline Expense Management?

Now, understanding expense management meaning and its details is a lost cause if we don’t know the right way of organizing the same. This brings us to our next question – how to streamline business expense management? The best and most concise answer would be to adopt an automated expense management system. On top of that, there are several ways in which you can pick the best expense management software for your company!

There are various benefits of streamlining expenses through an expense management system:

Streamline Expense Managemen
  • Mechanization: Whether it is automated expense approval for any particular amount, or developing journal entries instantly, you can search for several ways to introduce smooth functioning. Moreover, applying automation for approving expense reports saves a lot of time and money.
  • Integration: Easily connect your expense reporting process with other applications such as accounting software in order to avoid entering the same data twice manually. Not only this saves your time but also eliminates human errors.
  • Paperwork Elimination: Paper receipts fade with time and are also easy to lose. Hence, it is always better to scan the expense receipts with an automated expense management system and back them up on in the cloud.
  • Online Reimbursements: When your finance department reviews and approves employee expense claims, you can accelerate the reimbursement process by setting up ACH (Automated Clearing House) payments or direct bank transfers and sending the amount directly to an employees’ bank account.
  • Expense Data Recording: It is crucial to record expenses as and when it takes place to account for all expenses. Travel expense tracker with the mobile app comes in handy so that employees can submit their expenses even when they are on the go for a business trip.
Here’s a quick & easy 7-step way to strategize the expense management in your organization:
7-Step Expense Management Strategy:
  • Write a clear, fair, and comprehensive expense policy that reflects the needs of your company, its managers, leaders, and its employees
  • Collect relevant information, support business goals, avoid backlogs, tie expenses to revenue data, and explain how to submit approve claims in your policy
  • Provide an easy way for employees to submit their expense reports
  • Gather and retain critical expense information as required by law
  • Keep everyone, from managers to employees to finance staff, accountable throughout the entire process
  • Be timely with employee reimbursements so they’re not carrying balances
  • Conduct regular audits of your process, and pay attention to flagged anomalies that could signal abuses and fraud

Did you know?

“India is the world’s fastest growing business travel market. Yet, most Indian MSMEs still use traditional means to handle their expense management. What seems to be like an easy-save, costs businesses in many ways.” – GBTA Study Report

Financial Control Amid COVID-19

Talking about how this system has evolved and revolutionized expense handling and the overall financial management of organizations, the testing times of COVID-19 are a perfect example!

“In 2020, the onset of noble Coronavirus, Google’s ad revenue declined by more than 5%, the first drop in the company’s 16-year history.” – Fortune

On the road to recovery from adverse impacts of this global pandemic on businesses, the focus of every single employer has shifted to implementing spend control activities. With the business travels downsizing to zero and the world edging towards a sluggish economy, redefining expense management and cost control strategies using solutions for HR management have become the need of the hour.

“T&E is one of the most important costs to be reintroduced once revenue begins to return.” – Gartner Survey

Bouncing back to normal –

On one hand, additional health & safety measures are introduced for business traveling to make it more feasible in extremely necessary conditions. On the other hand, as a result of office shutdowns, zoom calls and other modes of conducting virtual meetings during WFH have significantly minimized the work travel expenses. In a time of crisis, switching to an automated system from the manual way of expense management has turned out to be highly beneficial. Most survey respondents indicated that many of the initial challenges they faced at the onset of the pandemic have subsided in recent months by switching to an expense management software or mobile app.

Expense Management Trends

Do you actually think entering receipts and bills by hand and emailing files around the office is still how expense management works? You have been living under a rock, I guess.

Millennial and GenZ have no patience and time to waste on shuffling records, bills, and invoices manually. So, the expense management industry has responded to their needs and come up with technological advancements to ease the pain.

Here are some top expense management trends that have made a huge difference in the bygone year:
  • Enabling mobile accessibility to create reports, and input, track & submit employees’ business expenses on the go
  • With redefined travel norms post pandemic, everything from booking flights to hotel bills are easily taken care of by simply submitting travel expense reimbursement forms through expense management tools
  • Integrating with travel booking & itinerary apps, ERP and other accounting software has led employees to move in sync
  • Using AI, Automation, and Machine Learning to save time, flag anomalies, detect and eradicate frauds & errors and mitigate risks, thereby steering clear of legal troubles
  • Customizing Expense Receipt Fields Parameters like Purpose, location, project, merchant, and other participants
  • Obtaining a holistic HR software expense management module to control costs and identify significance of visibility & transparency in expenditures
Expense Management Best Practices:
  • Defining Expense Policies
  • Maintaining Expense Reporting
  • Collecting Critical Expense Information
  • Establishing Accountability
  • Creating Expense Timelines
  • Conducting Regular Audits for Fraud Detection
Pro Tip: 2

Areas where investments in automated expense management pay off include increased productivity by cutting down on manual data entry, encouraging employees to submit expense reports more frequently and quickly, and managers spending less time poring over reports for problems.

What is Expense Policy?

Money controlled is money saved! The best possible way to keep check on the employee expenses, thereby saving business funds is to implement an Expense Management Policy. The key to drafting the perfect expense policy for your business includes creating clear categories and budget, keeping it simple, being fair, updating often, and checking the regulations.

Expense Policy
There are various relevant policies that make up the expense management policy such as:
  • Location Group Policy: Location groups are used in order to specify different expense limits for different city groups. You may create Tier 1, Tier 2 and Tier 3 location groups for different employees.
  • Advance Policy: Advance policy needs to be configured to enable employees to request advance for work related expenses.
  • Expense Policy: You can create & configure all types of expense categories & policies such as claim reimbursement policy applicable on employees and the company from this one. Some expense categories include: month-wise, location dependent, limit for all locations, year amount limit, no limit case, and monthly claim frequency check.
A number of factors are responsible to carry out the expense management process smoothly and play a vital role in defining expense policies. There are as follows:
  • Workflow: Exception workflow, expense workflow, and advance workflow.
  • Taxes: Tax types need to be created so that users can submit tax bifurcation at time of expense submission. Examples include: IGST1, UTGST, SGST, and CGST.
  • Currency: Currency conversion rates need to be created to convert expenses in base currency.
  • Notifications: Notifications are sent automatically to users for any important activity. Here you can enable or disable the same. You can release Push/Email notifications for requests like Dispense Expense Advance, Exceptional Expense Request, Expense Advance Request, and Expense Reports.
    • Notifying employee on completion of dispense expense advance
    • Notifying task owner on new dispense expense advance task
    • Notifying task owner on dispense expense advance task completion
Let’s KEEP it this way!

While drafting the expense policy, you need to keep the following parameters in mind:

  • KEEP it simple, short & sweet. Nobody wants to read a whole book. You just have to give employees answers to their own FAQs!
  • KEEP an eye on the updates. You need to regularly check if the employees are using the policy, where they are facing issues, and how the policy can be improvised.
  • KEEP compliant with the local laws and check the regulations once in a while.
  • KEEP the policy consistent company-wide. You don’t want to treat different employees differently and start a riot.
  • KEEP a budget for each expense category. Your policy should include the specific budgets for each type of spending – travel, office supplies, marketing and advertising.
  • KEEP options for suitable payment methods. Cash payment is history. Allow your employees to pay through company cards, online portals, and debit/credit cards, etc.
  • KEEP a proper plan for reimbursements not only because it’s a legal requirement but also because it’s the right thing to do. Employees have better things to do than file lengthy expense reports. Allow them some spare time this way!

If you wish to understand the Business Travel Policy in detail, here’s a quick runthrough by HROne!

Pro Tip: 3

Employees need to know how much is allowed, and which expense categories they can spend under. So, create clear categories and budgets in your expense policy.

What are the Challenges Faced in the Expense Management Process?

Challenges In The Expense Management Process

Did you know?

“Travel & Expense Management is the second largest operational cost to a business after employee payroll” –

The business-friendly strategy of expense management is only fruitful when it is driven by the latest technology, software or service. Else, there are numerous roadblocks that an employer may face while dealing with money matters. In the absence of an avant-garde platform and seamless integration with related systems like payroll software, a few challenges pop up that make the entire expense management process chaotic.

Here’s how you know you need Expense Management Software right away!
  • You are buried under piles of paper
  • There are too many accounting complaints
  • The workforce doesn’t understand the T&E policy
  • Accounts payable is always making delays
  • Employees aren’t excited about business travel
  • Too much time spent on rectifying errors
  • Your revenue generation is keeping low
Looking at the couple of challenges that employers/employees face while managing expenses, here’s a table of DOs and DON’Ts to follow:

Expense Management DOs & DON’Ts

  • Familiarize yourself with your company’s expense policies
  • Save your expense receipts and keep them organized in one place
  • Keep a copy of your expenses or receipts at all times, whether as a photocopy or on your phone, if in case you lose your actual paper receipts
  • Submit your expense report as soon as you incur your expense
  • Don’t ask for reimbursements for personal services or expenses incurred during your business travel
  • Avoid overspending for things or situations that don’t warrant it while you’re on your business trip. If you’re not being conscious of your company’s funds or budget, this will be found out sooner or later
  • Don’t hold your expense reports and reimbursement claims for a long time and submit them weeks or months later
Pro Tip: 4

While thinking about spend management, all the focus is on developing strategies and formulating plans. What we miss out on is hiring and training the right people to turn into experts and let them do the wonders for controlling business expenses. You see, that’s how talent acquisition, payroll and expense fit in the same picture.

Why is Expense Management Automation Important?

Why Is Expense Management Important

Did you know?

54% of companies have already (partially) automated their expense control processes, while PayStream Advisors (2017) estimates this number to be already 63%.” – Gartner,

Till now, you must have understood why expense management is important.

Now, to answer this big question, as to why its automation is important, ask yourselves a few smaller questions!

If you belong to any of the HR, accounting or finance teams, do you think your expense claims take too long to validate? Are the expense claims fraudulent? Do reimbursements get delayed because of missing receipts, incomplete claims or policy violations? Are you able to keep a tab on spending trends and category spends?

If you are an employee, you need to see – how much time is spent on collating receipts from business expenditures and on submitting expense reports? How much money does it cost you for missing receipts and delaying submissions? How much do you know about the company’s expense policies? How many times have your expenses been flagged for policy violations?

So, if you stress a little on the aforementioned questions and the answers you get are not positive, it’s time for you to get an automated expense management system.

Here are a couple of ways in which you can benefit from such software and systems:
  • Eliminating Paperwork and Erroneous Reports
  • Maintaining Controlled Spending
  • Enforcing Company Policies Properly
  • Preventing Expense Frauds
  • Catalyzing Time, Money and Resource Saving
  • Speeding Up Approval and Reimbursement
  • Increasing Visibility and Transparency

Benefits of Expense Management Software

  • Faster and simpler processes: The one-click execution of processes and mobile app accessibility has worked like magic on the spend control and management activities. All the steps included in the expense management process automatically become faster and easier to perform with the advanced software at your disposal, saving time & resources like no other.
  • Quicker employee reimbursements: The turnaround time (TAT) for reimbursements is minimized exponentially once you start using an automated expense management system. Furthermore, all expense claims are validated before processing and highlighted if violating any policy.
  • Fewer errors and delays: With amalgamation of machine learning and AI, errors are easy to detect and resolve. Moreover, the risks are identified and mitigated before time, thereby reducing scope of any discrepancies or delays.
  • Expense policy reinforcement: By simplifying the entire expense management process, businesses can expect a higher compliance rate as per the defined policies.
  • Improved visibility: With everything transparent, it is close to impossible to go about fraudulence. Moreover, admins and finance teams can use the power of analytics to gain an understanding of variables such as frequent high category spends, vendors, spending trends, and more.
  • Decreased processing cost, manpower and effort: When you have an automated system that does the thinking for you, admins and approvers would only need to access and approve reports via one centralized dashboard. Expense management was never a part of one’s job description. Hence, it is vital to not invest time, money or effort into it. With one software doing the business, finance teams can utilize their time in more productive ways.