Every business manages its expenses — but not every business uses expense management. Expense management is a system for processing, paying, and auditing business spendings, such as employee expense accounts, travel-related expenses, and the like. Being conscious about decisions related to managing expenses allows business leaders more insight into why and how employees spend business money.
But how does expense management work, and why does it matter? Read on to find out.
Table of Contents
Business spend is a wide category that covers all ways employees use business funds, such as procurement, invoicing, and payments, and business spend management is a comprehensive approach for controlling and optimizing spending. Within business spend, management is the field of expense management, which covers specifically the money employees pay to cover their own expenses, which most often include travel and related charges but might also include recurrent expenses like car and phone payments.
Expense management systems include many factors. Policies and procedures developed by business leadership should govern how employees can spend money, and technology and similar services should help businesses process and analyze data associated with expenses.
How a business manages its expenses affects every level of stakeholder and every level of stakeholder benefits from proper expense management in different ways. Business owners, for example, want better management of expenses to improve growth, productivity, and employee satisfaction while limiting risk and costs. Meanwhile, employees can utilize an effective expense management process to receive reimbursements faster and easier. Finally, financial teams appreciate the extra insights that expense management can provide for more accurate financial planning.
A clear expense management process helps everyone involved achieve their goals. Business leaders should work with employees who generate expenses to create a process that works best for the organization. The process can be as simple as the following steps:
Of course, rarely is the expense management process so straightforward. Business leaders need to be on the lookout for signs that the process is not as easy to manage as they might hope. Some of the most common challenges faced by businesses with new expense management systems include:
Traditionally, businesses have managed expenses with tools no more complicated than pen and paper — but in the Digital Age, there are better ways. Manual expense management comes with many challenges, from requiring employees to keep track of their receipts during travel to a high likelihood of errors with data entry and a lack of visibility obscuring leaders’ ability to gain accurate insights from analysis. A smarter method of expense management is through automated expense management software.
Automated expense management tools boast features that eliminate the most error-prone tasks while boosting leaders’ ability to see, understand and control expense-related business spending. The best components of an expense management program include:
Every business leader needs to consider how it will manage employee expenses — even startups with just a handful of staff. The sooner entrepreneurs find the right processes and tools for expense management, the better.
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