Last editedMay 20222 min read
Tracking expenses is a fundamental component of business accounting, with expenses reported on a company’s financial statements. While it may be easy to track your own expenses with receipts, the situation grows more complicated when you have multiple employee expenses. These must be tracked, approved, and reimbursed as part of standard expenses management. So, what is expense management, and how can you make it more efficient? We’ll offer some tips below.
What is expense management?
Expense management refers to any systems or processes used to request, track, approve, and pay for employee expenses. Businesses should set out clear policies for reimbursement, whether it’s daily travel allowances, company credit cards, or project-specific limits. Expenses might be related to a department’s daily operating activities or as part of employee travel.
Why is employee expense management important?
Employee expenses should be treated as a bill like any other. Whether it’s a client lunch or travel to a seminar, employees shouldn’t be expected to front work-related costs out of their own pockets. However, without an employee expense management system in place, reimbursement for these costs can be tricky. You need:
Documentation of the expense (receipt)
Approval of the expense
Reimbursement for the expense
Without clearly defined procedures to handle each of these aspects of expense management, employees might wait an undue amount of time to be paid back. Questions might arise surrounding which types of expenses are allowable, and which are not. By creating a company policy, you’ll be able to answer these questions without hesitation.
An employee expense management policy should therefore show:
List of expenses that the company pays for
List of expense the company does not pay for
Payment terms and conditions
Types of expense management systems
A company policy is important, but expense management also involves tracking receipts and documenting the process.
Paper tracking: The employee retains a paper receipt for expenses and submits this to the accounting department for approval.
Spreadsheet tracking: Employees collect multiple receipts in a spreadsheet, either online or on paper, which the accounting team processes in batches.
Expense management software: This automates the process using accounting software. The software sends alerts to managers for approval, streamlining the process.
Employee expense management tips
Whether you choose a manual or automated employee management system, here are a few tips to help you get organized:
Set up a filing system for forms, receipts, and invoices. These should be organized by category and in chronological order.
Consider opening a separate bank account dedicated to business expenses. This ensures that expenses are kept separate from your other finances.
Reduce paperwork where possible with group bookings, single receipts for company meals, and standard formats for receipts and invoices.
Automation makes it far easier to set up and follow standardized procedures. You run less risk of receipts going missing when you use accounting software to manage financial paperwork. You can also set up authorized lists of vendors and automate reimbursements to approved employee accounts.
How to choose an expense management tool
There are plentiful advantages associated with using expense management software. Here are a few key features to look for when comparing your options:
Receipt tracking and storage
Digital receipt capture with smartphone images
Integration with credit cards
Analytics and reporting
The best expense management tools will be intuitive and user-friendly, since they’ll need to be accessible by all your employees. Reliable, secure expense tracking and faster reporting should come as standard.
It’s also best for your expense management software to integrate with existing accounting and payment systems. GoCardless integrates naturally with over 300 partners, including major accounting software like Xero and more. Using automated, cloud-based systems like these keeps expenses, receipt management, and financial records in a central place.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.