Every organisation – big or small – gets to the point when expenses become difficult to manage using pen and paper or even spreadsheets. So if you’re lost in a pile of paperwork and receipts, or trying struggling to find the right documents to get reimbursed – it’s time to take back control.
This back-to-basics, no-nonsense guide, covers what expense management is, why it matters, and how it’s beneficial. It also explores why companies lose control of expenses, and how they can take back control by using an expense app.
What expense management is
A business expense is any cost associated with running a business. Within expense management, it refers to costs incurred by an employee in the performance of their duties. If an employee pays for an expense out of their own pocket, they need to be reimbursed. Alternatively, they might use a company card. Either way, incurred expenses need to be properly accounted for in the company’s finances.
Expense management covers all the functionality to do with business expenses incurred by employees. That includes paper or digital receipts, mileage, per diem, and entertainment.
As an example, imagine an employee attending a trade show as part of their duties. They drive to the event and stay overnight in a hotel. During their stay, they purchase food and drink, which is usually covered by per diem. At night, they take a client out to dinner to discuss a possible deal. These are all expenses that need to be reported.
In order to account for these business expenses, the employee needs to submit receipts, per diem, and mileage calculations for approval. Once approved, the data is sent to the finance team. Because the employee paid for these expenses out of their own money, the finance team reimbursed them. These expenses are also recorded in the company’s accounting ledger.
Why it matters
Expense management is important to different people for different reasons:
- Employees usually don’t mind incurring expenses as long as they’re reimbursed quickly. Faster reimbursement creates happier employees!
- CFOs need reliable expense management so that they can get a complete and accurate picture of a company's financial performance.
- Finance teams want clear oversight over expenses to manage risks and ensure compliance with tax regulations and accounting procedures.
How it’s beneficial
Many people would agree that expense management is a necessary evil. But that doesn’t mean there aren’t business benefits to doing it more effectively.
- No one likes to think an employee might be making fraudulent expense claims. Well-managed expenses make it harder for false claims to go through, and easier to spot an anomaly and investigate it.
- Tax rules are always changing. Knowing your expense data is correct and backed up by receipts, gives you peace of mind when it comes to the company accounts and filing tax returns.
- Getting oversight of a company’s finances is never easy. Choosing a more efficient way to handle expenses means you get a more accurate picture of operating expenses.
Why it’s easy to lose control
From startups in their early days to well-oiled enterprises, expense management can quickly get out of hand. It doesn’t matter what size organisation you work for – as the receipts and paperwork start to pile up, it can be tough to stay in control of expenses.
Manual processes for managing expenses are vulnerable to human error. It only takes a miskeyed value or a smudged receipt for inaccuracies to creep in. The cost of correcting an expense claim is about the same as processing one – doubling the costs.
Paper receipts are easily lost or thrown away by accident. When that happens, it can be difficult to verify an expense. Compliance with strict accounting procedures or tax rules might often make it impossible to reimburse without the correct proof.
How to take back control
Findity’s expense app is one place for employees and finance teams to manage every type of expense with complete transparency, oversight, and control. Key functionality includes:
- Receipts: Our built-in OCR scanner not only creates a digital version of paper receipts – but also extracts key information, like amount and currency, ready for processing.
- Mileage: Tracking mileage used to be a time-consuming task. Using Findity, all it takes is the start point and the endpoint. Then the distance and reimbursement are automatically calculated. Record a trip quickly and accurately, ready for reimbursement.
- Per diem: Ensure all employees can easily claim the right allowance based on local regulations. Employees simply tap what the trip included, and the correct reimbursement is automatically adjusted.
- Card purchases: Our app is card agnostic. Connect any European bank card and easily select which transactions that need to be reconciled or reimbursed.
Findity is a fully integrated expense solution which works with your favourite finance tools. Watch the video to find out more: