Every company needs to track its operational costs, which include managing expenses. Employees submit expense reports to claim reimbursements for out-of-pocket spending. Managers check the validity of such slips and provide the final approval. They have also to monitor other financial components like:
How much is the company spending on travel-related expenses?
Costs incurred in providing free meals to employees.
Money spent on giving gifts to employees.
These financial components ensure that the company can claim appropriate deductions during the financial year close.
Although big companies have already changed their ways of functioning by implementing expense management software, small companies still rely on inefficient processes — receipts, spreadsheets, and paper reports — for accounting purposes. It causes various disadvantages, such as:
Duplicate reports lead to reduced cash flow.
Accounting and financial mistakes attract severe government penalties.
Difficult accounting practices and redundancies frustrate the user.
This article will focus on the critical advantages of expense management software and why companies must implement them.
1. Increases speed and cuts costs.
Without the expense management software, managers either approve or ask employees to make suitable changes in the following documents:
Paper copies
Reports
Receipts
But this way of doing work often wastes a lot of time and can also introduce numerous human errors. On the other hand, expense management software automates data collection and sends them to the respective manager on time. The employee has to only click on the ‘send’ button and the process initiates. This process helps in two ways.
It reduces processing costs because the physical paper is eliminated.
It minimizes processing time because managers don’t have to reconcile data manually.
2. Enables faster reimbursement.
As stated above, employees experience technical difficulties while filling in the expense reimbursement details and corresponding documentation. Similarly, managers can review and approve the claims faster. Once the approval is done, the reimbursement is initiated and submitted to the payroll. This process eliminates any possibility of errors that increases employee satisfaction.
3. Enhances operational efficiency.
Companies need to bill expenses directly to employees and clients’ reports to increase cash flow. Expense management software is linked with accounting and enterprise management (ERP), time tracking, and project management software that makes it easy for employees to send their claims and for managers to review and approve them. Moreover, when the process is automated, employees don’t have to waste time doing mundane activities. Instead, they can focus on strategic tasks that require creativity and intelligence and bring value to the organization. Thus, expense management software is essential for all companies, especially SMEs, as efficiency plays a critical role in their growth.
4. Allows enforcing policies correctly.
Government rules, regulations, and norms are subject to change. In most cases, business employees — frontline workers and managers — aren’t very well informed on the changing government policies. It can lead to significant losses or can attract stringent government policies. For example, the salesperson asks for a daily travel allowance of Rs.100 while the government has capped the maximum limit for conveyance allowance at Rs.80 by passing a new law. In such a case, both the employee and the company can land in serious trouble. The expense management software updates the government policies regularly so that inaccurate reports can be eliminated.
5. Expense management software improves visibility.
The expense management software compiles the employees’ expense data into a single dashboard in a visually appealing format. It shows data using charts and graphs that make it easy for managers to review and provide approvals. The dashboard stores information such as:
Time taken by the manager to review and approve claims.
Expenses borne by the company per employee
6. Expense management software helps prevents frauds
Businesses often have to face several fraudulent expense reports, including:
Mischaracterized expenses
Falsified claims
Inflated expense claims
Multiple claims
Reports suggest that fraudulent claims are rising rapidly. Association of Certified Fraud Examiners says that 13% of big corporates and 20% of companies with less than 100 employees have faced fraudulent expense reimbursements. Managers may miss noticing fake entries from trusted employees and vendors, increasing the expenses to new heights.
Conclusion
Expense management software allows companies to manage their expenses in the best possible manner. It eliminates technical difficulties and enables employees to provide claims conveniently. On the other hand, it allows managers to review and verify claims at the earliest. Moreover, it also allows companies to adhere to government policies, thereby eliminating the imposition of penalties. Further, it also provides security from fraudulent activities and helps companies to save money.