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Contents

  1. 1. Why is expense management important?
  2. 2. What counts as a business expense?
  3. 3. Why you need an expense management system
  4. 4. How to manage your expenses
  5. 5. Why use expense management software
  6. 6. Implement an expense management policy
  7. 7. Summary

Why is expense management important?

September 1, 2021
In order for companies to track and control business spend, expense management is vital. Expense management usually covers things like employee expenses, which can be claimed back from the company for client lunches, travel costs and accommodation while on business trips.Most businesses that require staff to participate in activities on their behalf will have to reimburse employees for spending money out of their own pockets.Small business owners without a finance team in place can find processing, paying and auditing their business spend time-consuming, but without a robust system in place to manage expenses as they happen, you could end up taking months to reimburse your employees, which could lead to cash flow problems and unhappy staff.Managing expenses isn’t always easy – especially if you have to reimburse multiple employees – so it’s essential to implement an effective policy for documenting and approving your business costs.

Why is expense management important?

Keeping track of your business expenses is not only essential for having a healthy cash flow, but processing employee payments on time is also good for staff morale.

What counts as a business expense?

In business terms, an expense is something a company has spent money on in order to generate revenue. We’ve listed some examples of business expenses below.

Employee spending

As mentioned above, employers need to reimburse their employees for any of their own money they’ve spent while carrying out activities on behalf of the business. This could include business travel expenses and accommodation costs, as well as money spent on entertaining clients.

Petty cash

Usually, a business will have a small amount of money set aside to pay for things like postage costs, utility bills, office supplies and staff refreshments.

Purchasing

A company’s purchasing department ensures that all the goods and supplies required to operate are ordered and kept in stock.

Advertising and marketing spend

If a business outsources its marketing activities, the money it spends on this will need to be accounted for.

Why you need an expense management system

There are a number of reasons why expense management systems are so important:

1. To avoid overspending

If you're not keeping on top of your expense reporting, it's easy to overspend and cut into next month’s budget. If you’re unaware of the fact that you're spending more than you should be, you run the risk of coming into some severe cash flow problems – which in the most extreme case can lead to bankruptcy.

2. To ensure you’re audit-ready

You also need to make sure your accounts are audit-ready – and that means having every expense documented correctly. Inaccuracies in the expense data could lead to all sorts of difficulties, from problems in the reimbursement process to accusations of expense fraud. You could get audited by the tax office at any time, so managing your expenses as you go will save you the stress of having to get everything together quickly at a later date.

3.To keep your employees happy

You shouldn’t expect your employees to be out of pocket for any length of time, as it can be demoralising for staff and could mean they scrimp on future expenses. Worse still, they could be reluctant to pay out at all (which won’t look good if you’re trying to impress a potential new client). This means it’s also in your interest to make sure you pay your staff back as soon as you can.

How to manage your expenses

In order to manage your business’ expenses effectively, you need an expense management process that allows you to clearly see how much is being spent, who is spending money and what they’re spending it on.Different companies have different ways of managing expenses. These include the following:

Paper tracking

This is the most traditional way to manage business expenses, but it’s fast becoming outdated. Employees are required to save their paper receipts and submit them to the accounts department for approval on a regular basis.

Spreadsheets

Some companies may use spreadsheets such as Excel to record their expenses, as documenting them electronically can make them easier to keep track of and refer back to. Much like the paper tracking method above, filling out a spreadsheet is an incredibly time-consuming manual process, and not completely free of the risk of human error.

Expense management software

The best way to record, track and manage your spending is via expense management software (which is just one of the features you get with Ember). A good expense management solution alerts managers when reports need to be reviewed and allows them to approve expenses and send them to the accounts department for payment. Some of the other features include:
    Smartphone receipt captureIntegration with company bank cardsScheduled reimbursementsPolicy violation checksA streamlined approval process

Why use expense management software

There are many benefits to using software to manage your business expenses:
    Saves time – You can generate reports quickly, discrepancies are easier to spot and filing receipts instantly saves having to compile them at a later date. Your credit card expenses will be automatically captured by linking to your bank so you don’t have to enter them manually.Improves staff morale – Tasks are automatically assigned to the right people, and reminders ensure employees are reimbursed quickly and correctly.Reduces costs – You can set limits to prevent overspending, and analysis can easily be carried out to provide insight into where the money is going so you can make any necessary adjustments.Easy tracking – Instant notifications on every expense that happens in real-time makes it easy to stay on top of your spending.More flexibility – Employees have access across all devices and can capture images of their receipts to submit expenses on the go, with approvers reviewing and approving expense requests from anywhere.Greater accuracy – Data entered manually by employees is more likely to have inaccuracies due to human error. With an automated expense management system, you can do everything with one click of a button.Always audit-ready – Automated expense reports mean the business will always be audit-ready, and all information will be correct.Less risk of fraud – Automated systems can help perform real-time audits to stop expense claim mistakes, unmet regulatory requirements, compliance penalties and fraud as they happen.Improved organisation – Everything is stored in the cloud, meaning claims and receipts won’t get lost, and everyone in the company can access the information.
Despite these benefits, some business owners may be reluctant to change to an automated expense management system because they think it’s expensive or difficult to do. That’s not always the case, though.It takes five minutes to switch over to Ember from your current system, and for just £39 per month, you have all the benefits of an accounting app – including expense automation – as well as access to real-life accountants. Read on to find out more about the benefits of managing your expenses with us.

Capture and categorise expenses on the go

Use your phone’s camera to snap and record receipts on the fly, with push notifications that alert you every time you spend.

Simplify company spending

Track money owed to your employees for out-of-pocket expenses. Your team will thank you for it later.

Categorise your transactions

Our clever machine learning model categorises your transactions and only needs a click of approval from you to get them sorted quickly.

Understand your spending habits

View your outgoings and overheads in real-time and easily manage how much you’re spending across the business.

Implement an expense management policy

It’s essential to draw up an expense management policy and ensure all your employees know about it to avoid conflict over questionable expenses. An official document like this can justify why an expense is queried or rejected and help you decide whether to reimburse a cost.Your expense policy should be a clear set of rules that your staff can follow when spending money they wish to claim back from the company.When writing an expense management policy for your business, keep it fair and simple and include the following information:
    The types of expenses that the company authorisesA list of expenses the company won’t pay forDaily limits on how much employees can spendCompany-recommended hotels, restaurants and transport methodsThe steps to take for claiming back an expenseBest practices, such as requiring pre-approval for certain expensesHow an expense is processed
As your business grows, you’ll need to regularly review your expense management policy and adjust it to accommodate any changes.

Summary

With an effective expense management system in place, keeping track of the money going in and out of your business can help make informed business decisions that can take your business to the next level.To avoid confusion over claiming back expenses from the company, it’s essential to write up a clear expense management policy so all your employees know the rules.The best way to manage your expenses is via an automated system, as it will save you time and is far more accurate than manually inputting every expense. With Ember, you can effortlessly track and control your company spending in real-time, all in a few simple clicks.
Cam Finney
Cam FinneyHead of CX

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