For an organization, it remains always challenging to manage their expense. However, technology makes it easy also by providing them with automated and integrated expense management software and solutions. In this article, I am going to tell you about the Expense Management Process. So, if you want to know further then you are at the right place.
What is expense management?
Expense management is one of the tedious tasks in an organization. A process includes multiple steps of dealing the expense like expense reports, expense approval, expense checking, employee repayment, and much more.
Expense management is the foundation of the progress of an organization. The expense management process enables organizations to check their expense and control the expense to make organizational efficiency better. An organization needs the right Expense Management process and strategy to manage its expenses.
Categories of expenses in an organization
The expenses of an organization are classified as follows:
Some expenses in an organization alter from time to time. Such expenses are known as variable expenses like telephone and electricity bills, water, and other necessary utilities.
Some expenses in the organization are fixed like salaries, rent, insurance, and other such expenditures that are fixed are known as fixed expenses.
Some expenses that are not regular in an organization that is called periodic expenses like a machine and other things repair, SAAS expenditures, and License Renewal.
Some expenses occur at the sole discretion of management in an organization, which is known as discretionary expenses.
How many types of expense management processes are there?
Expense management processes are classified into the following two categories:
1. The traditional expense management process
In such an expense management process, the whole process depends on paperwork such as spreadsheets, paper bills, and receipts. Companies that follow the traditional expense management system use the manual process as mentioned below:
- Workers need to submit their manually filled expense reports and hard form of bills, receipts, and demands for approval
- The expense report submitted by the workers is then forwarded to the head of the department. The approvers have the right to approve and reject the claim
- After the approval, the claim was sent to the finance team for audit to ensure compliance with the organization’s travel and expense policy. If the claim complies with the policy then the finance team approves it and if not then rejects it. If they approve the claim, they store receipts, bills, and other necessary documents for tax purposes.
2. The automated expense management process
- An automated system offers a completely automated process for an organization to manage expenses. Every step from filling the claim to setting up a policy check and approval for reimbursement, every step is automated using a computerized software or program.
- Nowadays, automated systems are used because they make the whole expense management process fast and efficient.
- An automated system helps an organization easily streamline expense reporting, processing, and reimbursement.
Why do organizations need automated expense management software?
Some of the major reasons that are why organizations should use automated expense management software are mentioned below:
Rapid expense reporting
An automated system enables workers to track their expenses and report the expense efficiently and easily. It allows employees to file expenses using the computerized system and report on the go without any issues. It enables them to automatically capture the expenses from distinct sources like emails, text messages, and invoices.
Make automated process
With the automated system, companies can make their expense management system automatic. Within the automated process, workers no longer need to continuously remind their management and finance departments to approve expense reports. An automatic system enables them to make and submit their reports automatically and then enable their managers to approve their claim for reimbursement easily.
Greater policy compliance
An automated expense management system enables organizations to automatically identify fraud and red flag reports. It enables them to identify the T&E policy violations in reports. It allows approvers to review the reports, view the policy violation in the reports, and then decide whether to accept or reject the report.
One major benefit that’s why companies use automated expense management software is that it reduces the chances of error and fraud in reporting the expense.
Give real-time data
An automated expense management system gives real-time data, which enables organizations to classify their expenses.