Expense Management 101: Everything You Need for an Optimized Process

Table of Contents

Key Takeaways‍

• An efficient expense management process enables the AP team to track and optimize spend.
• Expense management can include anything from payroll to shipping and travel fees.
• The expense management process is simple but the tools you use can significantly impact its transparency and accessibility.

Every organization needs to track its expenses. Big or small, it doesn’t matter—but if you want to plan growth, you have to know what your outflow is. And how efficient your process is matters.

A recent survey of finance professionals found that over half of respondents find it challenging to integrate data sources into their decision making process. And much of this data collection begins with the expense management process. A clear, concise, and automated expense management software enables your team, from new AP hires to the seasoned CFO to see spend accurately and make well-informed decisions. 

In this article, we’ll cover the basics of expense management, key expense management skills, how to manage expenses efficiently, and best practices to optimize your process.

What is Expense Management?

Expense management is the practice of planning, paying, monitoring, and reporting on business costs. It includes payroll, employee reimbursements, and auditing, as well as maintaining an updated expense policy. 

Common Business Expenses

• Employee salaries and benefits
• Real estate payments, whether that be rent or a mortgage
• Office supplies and software
• Utility bills
• Marketing and advertising
• Shipping
• Interest and Loans
• Equipment
• Raw materials
• Insurance
• Professional fees 
• Travel and accommodations
• Conferences and workshops

Types of Expense Management Systems

There are several ways to manage your expense management system. These can include:

• Legacy expense management tools - This includes in-house systems, spreadsheets, and older software that has no or limited integration functionality.
• Cloud-based management systems - These enable you to store data in the cloud and often integrate with various accounting platforms. 
• Mobile management - This tool allows employees to submit expense reports on-the-go.

In addition, there are two ways to use these systems. You can use a manual data-entry approach, which is the traditional method. Or you can leverage automation software to streamline expense reporting and approvals. 

7 Critical Expense Management Skills

When it comes to expense management, you need more than Excel skills. In fact, the top 7 skills include: 

1. Auditing – Being able to distinguish important financial information to verify transactions, budgets, and other company documentation is a must-have skill. 
2. Budgeting and Forecasting - Companies cannot operate efficiently without basic budgeting and forecasting skills. Being able to read budgets, and align spending with current budgets, enables the finance team to better project both revenue and expenses.
3. Data Analysis - Data analysis can be used in various tasks, such as scenario planning or identifying cost drivers.
4. Policy Development - Your policy, whether enforced manually or automated, provides employees with your spend expectations. Without a clear policy, misunderstandings and overspend can occur. 
5. Sourcing - Knowing how to procure budget-friendly services and vendors is essential to expense management, especially in senior positions.
6. Technology - Expense management is increasingly reliant on technology. For that reason, it’s important for accountants to understand and adapt quickly to software and hardware upgrades. 
7. Training – Finally, being trainable and being able to train others is extremely important for not only maintaining a certain level of skill, but also to create a sense of cohesion within the department. 

How to Manage Business Expenses 

The expense management process itself is deceptively simple. In brief, there are 4 steps:

1. Employees submit expenses
2. Expenses run through approval rails
3. The expenses are approved or rejected
4. Employees are reimbursed, if applicable

The primary challenges in managing business expenses stem from human error, vague spend policies, and lack of transparency. Such obstacles can lead to poor decision-making, spending, and increase the potential for fraud. There are ways to negate these issues, however.

Easy to Streamline Best Practices for Expense Management

Map Your Processes

The first thing to do is define your workflow—and regularly update it. Most professionals only map out their processes in preparation for a digital transformation project. However, keeping a visual or written version of this on hand will enable you to recognize new opportunities as you come across them. 

Track Everything

The best thing you can do to streamline the expense management process is to track everything. This approach can be accomplished through eliminating or reducing manual data entry. Digitizing your workflow through app or mobile tracking, employee corporate cards, and automation can help you track expenses for audits and peace of mind.

Limit Permissions

Another best practice and easy way to enhance your security is to limit permissions in your AP approval software. Ensure that the only people who have access to the company’s financial data or the company card are authorized to use them. This typically requires regular pruning of user permissions. 

Automate Approvals

Streamlining your approval process doesn’t just pass all expenses. But you can easily automate items that fit your policy and budget—leaving the more nuanced or complicated expense reports up to your team. 

Merge Policy with Technology

Automating expense policy accurately and efficiently is possible through adding policy to technology. It is often worth the time upfront to create rules based on your expense policies, and maintain them. Doing so will enable you to better enforce policy, cut out duplications and non-policy expenses, and maintain control of spend. 

Issue Cards for Employee Spending

Providing employees with corporate cards offers a number of advantages. First, it lets you track spend, either by specific employees or general spend. Second, you can use these cards to reduce employees submitting reimbursement requests. The more that funds come from the official company bank account, the fewer times employees are using personal expenses. This both saves you time and gives your team accurate spending data.

Make Expense Reporting Easy

Finally, it’s helpful to simplify expense reporting. For employees, a quick and easy way to report expenses ensures they are more likely to report them. For the AP team, an easy or automated process reduces time spent on repetitive activities. It also ensures that expenses are processed and reimbursements distributed on a timely basis. 

Take Your Expense Management to the Next Level

Expense management doesn’t have to tie up your accounting process. With a sound process, it’s possible to streamline expenses, rapidly reconcile the books, and identify opportunities for savings.

Teampay offers an all-in-one purchasing platform to automate spend control and boost visibility. From corporate cards to AP automation, purchase order approval, and enhanced analytics, Teampay provides financial professionals with the tools to foster growth and control spend. 

Book a demo with Teampay today to discover how to streamline your expense management.