Spruce up Your Expense Management Process with Automation
The travel and expense management process is considered one of the most complex business functions. Most businesses fail to recognize the complexity of this function and end up spending way too much money, effort, and time on it. A recent survey by Tallie on 585 survey respondents, revealed that not many companies realize the complexity of travel and expense management.
A majority of the companies continue to use manual expense management systems as the losses without a professional travel and expense system are not obvious. The seemingly simple manual expense management process actually eats up productive work hours and leads to extraneous costs. Is there a cost-effective way to expense management? Read on to know more.
Expense Management at a Glance
All expenses incurred in a business right from the purchase of raw materials to marketing initiatives to business travel are to be filled in proper forms and approved by appropriate authorities. Any delay or error in expense management may cost a business dearly, both financially and otherwise. Expense management encompasses all the processes that help streamline business expenditure.
The expense management process follows a sequence of employees making claims for reimbursement and accounting for expenses they have incurred. When executed efficiently, the expense management process offers key business insights into the business spending and helps keep a tab on the expenses incurred. The data captured by the expense management system in a business helps in budgeting and planning for future expenses.
The key functions in expense management are filling in expense requests, reviewing and approval of requests, employee reimbursement, and gathering and validating data for auditing and budgeting. The Finance department, employees, and the team/department manager are the key players in the expense management process.
Let us now consider the lifecycle of an expense reimbursement request.
- Making a purchase is the first step in the reimbursement process. This is done after the necessary approval for the purchase has been obtained.
- Once the purchase is made, the employee obtains the receipts issued for the purchase.
- These receipts are submitted along with the reimbursement request to the manager.
- Once the manager reviews and approves the request, it is directed to Finance for review and approval.
- In case the manager requires additional information the request is redirected to the employee asking for missing or additional information.
- After approval by the finance, the claimed amount is reimbursed into the employee’s account.
- When all the steps of the process are executed smoothly, the reimbursement is credited quickly.
In practice, manual expense reimbursement is marred by inordinate delays and bottlenecks. Apart from expense reimbursement, there are many other components in an expense management system that need to be executed seamlessly for efficient business operations.
Components of Expense Management
Irrespective of the type and scale of the business, the expense management process is made up of different components. The method in which the expense management is carried out varies with the structure and policies followed in the organization. Ideal expense management consists of the following components:
1) Filling in Expense reports: Once a business expense is incurred, supporting documents like receipts, hotel bills, and invoices are collected. The reimbursement claim is submitted along with the supporting receipts and invoices to the department manager.
2) Review and Approval of Requests: The reimbursement request usually goes through 2 or more review and approval stages. The first review and approval are done by the line manager. Based on approval limits set for different approvers, the request may optionally be routed to the Head of Department and Director. From here, the claim is submitted to Finance for review and approval. Finally, the Accounting team sends the payment and completes the process.
3) Book Keeping: The entire lifecycle of an expense request; from submission to payout needs to be recorded.
4) Auditing of data: Adherence to companies’ policies and regulations is a must for all business processes. The data gathered by the expense management process is validated and used for auditing purposes.
5) Budgeting: Creating the annual budget and planning for future expenses can be done based on the data gathered by the expense management system.