Expense management: an all-encompassing guide

min Published on 05 August 2020

Table of content

Analysts expect the market for expense management software to grow to a value of $17.4 billion by 2027.

This figure reflects the growing importance of the topic, especially for small and medium enterprises.

A lot of businesses incur significant employee expenses, and failure to manage these properly can have disastrous results for the efficiency of a business.

Whether you conduct it in-house or outsource it, there are certain guiding principles you should always be aware of.

Read on as we look at these principles in greater detail and outline an effective expense management structure for companies.

What is expense management?

Expense management is the system companies put in place to record and reimburse business expenses incurred by employees. There are many different kinds of business expenses; travel expenses for workers going on business trips are perhaps the best-known example.

Reimbursing these kinds of expenses increases employee satisfaction, and therefore increases employee retention.

How to draft an employee expense management policy?

There are many different things to consider when you're putting your expense management policy together. We've looked at a few of the most important ones here.

1. What you will reimburse

The list of recoverable expenses doesn't tend to change much from one workplace to the next. Most employers cover travel, meals, accommodation, software licenses and education and training.

When it comes to travel expenses, it's a good idea to be clear on what does and does not constitute an acceptable expense. For instance, you might have to reimburse an employee for airline tickets, but not first-class airline tickets.

If your employees need to entertain business contacts using company money, set out clear limitations on what they can and what they cannot put down as an expense.

2. What you won't reimburse

Most employers have a list of costs that don't qualify as recoverable expenses. Common examples include alcohol and any fines (such as traffic fines) that employees incur on business trips.

3. How to submit expenses

Having a detailed system for expense submission is vital. It minimizes processing delays and lessens the risk of miscalculation.

Any employee who submits expenses should have a clear idea of the details they need to include, the receipts they need to provide, and the deadlines for doing so.

4. When to submit expenses

You should have consistent deadlines for expense submission. These can be monthly or quarterly, depending on your preference. The important thing is that they're regular, as this minimizes confusion and promotes efficiency.

5. How expenses are reimbursed

Again, clarity is the key here. You need employees to be in no doubt as to how and when they will get their money back after an expenses claim. Many employers choose to add the reimbursements to the employee's regular monthly salary.

You should keep as much of your expense management framework online as possible. This minimizes the risk of lost data.

6. The penalties for fraudulent claims

Every employer likes to think that they can trust their workers. While this is usually true in the majority of cases, there is always a risk that someone will try to scam you when filing expenses.

To mitigate this risk, you need to have strict penalties in place for anyone who submits a fraudulent claim. This deterrent should be enough to stop most of these kinds of claims.

The sanctions for this are up to you. They will usually depend on the severity of the offense. Someone who carelessly submits a claim for too much on one occasion could face a small wage fine. For someone who deliberately and consistently abuses the system for their own gain, you may need to consider termination. 

Best practices for expense management

While expense management can occasionally cause headaches, it should not cause too much trouble in your company if you stick to procedures that work. If you are consistent in your approach, you'll minimize confusion in relation to the process and promote satisfactory outcomes for both yourself and your staff.

Best practices to include:

  • Setting out a clear policy
  • Making the process as simple as you can for employees
  • Approving expenses as quickly as you can after receiving claims
  • Providing clear feedback as to why a certain expense was rejected
  • Use online solutions wherever you can.

How can expense management software help?

As is the case for many essential workplace processes nowadays, expense management is a lot easier if you put the right software solution in place. There are a number of reasons for this, including:

  • The simplification of the expense reporting process
  • The clarity of information requirements on standardized claim forms
  • The avoidance of any issues with paper receipts (loss, damage and so on)
  • More efficient reviewing
  • Time and money saved through employee self-service expense reporting
  • Increased adherence to deadlines because of email alerts.

There are many different software programs, all of which should offer these features. However, to maximize efficiency, you should consider getting an integrated HR software service like ours. Our automated expense management system will streamline your HR processes by keeping all your important data in one place.

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