Managing expenses is necessary when running a business. It involves implementing necessary policies and procedures to track expenditures or costs, such as funds used for marketing, travel, utilities and rent, and insurance.
In the past, businesses relied on manual processes to manage expenses. With the advance in technology, they now use practical tools, such as an expense management software.
An expense management software is a kind of application that lets finance teams manage expense reports, travel requests, and reimbursements. It also allows employees to handle and record their business expenses. In simple terms, it’s a tool that helps automate every aspect of business expenditure to address issues associated with manual or traditional expense management, including delayed employee reimbursement, unclear expense policies, and poor expense visibility.
In fact, using this software is one of the types of expense management. Expense management involves tracking employee spending and figuring out how your company will reimburse the costs. So, without it, you won’t be able to distribute reimbursements accurately and efficiently.
Small and medium-sized businesses face many challenges, one of which is the inability to manage their expenses effectively. But with expense management software, they can categorize and identify expenditures, such as those for mileage and office.
Keep reading to learn more about how SMEs can benefit from using an expense management software.
To Improve Employee Productivity
One of the benefits of expense management software is that it can help save time, thereby improving employee productivity. Through the use of this tool, employees can log all their expenses instead of filling out reimbursement forms. Plus, they’ll feel reassured about organizing their reimbursements.
To Minimize Errors
Whether you’re an SME or an SMB, keeping track of your finances is paramount to achieve success. It enables you to understand the performance and financial position of your organization. Hence, you should avoid mistakes.
Unlike an expense management software equipped with automation features, manual expense reports lead to delays and inaccuracies. For instance, employees may make several data-entry errors that could worsen when the finance team adds the details to spreadsheets.
On the other hand, an expense management software can identify duplicate entries and errors, as well as put a stop to overpayment or inform managers if the figure seems rather high. It can even send alerts if payment or a report is behind schedule.
Furthermore, data gathered from credit card statements and bank accounts can be merged with corporate travel management systems. Staff members can use their mobile devices to get a snap of receipts and include them in reports with an app-enabled optical character recognition (OCR). Thus, potential errors caused by trying to type on a small screen are prevented.
To Promote Compliance
Another reason why it’s worth investing in expense management software is to promote compliance. It allows your company to follow rules and regulations set by government tax agencies. For instance, by using the software, you can categorize expenses, such as travel, mileage, and office, and tag them accordingly. This is important since some expenses, including dues to golf, athletic, country clubs, are no longer tax deductible.
In addition, expense management software provides you with electronic copies of receipts and reports, which are easily accessible and extremely useful in case your company is audited.
To Enhance Operational Efficiency
Aside from ensuring your organization stays compliant, expense management software can help enhance operational efficiency. It can be merged with accounting and enterprise resource planning (ERP), project management, and time tracking software. So, it makes the process of generating accurate, timely reports of employees simpler.
As a result of a smooth process for managers who need to approve and report and employees who need to track, cash flow is improved. What’s more, employees can focus on other projects and tasks that are of vital importance to your company, such as planning strategic budgets and conducting sales calls.
To Implement An Expense Policy
It can be difficult to keep abreast of changes to expense policies and tax rules and regulations. Expense management software can carry out custom rules fit for your business, flagging out-of-policy travel expenses. For instance, because of federal guidelines, per diem meal allowances might have increased. However, staff are still sending expense reports based on the old amount, or an employee may try to request reimbursement for a new addition to the policy, such as an ergonomic keyboard, but is denied.
To Enhance Visibility
Expense management software enhances visibility too since it’s equipped with a dashboard that collates workers’ expense data and conveys it in the form of charts and graphs. With this information presented clearly, managers can check metrics, such as how much your organization spends for each employee or for each category or how long it usually takes to approve expense reports.
To Prevent Fraud
In the past, business owners reported fraudulent activities within their organizations. Finance managers and teams tend to overlook fake entries from employees, including trustworthy ones. Money can no longer be returned after expenses are paid.
Expense management software can reduce and prevent fraud cases by notifying managers if the amount seems exorbitant or suspicious, thereby calling for further investigation before payment is approved and sent.
To Simplify Reporting
Last but not least, expense management software simplifies reporting. By utilizing this tool, you can combine all expenses into one report.
Aside from consolidating expenses, you can do the following to maximize the software:
- Motivating staff members to save money
- Recommending which car rental, restaurant chain, or hotel your company can choose for volume discounts
- Pinpointing individuals that tend to overspend, repeat policy violators, and expense trends of each employee
All these insights you gain will allow you to determine areas that require spending policies or need clarification.
Takeaway
Investing in expense management software can be a game changer that can help your small business grow. With this tool, your company will see significant impacts, such as reduced errors, cost savings, and a simple expense reporting process.
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