Employee expense management is a critical component of any business. It can help companies save money by avoiding unnecessary purchases. It also enables businesses to monitor their employees’ spending and reduce the likelihood of fraud or theft by making sure that every pound spent is accounted for.
So, how do you manage employee expenses successfully? In this guide, we reveal everything you need to know about staff expense management to help your business get ahead.
Firstly, let’s take a closer look at exactly what employee expense management is, as well as why it’s so vital for your business.
What is Employee Expense Management?
Employee expense management is a systematic approach to processing, paying, and auditing employee-initiated expenses. These expenses typically include costs for:
Travel
Uniform/clothing
Entertainment
Office supplies
Training/education
Meals
Other business-related employee expenses
The primary goal of employee expense management is to control, monitor, and report the company's expenses efficiently and accurately.
Key Components of Employee Expense Management
Tracking: Monitoring expenses as they occur to ensure they are within company policy and budget.
Approving: Reviewing and authorising expenses to confirm they are valid and business-related.
Reimbursement: Ensuring employees are promptly reimbursed for out-of-pocket expenses.
When managing employee expenses, it’s also important to be aware of the 5 different expense ‘personalities’, as well as how they can impact your expense process.
These categories help in tailoring expense policies and monitoring systems to address specific types of spending, enhancing the overall management process.
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What Expenses Can Employees Claim?
There are various categories of expenses that your company might reimburse. These include:
Corporate travel expenses: Includes airfares, baggage fees for domestic or international travel, accommodations, local transportation costs (e.g., train, bus, taxi, ride-sharing), car rental and related expenses (e.g., tolls, fuel, parking), and meals or beverages during overnight stays.
Entertainment expenses: Covers meals or beverages with clients, and other necessary entertainment costs related to work.
Remote working expenses: Encompasses home office furniture, computer software and hardware, stationery, insurance, and utilities necessary for performing job duties remotely.
Professional development expenses: Pertains to courses, workshops, training sessions, or subscriptions essential for an employee’s professional growth and role fulfilment.
Health-related expenses: Includes expenses like eye tests and corrective eyewear (glasses or contact lenses) if required specifically for computer-based work.
How to Record Employee Expenses
Recording and managing employee expenses can be conducted through two primary methods: manual recording and automated systems.
What is Manual Employee Expense Recording?
Manual Expense Recording is a traditional method of managing employee expenses, primarily involving manually entering expense data into spreadsheets or paper forms.
Why Avoid Manual Expense Recording?
While commonly used, manual recording has notable drawbacks, making it less favourable in today's fast-paced business environment:
Time-intensive: Requires significant time to enter, review, and manage data.
Error-prone: Susceptible to human errors, which can lead to inaccuracies in expense tracking.
Lacks timeliness: Does not support real-time updates, potentially resulting in outdated information and slower decision-making processes.
What is Automated Employee Expense Management?
Automated employee expense management revolutionises how businesses handle their financial reporting by incorporating cloud-based software, user-friendly applications, and real-time data processing.
Benefits of Automated Expense Management Systems:
Opting for automated systems over manual methods offers significant advantages:
Efficiency: Streamlines the entire expense recording process, saving time and resources.
Accuracy: Minimises human errors, ensuring more reliable financial data.
Instant updates: Provides immediate data updates, allowing for real-time financial insights.
Key Features of Automated Expense Management:
Automated expense management systems generally come equipped with advanced features to enhance the expense management process:
Employee self-service: Allows employees to input their expenses directly online, fostering autonomy and efficiency.
Receipt scanning: Automates record-keeping, reducing paperwork and enhancing data accuracy.
Automated compliance policies: Ensures all expenses adhere to company policies, promoting standardisation and compliance.
Real-time expense reporting: Empowers managers to monitor spending by category and make informed budgetary decisions promptly.
Automated employee expense management not only makes the process more efficient and accurate but also fosters transparency and strategic financial planning.
It's a comprehensive solution that enables both employees and management to navigate expense reporting more effectively, safeguarding the financial integrity of the business.
What is the Process for Reimbursing Employee Expenses?
Reimbursing employee expenses efficiently is crucial for maintaining morale and financial clarity. The process typically involves:
Submission via expense management app: Employees submit their reimbursement requests through a dedicated mobile expense app, allowing for real-time report submission and tracking.
Approval by management: Requests are reviewed and approved by a manager or an authorised individual to ensure legitimacy and compliance with company policies.
Processing by accounting: Approved requests are forwarded to the accounting department for payment processing, ensuring employees are reimbursed for their legitimate business expenses in a timely manner.
How Does Integration with Payroll Software Simplify Reimbursement?
Integrating your expense management system with payroll software streamlines the reimbursement process further by:
Automated reimbursement: Employee expenses are automatically calculated and reimbursed through their regular paychecks, minimising manual input and reducing the chance of errors.
Efficiency and accuracy: This integration ensures a seamless flow of data and timely reimbursement, reflecting in the employee's paycheck at the end of each payment period.
What is an Employee Expense Policy?
An employee expense policy is a crucial framework within a company that dictates:
Clear instructions on how employees can submit their expenses.
Defined parameters outlining what expenses are and aren’t reimbursable.
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Why is an Employee Expense Policy Important?
The importance of a robust employee expense policy lies in its ability to:
Prevent misuse: Safeguard the company's financial resources from being misused or abused.
Promote compliance: Encourage employees to adhere to company guidelines, ensuring financial integrity and transparency.
Best Practices for Implementing an Employee Expense Policy
"Recently, we ran a LinkedIn poll in which we asked who has read their company's expense policy. The results were close with 44% of voters admitting that they have not read their company's expense policy and 56% of voters saying they have."
To maximise the effectiveness of an employee expense policy, consider the following best practices:
Ensure policy awareness and understanding: Providing clarity on what is reimbursable and ensuring that the policy is not just available but also understood is crucial.
Promote timely submission of expenses: Encourage employees to submit their expenses promptly. Swift processing and reimbursement not only streamline financial operations but also reinforce the culture of efficiency and accountability within the company.
Implement proactive fraud prevention measures: Be proactive in addressing and preventing expense reimbursement fraud. Setting clear guidelines and consequences for non-compliance is essential. It's not just about having a policy in place but ensuring that it is actively enforced and adhered to.
Incorporating these elements into your employee expense policy fosters a culture of financial responsibility and integrity. It also ensures smooth operational workflow and heightens employee satisfaction.
Remember, an effective policy is one that is not only well-crafted but also well-communicated and consistently enforced.
For more detailed insights and additional tips on ensuring compliance with your business expense policy, visit our in-depth guide: Corporate Expenses Policy Best Practices.
What are the Benefits of a Cloud-Based Expense Management Solution?
There are numerous benefits to using a cloud-based expense management solution within your business. This software is:
Ease of use: A cloud-based solution is easy to understand and implement, which means that employees can start using it right away.
Cost-effectiveness: Cloud-based solutions offer a lower cost of ownership and higher ROI than on-premise software. Since there are no hardware or infrastructure costs involved, there’s no capital expenditure required for setting up an expense management system; you just pay for the service and month-to-month usage fees.
Security: Your data is stored in secure servers, making it inaccessible from those who haven’t been granted access to it. This ensures that only authorised users can view the information, thus reducing the risk of theft or leakage of sensitive business data such as credit card numbers or transaction histories.
Scalability: With a cloud-based expense management solution, you don’t have to worry about upgrading hardware when your company grows. Instead, all you need to do is increase capacity by adding more users to your account.
Why Choose ExpenseIn for Cloud-Based Expense Management?
ExpenseIn stands out in the realm of cloud-based expense management solutions for its comprehensive, user-friendly, and innovative features:
Mobile app: ExpenseIn's mobile app allows employees to manage expenses anytime, anywhere, ensuring no delay in submissions or approvals. The app is designed for ease of use, enabling users to navigate and perform tasks efficiently, enhancing overall productivity.
Receipt scanning: With advanced receipt scanning technology, ExpenseIn simplifies the process of recording expenses, reducing the need for manual entry and minimising errors. Employees can capture receipts on the spot, ensuring immediate and accurate expense tracking.
Automated policies: ExpenseIn's automated policies help ensure all expenses are within company guidelines, reducing the risk of non-compliant spending. Automation minimises the risk of errors, ensuring a smoother, more reliable expense management process.
Advanced approvals: The platform's advanced approval features streamline the review process, ensuring quick turnaround times for expense approvals. Companies can set up approval workflows that match their organisational structure and needs, ensuring the right checks are in place.
Real-time reporting: Gain valuable insights into spending patterns and financial trends with ExpenseIn's real-time reporting tools. Real-time data empowers managers to make informed decisions, adjust budgets, and improve financial strategies promptly.
Card reconciliation: ExpenseIn simplifies the reconciliation of expenses charged to company cards, ensuring accurate and up-to-date financial records. Automated reconciliation saves time, allowing finance teams to focus on strategic tasks rather than manual data entry.
Carbon reporting: Monitor your company's carbon footprint related to employee expenses, aligning with sustainability goals and regulations. Use the data to make eco-friendlier choices and promote a culture of environmental responsibility within your organisation.
Choosing ExpenseIn means embracing a solution that streamlines your expense management process, ensuring efficiency, compliance, and strategic financial oversight.
Discover first hand how ExpenseIn can transform your business's approach to expense management. Book a demo with ExpenseIn today and experience the future of efficient, intuitive, and comprehensive expense management.
