|This article relies largely or entirely upon a single source. (May 2012)|
Expense management refers to the systems deployed by a business to process, pay, and audit employee-initiated expenses. These costs include, but are not limited to, expenses incurred for travel and entertainment. Expense management includes the policies and procedures which govern such spending, as well as the technologies and services utilized to process and analyze the data associated with it.
Software to manage the expense claim, authorisation, audit and repayment processes can be obtained from organisations that provide a licensed software, implementation and support service, or alternatively, from Software as a service (SAAS) providers. SAAS providers offer on-demand web-based applications managed by a third party to improve the productivity of expense management.
Expense management automation has two equally important aspects - the process an employee follows in order to complete an expense claim (for example logging a hotel receipt or submitting mobile phone records) and the activity accounts or finance staff undertake to process the claim within the finance system.
Typically, a manual process will involve an employee completing a paper, spreadsheet, or Graphical User Interface-based expense report which they then forward, along with the relevant tax invoices (receipts), to a manager or other controller for approval. Once the manager has approved the claim, they forward it on to the accounts department for processing. The accounts staff then key each expense item into the company's finance system before filing the claim and receipts away. In a Software as a Service implementation, these processes are largely automated and the submission and approvals processes are transacted electronically.
Expense Management automation is the means by which an organization can significantly reduce transaction costs and improve management control when logging, calculating and processing corporate expenses. Independent research evaluating the use of automated expense management systems has confirmed that the cost of processing an expense claim is reduced as the level of automation increases.
As found in an Aberdeen study on expense management automation in February 2007, there are three main factors that drive an organization to automate their expense management processes:
- Compliance focus: The need to reduce the current risk levels posed by non-compliance with internal policies and external tax/government regulations
- Cost reduction: The competitive pressure to reduce processing and auditing costs associated with expense reports
- Employee productivity: The organizational pressure to improve employee productivity and satisfaction
An automated solution typically provides the ability to code, approve and report on expenses. This will not only decrease the cost of processing expense claims, but can also enable an organization to have greater management control, bring transparency to expense spend and improve adherence to corporate policy.
Choosing an Expense Management Solution
While enterprise-level corporations have accounting departments capable of selecting an expense management solution appropriate for the business, many small-to-medium business owners have a difficult time knowing which SaaS solution to choose. Many accounting advisory partners are available to help the decision-making process, and will usually make recommendations based on the following criteria:
- Direct integration with accounting system: Can the expense data flow directly into the accounting system, coded appropriately, without the need for any manual data entry?
- Ease of employee use: Will the software be adopted by employees? Is there a mobile app? Does the automation component cut down on the need for employee data entry (via technologies such as Optical Character Recognition scanning)?
- Compliance & customization: Can the software be configured to evaluate expenses against company expense policies? Can approval processes be adjusted based on project, department or spend?
- Fraud prevention: Does the software have expense fraud detection capabilities, such a duplicate identification?