What is Expense Management?

Thus, a company could make a $10,000 expenditure of cash for a fixed asset, but the $10,000 asset would only be charged to expense over the term of its useful life. Thus, an expenditure generally occurs up front, while the recognition of an expense might be spread over an extended period of time. It must be (1) ordinary and (2) necessary (Welch v. Helvering defines this as necessary for the development of the business at least in that they were appropriate and helpful). Expenses paid to preserve one’s reputation do not appear to qualify).[5] In addition, it must be (3) paid or incurred during the taxable year. It must be paid (4) in carrying on (meaning not prior to the start of a business or in creating it) (5) a trade or business activity. To qualify as a trade or business activity, it must be continuous and regular, and profit must be the primary motive.

• It also helps reduce risks and frauds while boosting employee morale and overall profitability.
• Many expenses are related to business travel, so make sure your policy includes trains, taxis, petrol (if employees are using their own car) etc.
• Use distribution lists and workflow to set up alternate approving managers to manage the approval process without delays if managers change or are not available.
• This will help cut down on invalid expense applications, which will reduce your admin and free up more of your important time.
• Using technologies like artificial intelligence (AI) and machine learning (ML), it can auto-categorize the expenses from the digital receipts uploaded on the app.
• Maintaining detailed records of your business expenses ensures that your company stays compliant and assists companies in audit activity in case of fraudulent behavior.

With the onset of technology, the usage of spreadsheets for these functions has been employed, but they still do not solve the expense management process encounters’ problems. Delaying the processing and payment of personal expenses could produce problems in both your personal and business cash flow. If you delay in paying employee expenses, then you may also face problems with reduced morale. Have you thought about the potential return on investment (ROI) for your business and finance team? Automating the expense management process is a change that around 63% of companies in the world have already made.

What is the size of your organization?

Delaying the processing and payment of expenses can lead to problems in your cash flow. Your expense management policy should set out what is and isn’t classed as a work-related expense. Businesses, especially in the UAE, usually use spreadsheets to manage their expenses and reduce dependency on paper receipts.

After an employee makes an expense, the managers are alerted to either accept or reject the expense. If the expense is accepted, it is usually scheduled to be reimbursed with the employee’s EOM salary. To make this more accessible, expense management software can be used to achieve submission, approval, and processing irrespective of an employee, manager, or account department location. Expense Management is critical because it can help organizations identify areas of operations that gulp the most revenue. It also provides a  clear picture of the organization’s finances for effective decision-making and better control over expenses and increases employee productivity to reduce costs. Added to being time-consuming and labor-intensive, the expense management process is riddled with challenges right from when you set up policies till reimbursements are processed.

How to Track Business Expenses?

Thus, it reduces the administrative burden of your employees to obtain small information frequently. You can also set up recurring payments for products and services with Corporate Credit Cards. Invoice information is directly uploaded to the system from where the software can extract the specifics from the invoice and generate an expense report within minutes. But before that, let’s take a look at what expense management is really all about. We’ve partnered with Cashplus to help KashFlow customers manage their expenses using a prepaid card solution. If you want to understand more about the ROI of automating your expense management, book a demo with one of our specialists and master the tech wave in your company.

SaaS providers offer on-demand web-based applications managed by a third party to improve the productivity of expense management. After expense reports are submitted, they might require management or auditor approval. The system provides a checklist to assist in tracking receipts received and managing expense exceptions. With JD Edwards EnterpriseOne Expense Management, you create and expense management definition customize your expense reimbursement policies according to the type of expenses incurred. For each type of expense, you establish expense categories that you can customize to track pertinent information. For example, you might set up an expense category for airfare, and then further customize it to require the employee to enter a ticket number, ticket status, subledger, and so on.

Business Expenses Explained

Formplus also features a robust collection of free expense management templates. For more advanced expense management tools, such as integration with payment platforms, make payments to employees or vendors alike. Expense management is essential to the seamless running of any organization. Reports have shown that 8 to 10 percent of an organization’s revenue is expended on purchases. Therefore, managing the cost of processing expenses can affect an organization’s bottom line, and if it is not addressed correctly, the effect can be damaging. Software review platforms like G2 simplify and fasten the process by rating software based on real user reviews across various platforms.

RazorpayX completely changes the way businesses carry out expense management. Expense management not only tracks business spends but also determines how your business will reimburse the costs incurred. Once you’ve created your policy, you should make it easily visible to your employees. This will help cut down on invalid expense applications, which will reduce your admin and free up more of your important time. Not surprisingly, SaaS companies have been a growing business since the modern technology revolution.

What Are Examples of Deductible Business Expenses?

Such ease of recording transactions brings greater discipline such that your employees will be more regular in submitting their expense reports since they only have to upload the receipts. The kind of automation that these expense management systems bring is next level. For example, your employee incurred an expense; he just needs to upload the receipt to claim his reimbursements. The new-age expense management solutions bring automation in a way that the employees need not enter their expenses, thanks to Optical Character Recognition (OCR). They also don’t need to be present in the office or use their laptops to claim the expenses.

These costs include, but are not limited to, expenses incurred for travel and entertainment. It’s essential to have automated approval flows to ensure employee expenses and expense claims are approved by the right managers. Real-time expense reports are also one of the many benefits Pluto offers, helping finance teams, CFOs and accountants make informed decisions. Expense management is the process adopted by a business or organization to treat, pay, verify and refund expenses initiated by its employees. It also refers to the policies and systems that guide any spending and the technology used to process and scrutinize its data.