Expense Management Software: An Introductory Guide

By TechDogs Editorial Team

Overall Rating

Overview

Have you ever received a travel expense report from your staff after a business trip? If yes, then you know that for the amount to be reimbursed, businesses need to validate every cent of the transaction – yes Kenneth, even for the miniature Baby Yoda bobblehead you bought from the gift store!

However, for bills and receipts running into thousands of dollars, how the hell can one track and manage every transaction and expense? Well, don’t worry, we got you covered! The conventional methods of reporting and reimbursing expenses raise a slew of unnecessary challenges - manual invoice handling and validations, pen-and-paper expense reports and keeping track of all the travel and logistics expenses can be a headache. Basically, traditional expense management activities are not time efficient.

So, what’s the answer? No, it’s not to drop Kenneth from the business trip plans! Your business needs an Expense Management Software. In today's business landscape, where even remote employees incur expenses, tracking, processing and auditing employee-initiated expenses becomes critical.

In this article, we'll go over what Expense Management Software is and how it makes expenses management easier and error-free, along with its history, benefits, types and more!

When we talk about expenses, Benjamin Franklin comes to mind - "A penny saved is a penny earned."

Expenses are indeed an unavoidable aspect of doing business. Meals, flight tickets, guesthouses and rental cars all add up. Everything needs to be tracked and audited for effective budgeting and expense management. That’s where Expense Management Software (EMS) comes in!

An Expense Tracking Software provides an easy unified platform for capturing financial data and expense reports, monitoring the incurred expense and automating payments. EMS can either be on-premises or cloud-based. The software streamlines the expense management process of organizations – irrespective of size and industry. Essentially, as users upload their expense receipts, expense reports and business purchases into the system, the software allows managers to easily view, track and ultimately disburse compensation for the expenditure. A well-designed, user-friendly Expense Management Software even allows users to upload a picture of their paper receipt taken from a smartphone and apply for an expense claim, reducing the reliance on paper receipts and bills.

We’re sure your business already employs an Expense Management Software – just ask the guys in accounting! However, we’re also sure that they won’t be able to explain its origins, types, future and more – for all that, read on!

What Is Expense Management Software?

In short, an Expense Management Software is an application that assists employees in identifying and monitoring all their business expenses. That's why some people also call it as expense reporting software. Financial advisors and accountants use it to handle reimbursements, expense reports and business travel expenses incurred by employees. The automated features allow all aspects of budget monitoring to be streamlined, reducing the risks associated with manual expense management.

Talking about the old tradition of manually managing expenses, let’s go back in time to see how and when this tool was invented!

The History Of Expense Management

Our history has presented ample evidence that ever since civilizations existed, we have tried to keep a track of our expenses - the only aspect that has evolved over time is the currency and how it is transacted. (Ahem, crypto!)

So, let’s dive down the rabbit hole of expense management:

Stone Age

Prehistoric humans used livestock, shells, expensive stones and even salt for trade. Since expenses were in the form of exchange of goods, counting them was the closest approach of expense management available at the time.
The Age Of The Calculator

One of the greatest inventions to conquer the difficulty of counting was the calculator. It enabled people to count more accurately and quickly, allowing more time to focus on... other innovations!
Early 20th Century

The first five decades saw a tidal wave of progress that laid the foundation for today's technological advancements. During this century, the first cash register, fax transmission across a continent and other firsts occurred in the financial world.
Late 20th Century

We saw the birth of the first accounting software, which assisted companies in their ability to manage invoices, inventory and purchasing. This was a huge step forward as it lowered the dependence on manual processes, lowering the margin for error. (You know how those pesky humans tend to make mistakes when it comes to numbers!) Another major event was the invention of Microsoft Excel, which went on to become one of the most popular platforms for tracking expenses and was extensively used for streamlining expense reports.

Since the turn of the century, we've seen huge advancements – heck, you can manage your annual expenses on your smartphone now! As a result, EMS are made to fit today's lifestyle, where everything can be done on the go.

You must be wondering, how the heck is a digital expense manager any better than the trusty old Excel file. Here’s how!

How An Expense Management Software Works

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For starters, this will never happen if you use an Expense Management Software!

EMS is accountable for managing employee spending (including recurring expenses) and assessing how the business will reimburse the incurred expenses, down to each cent. Hence, the software needs to make use of various techniques and processes needed to manage various types of business expenses.

For instance – if employees receive daily meal allowances while traveling, the management tool takes those costs into account while determining the worker reimbursements. The company can set similar processes for travel spend, airfare, lodging, daily allowances, professional services, etc., that allow for better management of overall expenses. Furthermore, it looks for rule violations before reimbursing employees based on expense reports. We told you Kenneth, you won’t be reimbursed for buying all those Baby Yoda and Groot bobbleheads!

The basics of the Expense Management System remain unchanged no matter the provider, however, it is a good idea to make a checklist of business demands and check if the tool provides what the company’s finance team needs.

Here are the types of Expense Management Software you need to be aware of...

The Types Of Expense Management Software

Since each company has a different style and strategy for managing employee-related expenses, they have choices when it comes to investing in an Expense Management Software:

Paper Tracking Software

With this tool, employees collect and submit paper records to the accounting department for approval on a weekly or monthly basis. Although this is a conventional method of managing expenditure, it works well for small organizations.
Spreadsheets

Every business can use spreadsheets to manage cash flow and finances. It reduces the reliance on paper tracking and streamlines expense management, however, is not a complete automated system.
Financial Management Software

All software under this umbrella are automated, unified platforms for enterprise-wide expense management that allow managers to retrieve expense and expenditure reports, reviewed/audit them and finally accept or reject the claim. Approved expenses are then automatically reimbursed to the employees.

Surely, not every company needs a comprehensive financial management tool, however, using an EMS will give them the following benefits.

The Advantages Of Using An Expense Management Software!

The main advantage is that no one will ever have to say -

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Increased productivity, better cost control, higher employee satisfaction and robust financial compliance are some of the main advantages of using Expense Management Software. Other benefits are -

Enhanced Operational Effectiveness

If your business bills expenses directly to the client, your employee expense reports must be up-to-date and accurate. An EMS will help with time-tracking, project management, billable calculations, accounting, accounts payable, etc., making it easy for employees and managers to report expenses. Naturally, this boosts the company's operational efficiency in financial processes.
Enforcing Expense Policies

Even the most diligent manager may be unaware of every new expense policy or tax proposal. By enforcing custom rules and policies, depending on your company's needs, Expense Management Software will automate the red flags and out-of-policy expenses.
Simpler and Quicker Procedures

Employees spend ages printing paper copies, stapling receipts together and carrying them to the supervisors (who might be on their lunch break) and then submitting the approval to collect the reimbursement. An EMS automates this entire workflow.
Employees Reimbursements Are Quicker

With automated expense reimbursement, employees can submit expense claims and related documents without delay and managers can quickly and easily approve claims. As a result, this tool minimizes the anguish associated with errors and delays in payments, boosting employee satisfaction and morale.

Jack Ma, the co-founder and former executive chairman of Alibaba Group, once said, “Never give up. Today is hard, tomorrow will be worse, but the day after tomorrow will be sunshine.” With that in mind, let’s peek at the future of expense management. Shall we?

The Future Of Expense Management Software

Automation is infiltrating every aspect of life! We now have self-driving cars, pilotless planes and automated 3D-printing. We mean, even expenses are now filed by taking a photo of the bill and forgetting about it. The process of converting it into an expense report, reviewing, approving and disbursing payment is all automated now!

Yet, this is not the peak – the future will be even better:

Better Integrations

The integration of more payment options in EMS will enhance its effectiveness and provide transparency in the expense report cycle. Yes, Kenneth, you might just get reimbursed in Bitcoin for the next business trip!
Improved Analytics

Enhanced Artificial Intelligence and Machine Learning will give businesses full transparency into the spending patterns and improve expense management.
More Mobile Applications

Staff members will soon be able to handle their expenses on the go, thanks to improved mobile applications. It will offer both companies and employees the adaptability required in managing more complex expense-related activities.

We’re sure that the next generation of Expense Management Software will provide users with an extraordinary experience and allow organizations to focus on what is truly essential to expense management and improve budgeting. #CantWait

Conclusion

TechDogs-"A Star Wars Meme Showing How EMS Avoids Use Of Paper Receipts"

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The key ingredients for any organization's (irrespective of a small business or an enterprise) growth are a consistent increase in capital and employee productivity. Both can be achieved by using the right EMS to save efforts and time taken in managing finances, all the while securing valuable expense data insights. So, will you invest in this software to make the lives of your employees and accountants easier, not to mention the financial health of your business? Don't wait up - get the best Expense Management Software for your business already!

Frequently Asked Questions

What is Expense Management Software?

Expense Management Software (EMS) is a digital application designed to assist employees in tracking and monitoring their business expenses efficiently. Also known as expense reporting software, EMS helps financial advisors and accountants manage reimbursements, expense reports, and business travel expenses incurred by employees. By automating various aspects of budget monitoring, EMS minimizes the risks associated with manual expense management, streamlining processes and ensuring accurate financial tracking.

How does Expense Management Software work?

Expense Management Software operates by centralizing and automating the handling of employee spending, including recurring expenses, and assessing how businesses reimburse incurred costs. The software utilizes various techniques and processes to manage different types of business expenses effectively. For example, if employees receive daily meal allowances during travel, the EMS incorporates these costs into the reimbursement calculations. Additionally, EMS identifies and addresses rule violations before reimbursing employees based on expense reports, ensuring compliance with company policies and procedures. While the basic functionality of EMS remains consistent across providers, businesses should evaluate whether the software meets their specific financial management needs.

What are the advantages of using Expense Management Software?

Using Expense Management Software offers several benefits for businesses, including increased productivity, better cost control, higher employee satisfaction, and robust financial compliance. One significant advantage is enhanced operational effectiveness, as EMS streamlines processes such as time-tracking, project management, and billable calculations. By enforcing expense policies and automating workflows, EMS simplifies expense reporting procedures, reducing administrative burdens and processing times. Furthermore, automated expense reimbursement ensures prompt payments to employees, minimizing delays and errors while improving overall satisfaction and morale within the organization. Ultimately, adopting EMS helps businesses optimize their financial processes, leading to improved efficiency and better management of expenses.

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Expense Management Expense Management Software Financial Technology Expense Tracking Software Expense Management System Expense Report Software Expense Software Expense Claim Software

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