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Most small businesses have expense policies in place to reimburse employees for travel, lodging, and other business-related expenditures. Having an expense policy is great; however, businesses also need to track submitted expense claims effectively. Doing so using software helps ensure that employees are complying with organizational policies and not claiming reimbursement for arbitrary or personal expenses.
Expense management solutions offer various functionalities that help businesses maintain detailed expense records to identify fraudulent/erroneous claims and analyze employee spending to minimize wasteful expenses.
In this buyer’s guide, we’ll explore some key functionalities of expense management solutions that can help your small business track expense claims better. We’ll also cover additional factors you need to keep in mind when evaluating these solutions.
Here’s what we'll cover:
Expense management software is a type of accounting solution that automates tracking and processing expense claims, such as spending on travel, business calls, lodging, etc. This type of software offers functionalities that help small businesses avoid errors in tracking expenses, analyze trends in employee spending, and simplify reimbursement claims processing.
Expense management software solutions are available as stand-alone tools or modules included as part of full-suite accounting solutions. The right option depends on whether you only need a tool to manage employee expenses, such as tracking receipts and automating workflows for faster approvals, or a more broad-scoped platform to manage organizational financial transactions.
Stand-alone expense management software: These tools offer functionalities designed exclusively for expense management, such as receipt collection, reporting business expenses, and customizable approval workflows. They are ideal for small businesses that want a tool to specifically handle expense claims only.
Full-suite accounting solutions: These solutions include expense management as part of a group of other tools, such as bookkeeping and tax management, for managing all financial accounting processes. Growing small businesses might want to opt for full-suite accounting tools as their requirements are broader than the scope of stand-alone expense management software.
Key question to ask a vendor before you buy: Do you offer expense management as a part of a full-suite accounting solution or as a stand-alone tool?
In terms of deployment choices, expense management software solutions are either cloud-based or on-premise.
While both deployment options have their advantages and disadvantages, small businesses will often benefit by choosing cloud-based software. In addition to low upfront costs and faster implementation, many cloud-based expense management software platforms also have mobile apps. This allows users to update and track expense claims on the go using their smartphones.
Here’s a closer look at these two deployment types:
Cloud-based: The software vendor handles everything including hosting the software, data backup, periodic updates, and maintenance. Small businesses can use the software for a monthly/annual subscription fee.
On-premise: The vendor provides the software for an upfront, one-time license fee. However, businesses will have to manage software hosting, data backup, and software maintenance.
Key questions to ask a vendor before you buy: Which deployment option do you think would meet my requirements best? How is it more aligned to my business than the other?
Expense management solutions offer features ranging from receipt management to detailed expense reporting. Read on to learn how these features can help your small business manage employee expenses better.
Receipt management: Allow employees to scan and upload expense receipts from cloud accounts (Google Drive, Dropbox, etc.) using multiple devices, such as desktops, laptops, and iOS/Android tablets and smartphones. Store records of receipts categorized by expense type, such as travel or lodging.
Receipt management in Zoho Expense
Approval workflow management: Set up automated workflows to process employee expense claims; tag receipts to relevant stakeholders and departments, such as project managers or finance teams, for review and approval.
Expense approval in SutiExpense
Audit and compliance: Automatically notify employees about duplicate receipts, incomplete documentation, and other expense submission errors that violate your organization's policies. Facilitate periodic audits by providing a central repository of expenses data.
Detecting duplicate receipts in Nexonia Expenses
Analytics and reporting: Understand expense trends and plan for future expenses by analyzing common types of expenses, categorized by employee roles and departments, using visual charts and graphs. Identify fraudulent claims and spot anomalies to identify avoidable spending and revise expenses policies.
Expense analytics in Fyle
Key question to ask a vendor before you buy: What are the core features of your solution that can help my business track employee expenses better?
Integrating expense management software with other solutions allows seamless transfer of data and simplifies processes.
Here are two types of software that expense management software integrates with:
Cloud storage tools: Integration with cloud storage solutions allows employees to upload receipts they may have stored in these solutions temporarily to the expense management software at a later time. It also provides data backup.
Human resource (HR) software: Integration with HR systems provides automatic mapping to expense brackets for specific employee roles. For example, moving from manager to senior manager may allow for a higher expense limit, and, with this integration, the change would reflect automatically.
Key questions to ask a vendor before you buy: What are the different integrations your product offers and how can these benefit my small business?
The ability to embrace new technology is important for growth, but small businesses should focus on the tools/technologies that they can adopt most easily and that will have the greatest impact.
In the context of expense management software, there are two trends that small businesses should pay attention to:
Rise of mobile expense management apps: Many expense management software vendors now offer mobile apps for both iOS and Android devices. These apps use different smartphone features to help users handle processes on the go. For example, they can use cameras to scan and upload receipts and tag them with geolocation data to establish authenticity.
Increasing use of optical character recognition (OCR) to automate data entry: OCR uses computer vision to recognize and capture written or printed alphanumeric characters. The technology is a popular addition to expense management software for identifying required information (such as dollar amounts) from a physical document (such as receipts) and automatically updating relevant fields in the system.
Key question to ask a vendor before you buy: What new technology innovations have you incorporated in your product and what new trends are you planning to leverage?
Note: The applications selected in this article are examples to show a feature in context, and are not intended as endorsements or recommendations, obtained from sources believed to be reliable at the time of publication.
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