Expense Management Made Easy

If you're the CFO or controller of a company that employs more than a few road warriors, you may underestimate the amount of time people in accounting spend in taking care of travel and entertainment (T&E) expenses. This is likely the case as well for many of the other miscellaneous, nonstrategic things that your company buys, such as office supplies, computers, and other items. If you're one of those warriors who is on the road a lot for business, you probably spend too much time filling out reimbursement forms — time that you could put to better use.

Software that handles T&E and other nonstrategic spending (sometimes referred to as “expense management”) is available from several suppliers. It has been around for more than a decade, so many of the applications have a full array of functions. Best of all, your company doesn't have to purchase or manage the software. Most vendors offer it as a service, and you pay only for a monthly subscription.

There are good reasons for automating expense management.

Reason number one is that it is a much more efficient means of handling the process of requisitioning, expense reporting, reviewing, and payment. It saves time for the people who are requesting approval for business trips and to purchase office supplies and equipment, as well as the time of those who have to approve things or who process the transactions. All of this time can be spent more productively on other activities such as selling or managing. Most systems enable users to quickly drop information from electronic corporate credit card statements into expense reports. Paper receipts can be scanned and the image stored with the report. Automating the recording and filing of the paperwork also saves money and time during audits and reviews.

Reason number two for automating the process is that it provides greater control. It's human nature to think that layering on detail and process steps is a good way of increasing control and reducing fraud in nonstrategic spending. But here nature is wrong. Complexity works against being able to access relevant information quickly — to gain visibility — and therefore makes it harder to ensure compliance with controls and policy. Expense management can increase visibility into spending and improve efficiency.

Most packages make it possible to manage the entire requisition-to-pay process, from request to reimbursement. In practice, this makes it a lot easier to enforce company purchasing policies, especially the one about “approve before buy.” It enables those with oversight responsibility to manage by exception, focusing only on the items that are questionable.

For example, a salesperson can request approval for a three-day trip to call on prospects and clients, outlining all of the costs involved. When the person files an expense report afterward, if the items are in line with the approved request, the company can choose to reimburse the individual without a review. On the other hand, even if the numbers are in line, it also can choose to review all of the expense reports of people who have been serial abusers of company policy in the past. And not just for T&E — this also can apply to the nonstrategic spending of all or any part of the company.

Reason number three for automating the process is that it provides forward spending visibility. For many midsize or small businesses, this ability to factor in spending commitments at the requisition stage can be very helpful in managing cash flow.

Getting the benefits of the software can be easy and relatively inexpensive. Renting the software instead of buying it has many advantages. It is possible to test the application for a handful of people without having to invest in software or hardware to run it.

We believe that many companies, even midsize ones, will find this method cost-effective. Moreover, getting the data from these services into your accounting system is straightforward and easy to maintain. In fact, some companies that initially purchased software have transitioned to a service because they were convinced that neither this integration nor having this type of data outside the company firewall poses a problem.

When evaluating particular software, consider your needs as an organization. For example, some offerings are capable of handling multinational expense reporting and accounting. This is not just a matter of dealing with multiple languages and currencies. When it comes to business expenses, regulatory requirements differ from one country to the next, and being able to handle the details is important.

Expense management is one of those chores that finance departments do, usually without considering whether there is a better way. Your company ought to consider changing. You can save time and money, increase control, and make expense reports less of a pain for many people.