Why Is Expense Tracking Software Important?

Why Is Expense Tracking Software Important?

All companies need to track the cost of doing business, which includes managing expenses. Employees must submit expense reports to be repaid for out-of-pocket purchases. Managers need to approve these expenses for reimbursement, track how much the company is spending on T&E (travel and expense), and document everything for tax purposes to help ensure the company can claim all appropriate deductions.

While larger companies have typically replaced paper reports, piles of receipts, and spreadsheets with expense management software, smaller companies are more likely to hold on to inefficient manual processes and systems. It can have severe consequences: Small businesses lacking expense software risk employees purchasing something that isn’t allowed and frustration with cumbersome processes and reimbursement delays. They may experience hits to their cash flow when duplicate or fraudulent reports slip through the system. They can’t bill timely for expenses incurred on a client’s behalf, and careless mistakes lead to tax penalties.

Benefits of Expense Management Software

The benefits of automated processes are numerous: employee satisfaction, improved productivity, cost savings, and better compliance. Enhanced reporting helps with financial planning and analysis as companies assess current spending and find ways to increase efficiency and trim costs.

Here’s what companies can expect when they implement expense tracking software:

1. Faster, simpler processes

With expense tracking software, the workflow is automated. Once the employee hits “submit,” the report is automatically routed to the appropriate person for approval. After approval, the amount to be reimbursed can be automatically submitted to payroll. If the manager who typically approves that employee’s reports are on leave, the report can be sent to a temporary approver.

2. Faster employee reimbursement.

With automated expense reimbursement, employees can submit expense reports and corresponding documentation without delay, and managers can quickly and easily review and approve claims as notifications come in. Thus, these tools put cash back in employees’ bank accounts more quickly and eliminate the frustration of errors and delays—thereby enhancing employee satisfaction.

3. Fewer delays and errors.

In addition to reducing the time it takes to reimburse employees, the automation features in expense management software improve accounting accuracy. For example, employees might make data-entry errors with manual expense reports that could be further compounded when finance staff transcribes the information into spreadsheets. Eexpense tracking software can flag errors and duplicate entries and prevent overpayment or notify managers if the dollar figure seems too high. The software can also send alerts if a report or payment is overdue.

4. Increased operational efficiency.

If you bill expenses directly to clients, employees’ reports must be timely and accurate to maximize cash flow. Ideally, expense tracking software is integrated with time tracking, project management, accounting, and enterprise resource planning (ERP) software. When this process is simple for the employees who are tracking and the managers who approve and report, your company could see improved cash flow.

5. Expense policy enforcement.

Even the most meticulous manager may not be up-to-date on every new expense policy and tax change. Automated expense tracking software flags out-of-policy travel expenses by enforcing custom rules tailored to your business. For example, per diem meal allowances may have increased per federal guidelines, but employees submit expense reports based on the old amount. Or, an employee may request reimbursement for a new addition to the policy, like an ergonomic keyboard, but is being denied.