Expense Management Automation: Why Do You Need it?
Expense management is one of the critical processes in a company. It helps you to optimize budgets, track cash flows, and comply with tax regulations. However, some companies still prefer the inefficient manual expense management process rather than adopting expense management tools that offer expense management automation.
But why do you need to automate your expense? Why should companies move on from the manual expense management process? To get the answers to these questions, let’s start with the basic process of manual expense management?
- The manual expense management process
- Drawbacks of the manual expense management process
- What is expense management automation?
- How does expense management automation work?
- Why is expense management automation needed?
- Choosing the right expense management software
The manual expense management process
Managing and filing expenses manually involve the use of paper or spreadsheets. Here is how the process takes place:
- The employee needs to save the receipts of all the expenses they incur, which they must attach with an expense report (on paper or spreadsheet) every month.
- The report then goes to the approver (maybe your manager or a senior executive), which can sit on their desk for days.
- The report is sent to the accounts payable team that needs to validate the receipts with report entries for any error or policy violation.
- If the report seems valid, the employee is reimbursed. If not, the report shall go back to the employee, and the entire process must be repeated.
Looks tedious, doesn’t it?
Drawbacks of a manual expense management process
The manual expense management process takes weeks to process. When an employee files the expenses, it needs to go through an entire circle of approval processes before it gets approved.
If the approver ignores the expenses at any step, it just stays with him forever. They need to be reminded every now and then to approve the expenses.
2. Tough to manage
The manual expense management process is a clumsy one. It involves a lot of paper-based receipts for the finance team, burying them in a heap of paperwork. Not to mention if any expense gets lost in the process, there is no audit trail to track it.
Moreover, employees find it quite confusing to track their requests; it is usually after the approval that they get to know about the status.
3. Costly to sustain
When you deploy a manual expense management system for your organization, it requires physical resources, such as paper, stationery, etc. Hence, as the process expands, you need more and more space for storing the pile of papers.
You know very well that real estate is sometimes not affordable even to accommodate the employees. Would you want a bigger space just to keep the expense reports organized?
4. No fraud detection
Whenever there are finances involved, fraud becomes a part of it. However, when the finance team is handling expenses on paper, there is little scope for detecting any fraudulent behavior because it all needs to be done manually.
The finance team tallies the expense data with the receipts, cross-references them with the travel data, and ensures everything is in order before approving – all manually.
5. Tough to comply with policies
Employees don’t usually go through the policies when filing expenses on paper or spreadsheets because there is no visibility of the expense policy at the time of filing. As a result, most employees ignore the policies and file expenses as they see fit, leading to several expense policy violations.
Moreover, the finance team must validate every expense with the expense policy, which is a headache.
6. Difficult to analyze data
Analyzing expense data helps you identify the bottlenecks in the process, reduce unwarranted expenses, and manage budgets.
However, it is quite arduous for the financial team to analyze data in the case of the paper-based expense process. This is because they need to have enhanced visibility of all the data at once for expense analysis. The financial teams can’t identify spending patterns and employee behavior when the entire expense process is on paper.
7. Can’t avoid errors
To err is human. Employees often make errors while filing expenses when they have to manually record the expenses from a receipt.
Moreover, for the finance team, finding errors in a manual expense management process is like finding a needle in a haystack. They need to process so many expense reports manually that sometimes even the most critical errors go unnoticed.
8. Stresses the employees
Employee productivity is one of the KPIs that most organizations analyze to ensure success. However, the tedious nature of the manual expense management process makes employees unproductive and stressed. They need to file each expense manually, accumulate receipts, and keep enquiring for reimbursement.
The conventional expense filing process makes the employees frustrated and distracted from the actual work.
What is expense management automation?
Expense management automation is the process of automating core expenses processes, such as approvals, reimbursements, and payments, with the help of expense management software.
Expense management automation overcomes all challenges posed by the manual expense management system by streamlining workflows and bringing all the silos related to expenses on one platform.
How does expense management automation work?
Expense management software can automate the expense management process of a company. Here’s how expense management automation works.
Expense management software offers an interactive UI for employees to file their expenses easily. They can select the categories from the drop-down menu, upload receipts, enter the amount, and send it for approval.
Once the employee sends it for approval, the approver gets notified via email or SMS. The approver can then approve the expenses on the same software. The approver also gets notified if an expense report violates the policy.
Once the approver approves the expense, it goes directly to the finance team. The finance team can then validate the expenses on the same platform to reimburse the employees.
Note: You can also set up multiple workflows in the expense management software, in which case the expense will go to the next approver.
Why you need expense management automation?
Here are some aspects that make expense management automation imperative for a company.
1. Save Time
Automating expense management with a software solution saves time for both employees and the finance team. Firstly, the employees can upload receipts directly to the software and map them with the correct category. Moreover, the best expense management tools offer an auto-scanning feature that picks out all the details from the receipt itself and auto-fills the expense report.
Secondly, the finance team can filter the expenses by category, department, date, etc. They don’t need to go through the heaps of paper to validate every single expense.
2. Reduce Errors
Automating expense management cuts down on expense filing errors as the human intervention is reduced significantly. As the expenses are automatically filed when you upload the receipt, there is no chance of a manual error.
Moreover, when the expense reports go to the finance team, they don’t need to manually enter the data from the papers or spreadsheets into the accounting software. They can integrate the expense management software with the accounting software for automatic data sync.
3. Ensure Compliance
Expense management software offers real-time visibility of the expense policy. Whenever an employee files the expenses, a notification pops up for out-of-policy expenses. This reduces accidental expense policy violations considerably.
Moreover, the finance team also gets the same notification if the files expense is out of policy. They can filter out all the out-of-policy expenses at once and send them back to the employee.
4. Eliminate Fraud
By expense management automation, the finance team doesn’t need to manually check the expenses in the large pile of papers.
Expense management software offers automatic expense fraud detection and audit features where AI-based systems can identify duplicate expenses, expenses filed in the wrong category, and more.
5. Save operational costs
By opting for expense management software to automate your expense system, you need to invest in the software only. You don’t need to buy heaps of paper, stationery, etc., for the office.
Moreover, as the software is completely scalable, you can store any amount of expense data for as long as you want without expanding your cabinet space.
Choosing the right expense management software
The optimum expense management automation can be achieved only if you choose the right expense management software.
Ensure that the software has the auto-scanning feature for easy and error-free expense filing. You should also ensure the software deploys automatic fraud detection and audit to identify all errors in real-time.
The right expense management platform will ensure optimum employee productivity and reap lucrative results.
ITILITE expense management software automates your expense process by integrating expense filing, approvals, and reimbursements – all on one platform.
Get a demo of ITILITE now to try out all its features at no cost.