Typical expense management reporting follows several steps: employees have to save receipts and manually enter expense information; managers comprehend the context of purchases and inquire about them; finance teams complete the laborious monthly reconciliation process; and employees wait to be reimbursed. 

Almost all of the stakeholders along the road experience suffering. For example, employees dislike waiting, managers dislike badgering, accounting departments dislike reconciling accounts by hand, and finance departments dislike waiting until the end of the month or longer to learn how much money has been spent.

This time-consuming process has hidden costs, so it’s more than a hassle. Let’s discuss these hidden costs you are incurring by following a manual way of managing employees’ expenses.

What is Manual Expense Management?

Manual expense management is often done on paper or with spreadsheets like Microsoft Excel and Google Sheets. It refers to manually tracking, recording, and reporting spending.

All expenses are manually entered into a spreadsheet or a paper ledger when managing costs manually. This process typically includes some steps, as explained below.

Recording expenses: This entails recording every expense, along with its date, cost, and intended use.

Categorizing expenses: The areas that fall under include travel, entertainment, and supplies. This makes it easier to comprehend how money is being spent.

Totaling expenses: The total amount spent is then calculated by adding the costs for each category.

Comparing the budget: The total expenses for each category are compared to the budget to identify anomalies.

Reporting: The costs are disclosed for the company or personal use. Making a report for management or tax purposes may be necessary for this situation.

With its low cost and potential effectiveness for individuals or small organizations with limited resources, manual expense management is a good alternative. That being said, it can also be time-consuming and prone to mistakes. Thus, many organizations switch to more automated alternatives when they expand.

The Hidden Costs of Manual Expense Management

The hidden costs that result from employing manual techniques to manage expenses are referred to as the “hidden costs of manual expense management.” These expenses can accumulate over time and significantly impact how much money a business makes. For example, the hidden costs of manual spending management are the following:

Increased risk of errors and fraud.

As manual processes are more prone to mistakes and poor management, wrong expenses may be reported and processed, causing a loss of money.

Inefficient use of employee time

Due to the time-consuming nature of manual operations, employees may spend too much time on activities like data input, expenditure reconciliation, and error correction.

Difficulty in tracking expenses

Real-time spending tracking can be challenging with manual systems, which can delay finding and fixing mistakes or fraudulent activities.

Increased administrative workload

Manual processes can use many resources and add to the stress of employees who handle expenses, which lowers productivity and raises overhead costs.

Lack of visibility and control

It can be challenging to identify and stop overspending or financial mismanagement when manual processes are used since they reduce an organisation’s visibility and control over costs.

Increased stress

Manual, time-consuming expense management procedures can cause stress and burnout in employees, lowering morale and decreasing job satisfaction.

Decreased employee engagement

Employee disengagement and decreased productivity may result from employee frustration with manual expense management procedures, which could have a detrimental effect on the organisation’s financial performance.

Reduced compliance

Manual expense management systems may hamper employee compliance with the organisation’s financial policies and procedures, increasing the likelihood of non-compliance and financial mismanagement.

Furthermore, manually managing expenses can result in a lack of accountability and transparency, making it challenging for businesses to keep track of spending, spot fraud, and make sure that money is being spent wisely.

5 Steps to Avoid The Costs of Manual Expense Management

Automating expense management can avoid the hidden costs of manual expense management. In addition, it can result in enhanced data accuracy and real-time reporting, empowering businesses to manage costs more effectively and make wise financial decisions.

However, automated expense management solutions come at some direct costs. These are the costs a company incurs to oversee, manage, and control its spending. Examples of direct costs include

• The cost of the software and technology used to automate expenditure
• The cost of human resources involved in authorising and evaluating charges
• Other administrative costs, including training and assistance. 

However, the benefits of improved expense management, such as increased visibility and control over expenses, improved compliance with financial policies, and decreased administrative workload, typically outweigh the direct costs of expense management as an investment in a company’s financial well-being and stability.

So, here are the steps that organisations can take to avoid the hidden costs of manual expense management:

Step 1: Deploy Expense Management Software

Invest in efficient expense management software. It automates the expense management procedure, lowering the possibility of mistakes, fraud, and mismanagement while boosting accuracy and efficiency.

Note: The expense management market is anticipated to expand at a CAGR of 9.2% from 2022 to 2029, rising from $6.51 billion to 12.05 billion.

Step 2: Simplify the Expense Reporting Process

Ease the procedure of filing expenditure reports. This action would shorten the time duration and resources needed to execute it. Furthermore, it would increase openness and compliance.

Step 3: Train Your Employees

Train employees on how to manage expenses and use cost management software. This action can gradually decrease errors and help employees or stakeholders follow financial policies.

Step 4: Monitor Expenses in Real-time

This procedure will assist you in keeping track of your spending and spotting fraud or mistakes. In addition, it would increase expense control and visibility.

Step 5: Encourage Employee Engagement

Finally, encourage employee engagement. Also, you must give your employees the resources and skills they need to manage their spending. Stress and burnout would be less likely as a result of this action.

Implementing these actions can increase productivity, lower the risk of financial mismanagement, and avoid the hidden costs of manual spending management for businesses.

The Key Takeaway

Manual expense management entails logging all expenses, categorising them, figuring out how much was spent in each category and then comparing that to the budget to see any variances.

Automating expense management operations can lower the hidden costs of manual expenditure management, improve compliance and transparency, and raise employee satisfaction.

Furthermore, automating expenditure management can result in higher data integrity and real-time reporting, empowering businesses to manage their expenses more effectively and make wise financial decisions.

Almost 68% of companies expect a considerable increase in travel budgets this year, as per the survey conducted by Morgan Stanley recently. However, while companies have increased their allocations to spend more as they return to full recovery after the unprecedented event in 2020, they also need help with their expense management system. 

In fact, with an increased budget for expenses, expense fraud is likely happening in organisations. 

The top challenges for companies in managing their expenses include, 

– Lack of spending visibility 

– Expense frauds 

– Complex employee reimbursements 

So, how do you overcome them? 

By incorporating a clear expense policy! Let’s understand in detail what an expense policy is, what you should include in it, and how to create one.

What is a Company Expense Policy?

An expense policy is a set of standards or rules that define how the company and its employees can spend money for business purposes. In simple terms, it sets rules on how to spend, what to spend, and how to reimburse when employees spend the employer’s money.

Download the expense policy template to start instantly with building a better expense management system.

What Do You Need to Include in Your Expense Policy?

The contents of the expense policy defer from company to company as different companies will have different sets of expenses. For example, for a manufacturing company, internet expenses will be an indirect expense, while for a software company, internet expenses will be a direct expense.

However, at minimum, every expense policy includes the following details:

Expense categories: Travel expenses, airfare, marketing expenses, etc.

Reimbursement process: How employees can claim the amount spent for business purposes 

Claim limits: If a company reimburses a partial amount for a particular expense

Dispute resolution process: if an employee wants to dispute a claim

5 Reasons Why You Need a Precise Expense Policy?

Having an approved expense policy for your organisation helps you save time and money in many ways since you have clearly stated rules that you and your employees need to follow in case of disputes. 

Let’s look at the five most significant reasons for having a clear expense policy:

1. It helps prevent expense fraud in organisations because you can have more control over employee spending through an expense policy.

2. It helps you streamline the expense reimbursement process since you have a documented step-by-step process. 

3. Employees will clearly understand the expense limits within which they can spend money for business purposes.

4. It helps build trust among employees and the company’s financial department. 

5. Disputing a claim becomes much easier due to a well-drafted expense policy.

How to Create an Expense Policy for Your business?

If you are creating your expense policy for the first time, these tips will help you get started.

1. Decide Categories to Include

Employees incur different expenses, from mobile phones and cars to hotel stays. Hence, it would be best if you defined which category of expenses you want to allow reimbursements to your employees. 

Below are the most common categories of expenses included in an expense policy:

– Transportation costs (airfare or train tickets)

– Fuel costs

– Marketing expenses

– Travel conveyance

– Hotel stay

Download the expense policy template to start instantly with building a better expense management system.

2. Define Precise Rules for Each Category

Understand where your employees will have to spend the most and make rules for each category clearly and fairly. For example, your business requires frequent travel from the sales team, and they must spend the most on networking. 

Then, allocate a decent amount as reimbursements for the marketing expenses. You may only need to spare a small amount for transportation costs if the client sponsors the local transportation. 

3. Consider Employees’ Expectations

Be reasonable with what employees expect from you when it comes to reimbursing their business expenses. When employees spend money from their pockets for your business, make sure they get reimbursed faster. 

Delays in reimbursements will make your employees unwilling to work for your organisation. Thus, be fair and consider their inputs for the expense policy.

4. Simplify the Processes

Ensure to simplify various processes, such as reimbursement applications, dispute claim processes, etc., as much as possible. For example, if your reimbursement process is cumbersome, it will affect the productivity of your employees since they will have to spend a lot of their time claiming their reimbursements. 

Employees prefer an easy-to-implement expense policy that is compact and understandable.

5. Ensure Compliance With Regulatory Requirements

While framing an expense policy, you will also have to consider the compliance requirements of the applicable laws and accounting principles. You also need to check the local labour laws to see if you have considered relevant provisions while framing the company reimbursement policy. 

6. Revise Whenever Necessary

It is crucial to regularly update, revise and reconsider various expense categories of the company. As the company grows, you must change the expense limits, add new categories, and remove old ones.

Automating the Expense Policy-Making Process

Today, using technologies like open APIs, artificial intelligence, and machine learning, you can use automated expense management solutions that will help you create a robust expense policy and manage your expenses more efficiently. 

From faster employee reimbursements to better control over employee spending, automated expense management tools help you build a seamless expense management system. 

Book a demo to show you how to build an expense management system through the Xpence platform. 

Whether you are a small business owner or a freelancer managing multiple clients’ work single-handedly, you face many challenges while managing your business expenses. In fact, invoicing multiple customers and following up on the payment is a huge task.

However, it is incomplete if you haven’t done proper bookkeeping. Thus, expense management, invoicing, and bookkeeping are interconnected and depend on each other to some extent.

But how can you streamline the process of managing business expenses, timely invoicing and follow-up, and smart bookkeeping, all at once?

Xpence has multiple solutions and products that will cater to your needs of managing your spending, payments, and accounting procedures, everything in one mobile application on your phone.

Let’s explore Xpence’s offerings and how they can bring peace of mind while managing your business finances.

What Xpence Has for You?

From managing timely payments to controlling employee spending efficiently, Xpence has smart solutions for simplifying your business finances.

Corporate Cards

Xpence can issue smart Visa prepaid cards, physical or virtual, for your business payments and receipts. You can provide these cards to your employees for their business expenses.

Physical Cards

Xpence enables you to issue physical Visa cards to your employees and for your business to easily track and manage your spending. These cards can be topped up from your company bank accounts.

Virtual Cards

Xpence can also issue virtual cards, similar to physical cards without physical presence. You can send/receive payments through a virtual card stored in an app on your phone.

The app also allows you to manage your employees’ physical/virtual card settings by setting spending limits and tracking each spending in real-time.

Smart Bookkeeping

Xpence can help you categorise your expenses and payments and update them in real-time to record the accounting entries. The innovative feature of the Xpence app will let you automatically record your transactions and get instant reports.

Easy Invoicing

Xpence also offers invoicing solutions for busy owners and freelancers. The invoicing tool lets you send customised and beautiful invoices to your clients within minutes. The invoicing tool enables you to follow up quickly on your payments and track your expenses in real time.

Petty Cash Management

Xpence offers expense management solutions to manage your petty cash expenses efficiently. It provides digitised solutions to manage expenses as a team, track and update in real time, and control them by setting limits.

Thus, Xpence offers a complete solution to manage your business expenses. Let’s see what types of solutions Xpence has for you.

4 Types of Comprehensive Xpence Solutions for Your Business 

Xpence offers customised solutions for freelancers, startup founders, corporate CEOs, and small business owners.

Corporates 

Xpence offers corporate cards for your employees. You can manage your employees’ spending by tracking them in real-time.

SMEs

Xpence provides virtual/physical cards, automated bookkeeping, and invoicing solutions for small business owners.

It helps you streamline petty cash expenses and digitize your business finance management.

Startups

Xpence provides instant virtual cards to the founders and their employees to manage their expenses efficiently.

It also helps busy founders manage their petty cash expenses and automate their bookkeeping procedures.

Freelancers

Xpence provides invoicing solutions to freelancers to issue customized invoices. It enables you to get paid faster by managing your invoices.

Thus, whether you are a startup founder, a freelancer, a small business owner, or a corporate executive, Xpence caters to everyone’s need to manage business expenses. Let’s see why Xpence products and solutions can give you peace of mind.

 

Why Should You Use Xpence for Your Business?

Below are the reasons you should use Xpence and have peace of mind about business expenses.

– It is simple to use and more convenient for managing expenses.

– Your transactions and information are safe as we follow industry-leading security standards.

– The cards provided by Xpence have global acceptance. Hence, you can use them anywhere in the world.

– You can provide real-time approvals for your employees’ expenses so they get reimbursed quickly.

– offers easy control of the card spend limits through the card settings option on your phone app.

– You can send instant team invites to your team members and employees to issue cards and track their expenses.

– The smart bookkeeping feature automatically categorizes your expenses and records them under an appropriate heading.

Thus, using Xpence is simple and secure, giving you peace of mind while managing your business expenses.