Expense management – dealing with the cost of processing, paying, and auditing expenses can directly impact the bottom line. Most businesses don’t effectively manage their expenses because of the gaps in the system they’re used to. Automation is the answer to effective expense management.
But before that, let’s take a look at what expense management is really all about.
What is expense management?
Expense management is the approach a business takes to process, pay, and audit their business overheads. Expense management also includes the policies that govern business spending, along with the technologies and services utilised to process and analyse data linked to it.
Expense management has two key elements.
- How a business pays for particulars
- How it tracks that spend
Types of expense management
- Travel & accommodation management – managing expenses involving employee travel and accommodation
- Purchase management – business purchases like raw materials, finished goods, etc., purchased from the vendors
- Cash management – expenses like rent, utility bills, outings and gatherings, etc.
Managing expenses can be a difficult task, especially if you’re tracking expenses from multiple sources. Without a proper system in place, you will quickly find yourself amidst a number of invoices.
Expense management not only tracks business spends but also determines how your business will reimburse the costs incurred.
It can be hard to establish an audit trail if expenses aren’t processed immediately. And, finding the time to process expenses as they come through can be equally challenging when you’re a small business.
Delaying the processing and payment of expenses can lead to problems in your cash flow.
Traditional expense management process
The business receives invoices for all the expenses from vendors, suppliers, employees, and more. All these invoices are passed on to the finance team. Next, the finance team reviews the invoices and documents particulars in ledgers or spreadsheets, and finally processes payments to the respective payees.
If the business has to make vendor payments, the finance team also must ensure that appropriate taxes are deducted and paid to the government. And these payments are recorded in the ledgers or spreadsheets as well.
These methods are ancient in this day and age as tracking expenses on paper and ledgers is not convenient for any business. With the onset of technology, the usage of spreadsheets for these functions has been employed, but they still do not solve the expense management process encounters’ problems.
Here are some of the major disadvantages of traditional expense management.
- Managing expenses traditionally is time-consuming
- It experiences a higher risk of human error
- Compiling data manually to track spending trends lacks sufficient insight to make the right decisions
- There is a significant drop in productivity and efficiency as the finance team has to spend a long time compiling and reviewing expense data
- Lack of visibility due to insufficient data
Automated expense management
Modern methods of managing expenses are a lot more efficient and can facilitate better experiences for businesses. Automated expense management does everything that the traditional process does but in a much efficient way.
Invoice information is directly uploaded to the system from where the software can extract the specifics from the invoice and generate an expense report within minutes.
The expense report is verified for any inconsistency or policy violations. The finance team can then perform necessary corrections.
Businesses don’t have to shuffle through tons of paper receipts and emails as they can use the software to fetch any expense details with just a few clicks. The software also shares valuable insight into these expenses and also categorizes them.
This gives businesses the ability to make informed decisions to cut down on expenses. Security is also one of the strong suits as traditional methods are prone to fraud.
Fraud occurs when,
- Duplicate invoices are submitted
- Errors are created while making accounting entries
- Expenses are exaggerated in the invoices
- Expense receipts are forged or fictitious receipts are submitted
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Automate your expense management process with RazorpayX
RazorpayX completely changes the way businesses carry out expense management. It does everything mentioned above and then some more.
With an option to set your approval workflow, you can now create a workflow that you are comfortable with. You can also set limits on any expense. In case it exceeds the budget, it gets flagged for review. These limits help control unnecessary expenditures without checking if any expense has gone out of budget.
RazorpayX also shares valuable insight that enables businesses to make informed decisions. With the categorisation of expenses, you can now see where most of the unavoidable expenses are taking place. RazorpayX also offers a very user-friendly interface to track expenses, verify them, and understand insights with ease.
You can also set up recurring payments for products and services with Corporate Credit Cards.
Managing employee expenses like salaries, reimbursements, etc., are also very easy. Opfin automates your whole payroll process so you no longer have to spend hours and hours on payroll.
Efficient expense management leads to a successful business. And, RazorpayX has all the right tools to assist you along the way.