SMB Expense Management in 2021: A Complete Guide
SMBs work on limited resources. Hence most times, you’d see SMBs using traditional means to manage their business processes. Unfortunately, for expense management, this translates into lengthy spreadsheet-based expense report forms, lack of insight and control into expenses, and overall messy expense management.
The COVID-19 pandemic has changed the way businesses function. But, unfortunately, it has sadly also sprung open policy violations and expense fraud. With broken processes, accounting and manual errors, and a bit of expense fraud, SMBs know that this spells financial disaster.
Hence it is the need of the hour for SMBs to safeguard their financial bottom line while also navigating through these times. This guide builds a business case as to why SMBs must consider an expense management software to drive their (remote) expense management in 2021.
Challenges employees face with traditional expense management
Time-consuming, labor-intensive, and repetitive are some ways your employees might describe traditional expense management. Here are some reasons why:
- Manual expense tracking relies solely on receipts which means your employees can’t have butterfingers. While the storage process itself is tedious, losing just one receipt would result in delayed or no reimbursements.
- Expense reporting is a lengthy process of filling out reports and getting them signed. One incorrect value in the report where $43 is entered as $34 could mean multiple back and forths with the Finance teams for corrections.
- Employees cannot be expected to remember company policies when submitting expense reports. As a result, policy violations that have crossed the limits set by the company would need to go through multiple iterations before a complete or partial refund is processed.
- Knowing their expenses will be reimbursed with significant delays leads to a marked decrease in employee morale and productivity. This could also hurt your employee retention rate.
Challenges Finance teams and approvers face with traditional expense management
An entirely paper-based system for Finance teams and approvers means repeated and constant manual verifications to ensure no erroneous values slip by. Listed below are some challenges they face almost every time they sit to verify and process business expenses:
- Finance teams need to constantly remind employees and approvers to submit and verify expense reports on time.
- Finance teams find it challenging to track and manage business expenses, pre-approvals, card spend and cash advances.
- Finance teams find it difficult to track employee spend against categories, projects, departments. This leads to a lack of control and insight into the business’s expense management.
- Finance teams and approvers must manually verify and approve expenses per expense policies before pushing out for payment processing.
- In case of violations, Finance teams need to connect with the employees to explain what went wrong and how employees can correct it.
- Finance teams also need to keep an eye out for out-of-policy expenses and expense fraud. Any of these expenses slipping by would mean a leak in your financials that could severely hurt your business in the years to come.
How can SMBs overcome their traditional expense management challenges?
There’s no denying that traditional expense management is a system of the past. Additionally, businesses that resort to conventional methods seem to be most affected by the pandemic. With distributed teams and remote processes, companies are now challenged to shift to better ways or succumb to financial losses via leaks and expense fraud.
We’ve seen a marked rise in finance and overall business automation ever since businesses have begun to reopen post the pandemic. SMBs are slowly yet steadily understanding the importance of streamlining and automating processes.
But, where do companies start on this buyer journey from traditional to automated expense management?
The alternative to traditional expense management for SMBs
Now that you’ve understood all the pain points that all the stakeholders in the company have concerning traditional expense management, let’s focus on the solution – an expense management software.
An expense management software is an AI-powered software that automates, streamlines, and removes the guesswork from expense management. You name it, and they already have it automated for you.
An expense software boosts employee morale by doing all the heavy lifting while also helps businesses achieve compliant expense management. But how, you ask? Let’s dive in!
How does a cloud expense management software fix SMB expense management:
An expense software listens and addresses your employee challenges concerning expense management. Be it your regular employees, approvers, or even Finance teams, it has you covered. Given below is a breakdown of how an expense software can benefit your company and stakeholders.
Benefits employees get from using an automated expense software:
- Employees can use the mobile app to easily submit and track expenses from everyday applications like G-Suite, Outlook, Slack, and more.
- Employees no longer need to store receipts with an expense software. The software comes with OCR technology that enables employees to snap images of receipts using their phones.
- The software then auto-populates expense report details eliminating any manual work or data entry errors.
- The software then runs real-time policy checks to ensure employees only submit expense policy-compliant reports.
- It also reduces physical back and forths by notifying both the employee and Finance teams in case of violations within the app.
- Additionally, all actions taken on expenses no longer need to be lost in email threads as the software documents it on a digital audit trail.
- Employees can then explain or modify expenses to suit the business rules and then submit expense reports to the approvers and Finance teams.
- This simplifies the entire employee perspective of expense management, thereby encouraging happy employees to submit compliant expenses on time always.
Benefits approvers and Finance teams get from using an automated expense software:
An expense software is most beneficial for approvers and Finance teams as it automates almost all the tedious workflows and processes.
- It comes with a real-time policy engine that checks all expenses at the source of creation for expense policy violations, duplicate submissions, and expense fraud. This ensures no problematic expenses get by.
- An expense software comes with centralized cloud storage. This means all expense data from receipts, claims, and reimbursements are stored in a secure cloud, making search and retrieval easier for Finance teams and approvers.
- The software eliminates manual intervention in corporate credit card reconciliation by automatically matching expenses with bank statements. Finance teams can also get real-time visibility into credit card spends from the expense management dashboard.
- The expense software also comes with advanced data analytics that provides accurate and real-time data analysis across departments, projects, budgets, and more. This helps Finance teams understand whether they need to optimize, control, or cut down on spend and budgets.
- A digital audit trail makes it easier for Finance teams to verify reports before moving them into the payment queue. The process also ensures that companies stay audit-ready and have little to no unpleasant surprises from the IRS.
- This simplifies the entire approver and Finance perspective of expense management, thereby reducing manual errors and expense fraud.
Steps SMBs must follow before picking an expense management software
- Understand the current state of expense management and financials before making the switch.
- Document problems your employees, approvers, and Finance teams face concerning expense reporting and management.
- List must-haves and nice-haves in the expense software keeping in mind your business’s requirements.
- Go through multiple reviews from trusted sources like G2, Capterra, or GetApp, for honest customer reviews.
- Try out a few expense software in the market with employee segments to see if they are satisfied.
- Don’t be afraid to switch or experiment with different software till you find the one that best suits your needs.
SMB feature checklist for picking an expense management software
- An efficient mobile app that enables easy employee expense reporting
- Cross-platform functionality that provides multiple expense tracking options for employees
- OCR (Optical Character Recognition) capabilities that automatically extracts data from receipts
- Provide real-time visibility into spend across departments, budgets, cost centers, and more
- Allow for customizable workflows, expense policies, approvals, and more
- Offers a robust policy engine that ensures no non-compliant business expenses or expense fraud slip by
- Enables seamless corporate credit card reconciliation
- Easy integrations with accounting and other software
Efficient expense management is the crux of a successful business. Budding businesses have to realize broken systems will prove counterproductive to all their effort and hard work.
Hence SMBs need to pay as much attention to expense management as they would any other business function. In addition, we’ve seen automating expense management comes with various benefits to employees and employers. So it’s time your business also gives it a shot!
Rahul believes everyone has a story to tell. If he isn’t writing one, he’s hearing one from someone.