Expense Management: A complete guide for Businesses

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In this guide we will look at the common challenges of expense management, the opportunities that smart record-keeping can offer, explain how your business will benefit from expense management software, and tell you what to look for when choosing an expense management solution.

Expense Management Guide


Chapter 1: What is expense management?

Expense management is the systems and processes you use to pay and report on expense claims, from train tickets to stationery to (allowable!) drinks bills.

Many small businesses are surprised at the sheer effort involved in tracking and auditing this constant stream of small but significant payments, which is why many don’t do it well. It gets particularly complex when you also have staff to worry about.

But thanks to technology, there are ways to make the process of managing all the payments your business needs to make significantly easier, more cost-effective and way more time-efficient.

Managing your expenses with expense management software is important for three reasons:

  1. Expenses are a sizeable business cost. One survey found that companies spend on average between 6-12% of their total annual budget on travel and entertainment. The same research found that the cost of processing these expense claims or extracting useful value from the data can vary wildly. Achieving a single actionable expense report can range from just under $7 for automated systems to over $26 for manual/Excel-based processes.
  2. Also, companies that lose track of expenses risk losing money. A survey by Soldo of 2,500 employees revealed that over a third claimed for things they shouldn’t, averaging out at £117 in fraudulent claims each month. Even when fraud is not a factor, smaller businesses consider controlling company spending as one of the biggest challenges they face.
  3. Expense claims have to be legally compliant. To claim back tax on employee business expenses you have to be able to prove to HMRC that they are genuine, meet all criteria for employee business expenses and that the cost is reasonable and appropriate. A robust expense management process – especially one linked to accountancy software for small businesses – can ensure you always remain compliant.

Expense Management with Petty Cash: the old way.

Businesses typically handle expenses in one of three ways:

Petty cash expenses:

Many small businesses still operate a petty cash fund, which employees dip into for small value purchases, replacing cash with the relevant receipts. Expenses are recorded in a general ledger when the petty cash fund is topped up at the end of each accounting period. Even though there are plenty of alternatives to the petty cash system, they continue to be popular, despite the complexities of administering them: endless scraps of paper or plain theft!

Employee expenses with cash advances:

Cash advances are commonly used for travel costs and subsistence during business trips. This means handing over a cash sum that is unlikely to match the exact amount spent. Surplus cash is collected and banked after the trip, or the individual reimbursed for any money spent out of their own pocket. Employees submit receipts and an expense report, which have to be painstakingly reconciled to avoid either the business or the individual losing out.

Traditional credit cards:

Company credit cards for small business avoid the risks associated with employees carrying large amounts of company cash. Similarly, employees are not left frustrated by being forced to pay for company items out of personal funds. But giving out traditional company credit cards presents a potential fraud risk and, with high credit limits, spending can be difficult to control. It can be weeks before unauthorised spending gets spotted.

Chapter 2: What’s wrong with traditional expense management processes?

Employee Expenses can be frustrating for staff

Traditional expense management has employees carrying around a wallet full of receipts – and losing a receipt means losing the cash. People lose an average of £142 in unclaimed expenses on every business trip.

Meanwhile, finance staff have to manually check receipts against the amounts entered on a spreadsheet, check claims against company spending policy, check receipts against credit card statements, and so on. If anyone spots an error, the whole process begins again.

Bonus: Our ROI calculator can help you find out exactly how much – time and money – you could be saving if you weren’t doing expense reporting manually. Give it a go here.

Business Expenses can be frustrating for finance teams

Submitting expense claims is a chore for companies without a dedicated bookkeeper. Details are typed into an expense management spreadsheet, where they are reconciled, reviewed, and approved. Each individual expense must be manually checked. It’s a long-winded process, and prone to error. Receipts go missing, mistakes are made, and figures refuse to add up. Over a third of finance directors say they spend valuable time every month doing financial detective work to find out who spent what, and when. Not only is this a waste of time, it means that FDs lose visibility over their businesses. They are stuck with management data that can be several weeks out of date.

Expense Fraud is hidden

On top of everything, paper-only trails make fraud easier.

Let’s say an employee who regularly travels for work buys a train ticket to a conference for £100. The conference is cancelled, and he claims most of the money back from the train company. Three weeks later, he enters an expense claim using the original £100 purchase receipt, which is quickly approved by a hard-pressed line manager with neither the time nor inclination to make in-depth checks.

Far-fetched? Expense reimbursement fraud accounts for 15% to 17% of all business fraud.

Making Tax Digital and expense management

You’ve probably heard of Making Tax Digital (MTD), a government initiative to take the entire process of tax for businesses online; but you may not be prepared for it. If that’s the case, you are not alone.

The first part of the initiative – Making Tax Digital for VAT – came into force in April 2019.

It means that, even if you rely on a paper trail for expense management at the moment, you won’t be able to for long. Right now, MTD for VAT only requires that you use software to actually file your VAT return online – and there are some ultra-lightweight options on the market that really do achieve no more than a jazzed-up email. But the next step is clearly digital recordkeeping across the enterprise, which will make life for HMRC’s auditors much simpler, and make retrospective inspections less burdensome for business owners, too.

MTD can’t be avoided, and it’s likely going to involve changing the way you work. So you might as well use it as an opportunity to make life simpler. Invest in cloud accounting software for your small business and you can save valuable time and money.

Chapter 3: Implement expense management policies that cut out the extra work

Only with a clear policy can staff have confidence when spending money on the company’s behalf. In addition, your finance team gets a clear template for accepting or rejecting claims.

You need to house your policy somewhere and publicise it to employees. It should be clearly signposted on the company intranet, included in any HRMS (Human Resources Management System) software (e.g. CharlieHR), and emailed to all staff.

Good employee expense management software allows managers to set spending rules and limits, based on individuals, departments and categories, and have them automatically enforced.

End-to-end spend management software with their own prepaid cards, such as Soldo, other expense management software (e.g. Expensify and Certify), and some company credit cards let you predetermine how much an employee is allowed to spend – and on what.

Visibility and control across whole teams

Digitisation of expense management puts you in control. With a solution like Soldo’s business prepaid cards, you can reduce the possibility of overspend by enabling or disabling cash withdrawals, and limiting spend by amount, category and geography.

For example, an employee attending a conference needs to spend sensibly on accommodation, food, and travel. Enable these categories and set appropriate daily spending limits, while disabling all others, and thus keep control of company spending.

When he returns to the office, digital expense management tools can integrate with your accounting software, helping ensure that expenses incurred are categorised correctly for tax purposes.

Data-driven Decisions with Expense Reporting Software

Employees pay for services – online or in-person – with company credit or prepaid cards, which automatically enforce company spending rules and prevent leaving them out of pocket.

Reimbursement payments should be made within a few days of employees submitting an expense report – spend management mobile apps let employees capture receipts at point of purchase and create expense reports with a click.

Track spending in real time

With manual expense management systems, data is usually weeks out of date before anyone checks it. With digital expense management, you can see what staff are spending in real time, quickly alerting you to costs that are unnecessary or extravagant.

You can take care of reconciliation throughout the month, too, so you don’t have to worry about getting it all down at month-end.

Link expense data to business decision-making

Digital business expense management solutions allow you to collect and analyse useful data on the who, what, when and where of your company spending.

With basic filters, you can create reports that show trends, highlight exceptions and identify problems – helping you make better decisions as well as:

  • Manage employee policies better – not only for patterns of suspicious activity, but also to identify unnecessary spending or areas where more cost-effective alternatives might exist.
  • Monitor business performance – set targets to reduce expense spending and track progress. Identify departments or individuals who regularly overspend and set limits. Equally, use experience to spot where you’ve been too overzealous.
  • Identify better spending opportunities – data might suggest that certain activities, individuals or events justify increased spending, because the return on investment is higher. At the other end of the scale, others will need to be discarded.

Chapter 4: How to choose the best expense management software for your business

Ask the right questions: what is happening at the moment?

You know what expense management solutions can do, but what do you need from them? Here are some questions to ask yourself:

  • How do employees submit expenses? If they spend their own money, it could be a source of frustration or resentment. If they then submit paper receipts connected to manual expense reports, even more so.
  • What problems do you need to fix? Admins spend large amounts of time – up to 100 hours a year – chasing incomplete expense forms. At the same time, getting full visibility over spending gives management the insight it needs to target spending more effectively and identify potential savings.
  • Where are receipts stored and accounted for? By law, receipts need to be kept for at least six years. Do you store them securely, and are they easy to access?
  • How do approvals work? Your approval flow should be obvious. If it isn’t, employee reimbursement may not be as fast as it should be.
  • Does your current expense management solution (if you have one) integrate with other solutions? Can you connect it to your accountancy or payroll software, for example, or credit and prepaid business cards?

Ask the right questions: what features should an expense management system have?
When looking at expense management tools, ask relevant questions based on your specific requirements.

Rules and control

  • Spending limits: Can you limit by category, individual or group/department? How about time limits, like daily, weekly or monthly budgets?
  • Rules: Can you customise rules, forbidding spending on weekends, for instance, or outside geographical limits? Can you ban – or allow – cash withdrawals or online purchases?
  • Categories: Do pre-set categories meet your needs? If not, can you add custom categories?
  • Mileage: Does the software support mileage tracking for car journeys?
  • Approval: Does it allow for an approval flow (your finance team or line managers)?
  • Payments: Does it come with integrated payment cards? If not, can you add them as a method of payment?

Submitting expenses

  • Submitting expenses: How is it done, and is it straightforward?
  • Mobile app: Is the app useful for more than just receipt capture?
  • Receipt scanning: Does the software automatically extract transaction details from receipts?
  • Reporting: Can you send expense reports direct from the app? Can you add notes and assign receipts to categories?
  • Missing information: Does the app notify you when information is missing from a receipt or report?
  • Multi-currency: Does it support multi-currency reports (if you need it to)?

Exporting and reporting

  • Exporting tools: Does the solution make it easy to export information in multiple formats – for example, pdf and csv?
  • Accounting integration: Does it integrate with accounting packages like NetSuite, Xero or QuickBooks?
  • Other integrations: Does the app integrate with HR software? Does it have an open API for further connections?
  • Reporting: Does it allow for detailed management reporting, including filtering for time periods, expense types and users?

Chapter 5: How Soldo takes the hassle out of expense management

1. Reconcile transactions in seconds

No more pouring over bank statements to marry transactions – or missing VAT deadlines due to incomplete paperwork.

You can export your expense reports to your accounting software in just two clicks. If you use Xero to manage your accounts, then you’ll benefit from a seamless integration with an automatic feed.

2. Manage travel expenses effortlessly

Set separate daily budgets for fuel, food and more – and allocate funds for entertaining customers. When a trip’s over, disabling the card takes a single click.
Plus, with Soldo’s integrated app, your staff can track their spending and record receipts with zero fuss. They get an instant prompt asking them to submit them as soon as they spend.

Need to travel overseas? Soldo works as an FX card too – with conversion fees set at just 1%.

3. Control spending before it happens

Soldo doesn’t just help you track business spending – it comes with all the limits, rules and budgets you need in order to set out precisely how each card is used. It’s completely free to add funds to any account, and the money will be available to spend instantly.

Our web console gives you complete control over each card. As well as deciding its daily, weekly or monthly limit, you’ll be able to set rules on where and when it’s used. You can even enable or disable contactless payments.

Plus, you can create virtual business cards for online transactions (e.g. software subscriptions, Amazon purchases) as and when you need them.

4. Track all spending in one intuitive app

Soldo’s integrated app is designed to make processing expenses as simple as possible.

It saves your staff time, eliminates unnecessary paperwork and puts an end to incorrect expense claims.

5. Empower your staff

A complete expense management system is good for your business, but it’s also good for your staff.

With prepaid cards, employees never have to spend their own money, fill in forms and wait weeks for reimbursement, or carry around a wallet stuffed with paper receipts.

There’s a smarter way to manage business expenses

Unlimited flexibility

Give Mastercard cards to any number of employees, then control spending before it happens with bespoke budgets and rules.

Effortless expenses

Simplify expenses with the intuitive web and mobile apps. Download as CSVs any time for easy imports into accounting software.

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Fast and easy setup process

Soldo is a prepaid solution, so there’s no need for credit checks. You can get up and running in as little as one working day.

How Soldo works for you

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