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 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.
Businesses typically handle expenses in one of three ways:
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!
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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:
You know what expense management solutions can do, but what do you need from them? Here are some questions to ask yourself:
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
Exporting and reporting
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.
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%.
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.
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.
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.
Give Mastercard cards to any number of employees, then control spending before it happens with bespoke budgets and rules.
Simplify expenses with the intuitive web and mobile apps. Download as CSVs any time for easy imports into accounting software.
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.
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