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Expense management software is critical for every business. Regardless of the size, businesses need to carefully track expenses so that they stay compliant with regulations. Also, it helps avoid overspending or even unauthorized purchases by employees.
For this, a key need is monitoring operational expenses, big or small. While most larger companies have transitioned from paper reports, stacks of receipts and spreadsheets to expense management software, smaller businesses still rely on these manual processes to track their expenses.
These businesses are at a huge risk of unauthorized employee purchases. Most often, they end up facing frustration with cumbersome procedures and delayed reimbursements. Cash flow may suffer because of duplicate/fraudulent reports that slip through the cracks. This could then lead to delays in billing clients for expenses incurred, and even inadvertent errors that result in tax penalties.
But before we move on to exploring more about expense management software, let’s first understand what exactly expense management is.
What is Expense Management?
Expense management is all about the process of reporting, submitting, approving, reimbursing, and auditing all the business expenses incurred by employees within an organization.
Employees frequently incur several expenses that support their business operations. This could be travel, office supplies or at times even entertainment. To claim reimbursement, employees must submit detailed reports with receipts and then get approval from their line managers and finance teams.
In essence, expense management is the process that oversees how employees cover business expenses.
Disadvantages of Manual Expense Management
Traditional expense management processes rely heavily on manual data entry and validation. This can be a super time-consuming and labor-intensive process. It also increases the chances of errors, such as expense fraud, duplicate submissions, missing information, and wrong reviews.
Delays in approval and reimbursement further worsen these issues. Result? Employees wait endlessly for reimbursement while continuing to accumulate new expenses.
For finance teams, the lack of real-time data visibility is a challenge when it comes to detecting expense fraud and monitoring employee spending effectively.
Bottomline: Manual expense management hampers operational efficiency and creates severe frustrations for both employees and finance teams.
What is an Expense Management Software?
An expense management software automates and simplifies the entire process from receipt to reimbursement. It enables companies to handle travel bookings, automate expense report submissions, better manage approvals, speed up reimbursements and track expense claims in real-time. By automating all aspects of travel and expense management, this software reduces the risks associated with manual processes.
Benefits of a Cloud-based Expense Management Software
Cloud-based expense management software helps in handling expenses like a breeze. The following are some benefits of using cloud-based expense management software that is integrated with HRMS platform:
1. Easy Receipt Management
Expense management software allows employees to report expenses in real time on their preferred devices. Instead of dealing with physical receipts, employees can simply capture images and upload them.
The expense management software uses advanced software like OCR (optical character recognition) to extract essential details like amount, name of merchant, date and category from the receipts. It then stores all the information securely in the cloud. Such digital receipts then ease reconciliation processes for finance teams during audits.
2. Better Enforcement of Policies
Automated expense management ensures strict adherence to company policies which reduces fraud risks. Administrators can define and modify expense policies, set spending limits, and specify consequences for policy violations. The expense management software automatically detects and flags policy breaches while notifying approvers and employees instantly. This saves time and ensures compliance without manual oversight.
3. Efficient Expense Report Approval
Expense management software automates approval workflows based on organizational hierarchy. Once the workflows are customized, it reduces the need for manual intervention which results in faster approval cycles. In fact, stakeholders immediately receive notification of pending actions. Automatic reminders for report submission and pre-set rules for approval or rejection further streamline the process which improves efficiency across departments.
4. Faster Reimbursements
By automating expense management processing and approval, the software accelerates reimbursement cycles. Reports that once took weeks for approval are processed immediately which means employees receive reimbursements on time. This efficiency gives a great boost to employee satisfaction and improves cash flow management for the company.
5. Holistic Data Analytics
Real-time expense data allows finance teams to analyze spending patterns and performance metrics. Built-in analytical tools provide insights into company-wide expenses, budgets for departments, project expenditures and individual claims. This data-driven approach helps in informed decision-making, facilitates budget adjustments and supports strategic planning for future expenditures.
Role of Integration in Expense Management Software
An expense management software should ideally never be working in silos. Powerful integration needs to be one of its key features.
Leading expense management systems offer extensive integrations with various tools such as HRMS, accounting software, payment systems, booking tools and CRM systems. These integrations ensure seamless data transfer and eliminate the need for manual importing, exporting, or re-entering data across different platforms.
While all integrations are important, a very key one is integration between the expense management software and HRMS (Human Resource Management System) to ensure that expense tracking and HR tasks work together in tandem.
This setup automates how expenses get assigned to employees and departments, making reimbursements smoother. It also gives clear reports on spending habits across teams, helping plan budgets and make smart decisions.
Best Practices for Integrating Expense Management Software with HRMS Platform
In order to improve efficiency and data accuracy, follow the below-mentioned best practices to successfully integrate expense management software with HRMS platforms:
1. Sync Important Data
A very important initial step is synchronizing key data between the expense management system and HRMS. This ensures that expenses are automatically attributed to the right employees and business units once they are submitted.
Integrating expense management with HRMS is mission critical for centralized reporting and analysis across both HR and finance systems.
2. Digitalize Processes
Once data synchronization is done, automating workflows across platforms is important. Rules should be implemented to automate expense report calculations based on field data. This will minimize the need for manual input. Systems must be designed so that expense reports undergo HR verification as a standard process.
3. Enable Self-Service Capability
Giving self-service access to the expense management system brings paybacks for both employees and managers. Employees can easily submit expense reports and track their status online without relying on HR staff.
A centralized portal also offers effective review and approval of expense reports by managers. Integration with HRMS provides quick access to the expense portal through fast links. Single Sign-On (SSO) functionality ensures a smooth user experience across systems.
4. Managing Reimbursements
To get approved expense reimbursements via payroll, it is possible to explore integrating various methods. This can involve issuing separate direct deposits or checks. Alternatively, for a more streamlined approach, integrating the accounting module within the HRMS allows for automatic reimbursements through regular payroll cycles.
5. Enhance Compliance Monitoring
Another important need is aligning additional expense compliance regulations, like meal limits or travel pre-authorization. Businesses can integrate these compliance checks into unified platforms to reduce risks and flag exceptions or policy violations automatically.
Robust integration between expense management software and HRMS helps avoid lapses/errors and resultant expenditures.
6. Strong Reporting Across Systems
Integration offers a seminal advantage: solid reporting and analytics across expense management and HR data. It is easy to generate consolidated reports that detail employee expenses by department, category or any other metrics alongside HRMS data like headcounts.
Analytics integration also gives a powerful tool for budgeting, forecasting and strategic financial decisions.
Key Takeaways
By integrating expense management system and HRMS, both processes connect closely and that brings several benefits for the business. It helps with continuous monitoring, training, and maximizing ROI for both HRMS and expense management systems.
Looking to upgrade to the best HRMS software with powerful integrations? Akrivia HCM is your solution!
Request a demo and know how you can streamline your expense tracking effortlessly.
